Q: In 2005 I sold my home. The capital gains over the amount I’m allowed to exclude increased my adjusted gross income to $210,000. Last year my monthly Social Security benefits were just $922.50 after deduction for the $88.50 Part B premium. Recently I learned that my new monthly Medicare Part B premiums would be Means Tested, and that the government calculated my premium using my one time 2005 capital gains inflated adjusted gross income! My new monthly Part B premium is $162.10. In addition my monthly Social Security check is now only $881.90 to pay the Means Tested premium. Selling my home was a one-time event. Will I be Means Tested for the rest of my life?
A. Starting this year the government began to calculate Medicare Part B premiums based on income. Individuals with incomes that exceed $80,000, and married couples with incomes that exceed $160,000 will pay a higher portion of the premium.
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According to the Social Security Administration, the income figures are based on your 2005 adjusted gross income, line 37 of Form 1040, plus any tax-exempt interest shown on line 8b of your 1040. Each year the government will review your tax return to determine whether your income continues to subject you to the Part B Means Test. Thus in 2006 if your income was less, you would not pay the higher “income based” Part B premium.
According to a report from the Government Accountability Office (GAO), you may be able to request a new determination, or a reconsideration, under the following circumstances:
- You have more recent tax data than those used in SSA’s premium calculation;
- You have amended the tax return that SSA used in its premium calculation;
- You have proof of a corrected return; or
- You have experienced a major life-changing event, which significantly reduced your income; or
- You question the accuracy of SSA’s calculation of the premium adjustment.
The time frame to request a recalculation of premium increases is generally very short. For reconsiderations, a beneficiary must file a request within 60 days after receiving SSA’s notice of the premium adjustment, which ended in January.
Late last year, the Government Accountability Office (GAO) warned, in a report requested by the Senate Finance Committee, that many of those affected might not know about the new change to their premiums. TSCL recommends that you contact Social Security at once to learn if you may file an appeal. In addition, we recommend early preparation of your 2006 tax return, which you potentially might be able to provide as proof of lower income, and why your Part B premium should be recalculated.
This same advice also applies to persons whose 2005 income was inflated by other unusual capital gains, winning a lottery or other one-time event.
January 2007
