retirement

Coping With High Medicare Premiums

If your income spiked in 2006, you'll pay more in 2008 for Part B medical coverage.

I sold my house in 2006 for a large profit, and now it looks like I'll have to pay extremely high Medicare Part B premiums because my income was so high that year. Is there any way to contest the premium increase because it was a once-in-a-lifetime profit, not my regular income?

First, some background: In 2007, Medicare started to base Part B premiums on the beneficiary's income for the first time ever -- with higher-income people paying more.

The premiums for 2008 are based on 2006 income because those are the last tax returns the IRS has on record. You may be able to get your premiums reduced if your income has dropped since then under certain circumstances. But a home-sale profit is not one of the approved reasons.

The "life-changing events" that do count include the death of a spouse, marriage, divorce, a reduction in income due to the loss of income-producing property or due to the loss of certain forms of pension income, and work stoppage or work reduction (which includes people who have retired since 2006).

If you've experienced any of these changes, contact the Social Security Administration at 800-772-1213 or visit your local field office. You'll need to provide an estimate of your 2007 taxes or a signed copy of your tax return.

You also need to provide evidence of the qualifying change. For retirees, that could be a statement from an employer verifying that you've retired, or you could use past and current pay stubs showing a change in hours. If approved, any excess premiums can be refunded retroactively.

A big home-sale profit in one year doesn't qualify as an approved life-changing event. But your premiums should go back down again next year, when your income is back to normal.

In 2008, joint filers who earned $164,000 or less in 2006, or single filers who earned $82,200 or less pay the base rate of $96.40 per month. Joint filers earning up to $204,000, or single filers earning up to $102,000 pay $122.20 per month. The premiums gradually increase based on income up to a maximum of $238.40 per month for joint filers who earned more than $410,000, or single filers who earned more than $205,000. For a full list, see my Medicare Premiums to Increase column.

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