Medicare Part B

What is Medicare Part B? What does Medicare Part B cover?

Many individuals perceive it as medical coverage; however, it extends its scope to both within and outside the hospital setting. Consider Part B coverage as encompassing care provided by medical professionals.

What Does Medicare Part B Cover?

Medicare Part B coverage grants you access to an array of outpatient medical services. It includes preventive care like flu shots, colonoscopies, mammograms, and more. It caters to routine outpatient services such as doctor’s appointments, lab tests, home health care, ambulance transportation, and even some chiropractic care.

Nonetheless, Medicare Part B also covers services that might occasionally occur within a hospital environment. This encompasses services like physician care, cancer treatments like radiation or chemotherapy, surgical interventions, diagnostic imaging, medical equipment, and even dialysis for failing kidneys. Part B also extends coverage to drugs administered within a clinical setting, such as osteoporosis injections, infused medications, antigens, and insulin utilized with an insulin pump.

Outpatient medications, however, fall under Part D.

Part B is optional, yet if Medicare is your primary coverage, having Part B is crucial. Medigap supplemental coverage is also contingent on its inclusion.

What does Medicare cover in terms of costs under Part B?

Covers 80% of approved costs after your initial payment of the annual deductible.

How Much Will I Pay for Medicare Part B?

Monthly premium payments are necessary for your Medicare Part B benefits. The majority of Americans adhere to the standard monthly amount established by the government. In 2023, the base rate for Part B is $164.90/month for newcomers to Medicare. However, there might be a higher amount owed for individuals whose income surpasses a specific level.

A chart displaying costs based on your income bracket can be found on our Medicare cost page. Enrolling late into Part B could potentially lead to a lifelong penalty. It’s imperative not to miss your enrollment window during retirement, as losing access to employer group health insurance might occur.

If you are already enrolled in your SS income benefits, Medicare will deduct your Part B premiums from your Social Security check. For those not enrolled, quarterly billing will take place, with a credit card payment option available. To pay for Part B using a credit card, simply complete the payment coupon’s bottom portion and send it to the Medicare Premium Collection Center.

Another option is Medicare Easy Pay, a free auto-draft service facilitating monthly deduction of premium payments from a checking or savings account.

How Do I Sign Up for Medicare Part B?

Individuals receiving Social Security income benefits at age 65 are automatically enrolled, with the Social Security office handling this process. Your card arrives in the mail 1 – 2 months before your 65th birthday.

For everyone else, application for Medicare Part B is necessary at age 65. Applying can be completed online, over the phone, or in-person at your local Social Security office. After application, it takes 2 – 3 weeks for your card to arrive, so applying several weeks before coverage is needed is advisable.

As evident, signing up for Part B is straightforward. Enrolling during your Initial Enrollment Period is vital, unless other credible coverage is in place. Failing to do so might result in a penalty.

For additional details on each application option, visit our Apply for Medicare page.

A suitable perspective is to regard Part B as coverage for any care provided by physicians and considered medically necessary.

Does Medicare Part B Cover Everything Outpatient?

Part B typically covers anything deemed medically necessary. If a doctor documents the need for a specific procedure, it’s generally covered. Disagreements between Medicare and the physician regarding medical necessity might require additional documentation.

What Doesn’t Part B Cover?

Part B excludes hospital expenses covered by Part A. It also omits cosmetic procedures, routine dental, vision or hearing care, and routine foot care. Additionally, drugs obtained from a retail pharmacy are not covered; a Part D drug plan is required.

In general, Part B doesn’t cover services considered unreasonable or unnecessary. Physicians typically understand the rules governing covered and non-covered services.

What is My Cost Sharing Under Medicare Part B?

You’re responsible for a portion of the costs for your medically necessary Part B services, which generally include:

The annual Part B deductible ($226 in 2023)

20% of the remaining costs, without limitations or caps

Any additional charges from providers or facilities beyond what Medicare reimburses

Significant among these is the 20% you owe for outpatient medical care. Expenses for services like surgeries or chemotherapy can accumulate to thousands. Fortunately, a range of supplemental coverage options exists to suit various budgets.

What is the Medicare Part B Late Enrollment Penalty?

Failure to enroll in Medicare when initially eligible, coupled with the absence of creditable coverage, leads to the Medicare Part B late enrollment penalty. This penalty amounts to 10% per year for each year (12 full months) of delayed enrollment. The penalty is applied to the standard Part B premium, set at $164.90 in 2023.

Upon eventual enrollment, you must await the Medicare General Enrollment Period to sign up for Part B. This period runs from January 1st to March 31st each year. Benefits commence the following month after application. This situation entails a double setback: not only incurring a penalty but also waiting months for coverage initiation.

If delayed enrollment results from having employer group health coverage from a company with 20 or more employees, you’re exempt from the Part B late enrollment penalty. Upon leaving such coverage, an 8-month window to sign up for Part B is granted – this is your Special Enrollment Period for Medicare.

Opting to enroll in Medicare during your Initial Enrollment Period remains the most effective strategy to avoid the Medicare Part B late enrollment penalty. Additional information on Medicare enrollment periods can be found here.

Seek Assistance with Medicare Part B

Two primary approaches safeguard against significant medical expenses:

  1. Medicare supplements can be purchased to cover areas not addressed by A & B.
  2. Medicare Advantage plans provide an alternative if you’re open to obtaining A & B benefits through a private health insurance plan featuring a smaller network than Medicare.

Learn more about purchasing a Medicare Supplement or enrolling in a Medicare Advantage plan. Contact us for a complimentary consultation at (855) 732-9055 today. Our experts can help you compare options, elucidate your Medicare Part B coverage, and identify the most fitting plan for you.

Medicare Supplements Vs Medicare Advantage Plans

Medicare Supplements Vs Medicare Advantage Plans

Medicare Supplements, also known as Medigap.

are private health insurance plans designed to supplement Original Medicare (Part A and Part B) coverage. Medigap plans pay for some or all of the out-of-pocket costs not covered by Medicare, such as copayments, coinsurance, and deductibles. There are ten standardized Medigap plans, each labeled with a letter (A, B, C, D, F, G, K, L, M, and N).

Each plan covers a different set of benefits, and every insurer that offers Medigap plans must offer the same standardized benefits for each plan type.

Medicare Advantage plans, also known as Medicare Part C,

are an alternative to Original Medicare. These plans are offered by private insurance companies that contract with Medicare to provide Part A and Part B benefits. Medicare Advantage plans typically offer additional benefits not included in Original Medicare, such as prescription drug coverage, vision, and dental services. In most cases, Medicare Advantage plans have lower out-of-pocket costs than Original Medicare, but they also often require individuals to use a specific network of healthcare providers.

One of the significant differences between Medigap and Medicare Advantage plans is how they cover healthcare costs. Medigap plans are designed to supplement Original Medicare coverage, so individuals can see any healthcare provider that accepts Medicare. Medigap plans may have higher monthly premiums, but they often result in lower out-of-pocket costs when seeking medical care.

On the other hand, Medicare Advantage plans have a set network of healthcare providers that individuals must use to receive coverage. These networks can be restrictive and limit an individual’s ability to see a specialist or a preferred doctor. However, Medicare Advantage plans often have lower monthly premiums, and some plans may offer additional benefits such as vision, dental, or prescription drug coverage.

Another difference between the two options is how they are regulated. Medigap plans are regulated by both state and federal laws, and insurers must adhere to specific standards when offering plans. These standards ensure that each plan type offers the same standardized benefits, and that premiums are based on community rating, not individual health status.

In contrast, Medicare Advantage plans are regulated by both Medicare and state laws. These plans have different rules and regulations than Medigap plans, and insurers can design plans with varying levels of benefits and cost-sharing requirements. Additionally, Medicare Advantage plans can use risk adjustment to determine premiums, which means that an individual’s health status can impact their monthly premium.

In summary, the primary difference between Medigap and Medicare Advantage plans is how they cover healthcare costs and the level of provider flexibility. Medigap plans offer more flexibility in provider choice but have higher monthly premiums, while Medicare Advantage plans have a set network of providers but often have lower monthly premiums and additional benefits. It is important to carefully consider individual healthcare needs, budget, and provider preferences before choosing between the two options.

4 tax moves to consider before filing your return

Want to lower your 2019 tax bill? A number of opportunities to offset prior-year income and capture credits are still available until the July 15 tax filing deadline. (The due date for filing 2019 federal income tax returns was extended to July 15 from the traditional April 15 in light of the COVID-19 crisis.)

Areas to look at include:

  1. Retirement plan contributions
  2. Deductions
  3. Penalties
  4. Credits

Taxpayers who were looking to minimize their tax liability, of course, had dozens of tools at their disposal before the New Year hit, including potentially deferring income, accelerating deductions, or selling off losing stocks to offset capital gains — a concept known as tax-loss harvesting. But those opportunities abruptly ended on Dec. 31 for the 2019 tax-filing season.

“There were a whole host of tax moves you could make before the end of the year,” said Paul Morrone, a certified public account and financial planner for U.S. Wealth Management in North Haven, Connecticut, in an interview. “Most have expired, but not all.”

Those that remain, he said, revolve primarily around retirement plan contributions, tax credits, and penalty avoidance.

Retirement plans: Retroactive contributions

Your traditional Individual Retirement Account, or IRA, offers the biggest potential bang for the buck.

The Internal Revenue Service (IRS) allows taxpayers to make deductible prior-year contributions all the way up to the tax-filing deadline. (Related: IRA advantages)

For tax year 2019, total contributions to all of your traditional and Roth IRAs for taxpayers under age 50 cannot be more than either $6,000, or your total compensation for the year if you earned less than that amount. Those 50 and older can make an additional $1,000 catch-up contribution, for a total of $7,000.1

Deductible contributions could save you big. A taxpayer in the 25 percent federal and 5 percent state tax brackets, said Morrone, “effectively gets a 30 percent return right out of the gate by virtue of a reduction in their federal and state tax bill.” On a $5,500 contribution, that amounts to a $1,650 tax savings.

Your actual tax deduction, however, may be limited if you or your spouse are covered by a retirement plan at work and your income exceeds certain levels.

For those covered by a workplace retirement plan, the deduction begins to phase out for single tax filers who made more than $64,000 in 2019 and disappears completely at $74,000 and beyond — $103,000 and $123,000 respectively, for married taxpayers who file jointly.2

Eligible taxpayers can also make retroactive contributions to their Roth IRA until July 15. Different phaseout limits apply for Roth contributions.

Because Roth IRAs are funded with after-tax dollars, your contribution will not yield a current-year tax deduction, but it could potentially produce a better investment return since earnings upon retirement can be distributed tax free.

Simplified Employee Pension IRA (SEP IRA) account owners who get an extension to file can potentially delay their contribution further still, until October.

Contributions to a SEP-IRA, geared for small-business owners and the self-employed, cannot exceed the lesser of 25 percent of total compensation or $57,000 for 2019.

If you operated a business last year, the “SEP may be a terrific way to receive a deduction and save for retirement with contribution limits well over those available with regular IRAs,” said Elliot Herman, a CFP® and CPA with PRW Wealth Management in Quincy, Massachusetts, in an interview.

Tax deductions: Roll up your sleeves

Most taxpayers take the standard deduction, a fixed dollar amount set forth by the IRS that reduces the amount of income on which they are taxed.

(Learn more: Overlooked tax deductions)

Why? Because it’s a lot less work. You don’t have to keep track of your expenses, or individually deduct them on IRS Schedule A. Under the tax-reform legislation known as the Tax Cuts and Jobs Act (TCJA), which took effect in 2018, the standard deduction has nearly doubled in 2019 to $12,200 for single filers, $24,400 for married taxpayers filing jointly, and $18,350 for heads of household.

As a result, many taxpayers who previously itemized deductions may find it more beneficial to claim the standard deduction this year.

Big changes for itemized deductions

To determine whether you might come out ahead by itemizing, you must first be aware that the TCJA

changed the rules significantly for how taxpayers itemize deductions.

According to the IRS:

  • The income-based phaseout of certain itemized deductions no longer applies. That means some taxpayers may be able to deduct more of their total itemized deductions if those deductions were previously limited because their income exceeded certain thresholds.
  • A taxpayer’s deduction for state and local income, sales, and property taxes is limited to a combined total deduction. That limit is $10,000, or $5,000 if married filing separately. Any amount above that limit is not deductible.
  • There is also a new dollar limit on total qualified residence loan balances. If your loan was originated or treated as originating before Dec. 15, 2017, you may deduct interest on up to $1 million in qualifying debt, or $500,000 for married taxpayers who file separately. If the loan originated after that date, you may only deduct interest on up to $750,000 in qualifying debt, or $375,000 for taxpayers who are married filing separately. The limits apply to the combined amount of loans used to buy, build, or substantially improve the taxpayer’s main home and second home.
  • The deduction for home equity interest was also modified. Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build, or substantially improve a main home or second home. As it was previously, the loan must be secured by the taxpayer’s main home or second home, not exceed the cost of the home, and meet other requirements. Any such home equity loan contributes to the qualifying debt limit of $750,000 (or $375,000 for taxpayers who are married, filing separately).
  • The limit for deductible charitable contributions of cash was also increased to 60 percent of a taxpayer’s adjusted gross income, up from 50 percent in prior years. Thus, generous donors may be able to deduct more of what they give this year. (Related: Using life insurance for charity)
  • A taxpayer’s net personal casualty and theft losses must now be attributed to a federally declared disaster to be deductible.
  • Lastly, the ability to itemize miscellaneous deductions was suspended. Taxpayers are no longer able to itemize deductions that exceed 2 percent of their adjusted gross income.3

Tax penalties

The only thing worse than giving Uncle Sam his due is leaving him a tip.

To avoid a potentially hefty late-filing penalty, you must submit your income tax return on time, regardless of whether or not you can afford to pay.

Indeed, the failure-to-file penalty can be as much as 5 percent of your unpaid taxes for each month or part of a month that your tax return is late, up to 25 percent of your unpaid taxes.

By comparison, the penalty for failure to pay is far less: one-half of 1 percent of your unpaid taxes for each month or part of a month for which your balance is unpaid after the due date, up to a maximum of 25 percent.

If you can’t afford to pay your taxes in full, you can reduce additional interest and penalties by paying as much as you can with your tax return, according to the IRS.

Remember, too, that simple mistakes on your tax return may result in a rejected claim or underpayment of your balance due, which opens the door to late-payment penalties.

According to the government, the most common errors include missing signatures, math errors, insufficient postage, and incorrect identification information such as name, taxpayer identification number, and current address. Others select the wrong filing status, forget to date their return, or check the wrong exemption boxes for their personal, spousal, and dependency exemptions.

Double-check before you file to minimize the risk of costly penalties.

Submitting your tax return electronically ensures greater accuracy than mailing it in since the IRS e-file system flags common errors and kicks back returns for correction.

Tax credits

When it comes to lowering your taxable income, you are your best advocate.

Tax deductions, which reduce the amount of your income subject to tax, are great, but tax credits, which reduce your tax bill dollar for dollar, are even better. So don’t leave any tax credits or deductions for which you are eligible on the table. (Related: Overlooked deductions and credits )

Families with dependent children may be eligible to claim a credit of up to $2,000 per qualifying child under the Child Tax Credit. The tax-reform law increased the modified adjusted gross income phaseout limit for joint filers to $400,000 from $110,000, making it easier for many families to qualify. The phaseout limit for all other filers is $200,000. Additionally, a non-refundable credit of $500 is provided for certain non-child dependents.

If you paid for someone to care for your child, spouse, or dependent so you could work or look for a job, you may be able to claim the Child and Dependent Care Credit. The amount of the credit is a percentage of the amount of work-related expenses you paid to a caregiver, and is based on your income. Total expenses may not exceed $3,000 for one child or dependent or $6,000 for two or more qualifying individuals, and the amount of your credit is between 20 percent and 35 percent of allowable expenses.

Low- to moderate-income taxpayers, especially families, should also check to see if they can claim the valuable Earned Income Tax Credit. For tax year 2019, the maximum credit for those with no children is $529, while those with one child may receive a credit of $3,526, two children $5,828, and three or more children $6,557. To qualify, you must meet certain federal requirements and file a tax return, even if you owe no taxes.

Single taxpayers with adjusted gross income of $32,000 or less in 2019 ($64,000 for married couples filing jointly) may also be able to claim the Retirement Savings Contributions Credit, or Saver’s Credit, which provides a credit up to $2,000 ($4,000 for married couples filing jointly) for amounts they voluntarily save for retirement, including amounts contributed to their IRAs, 401(k) plans, and other workplace savings plans.

Similarly, those paying for higher education expenses may be able to claim one of two tax credits: the American Opportunity Tax Credit, which provides up to $2,500 in tax credits on qualifying education expenses, or the Lifetime Learning Credit, which may be as high as $2,000 per eligible student. You cannot claim both credits for the same student in the same year.

If you haven’t yet filed your tax return for 2019, there’s still much you can potentially do to minimize the amount you may owe.

By taking advantage of tax-favored retirement tools, filing an accurate return, and educating yourself on available deductions and credits, you might just save enough to pay off your credit card debt or catch a flight somewhere warm.

Learn more from MassMutual…

Life insurance: 3 income tax advantages

Building your financial pyramid

Need financial advice? Contact us

This article was originally published in March 2019. It has been updated.

_______________________________________

Internal Revenue Service , “Retirement Topics – Contribution,” Nov. 22, 2019.

Internal Revenue Service, “2019 IRA Deduction Limits – Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work,” Nov. 18, 2019.

Internal Revenue Service, “ Publication 529 Miscellaneous Deductions,” December 2019.

What is the ‘right’ measure of pension liability?

When having discussions with defined benefit (DB) plan sponsors, financial intermediaries, and many of my “non-actuary” peers, we frequently land on a somewhat technical and confusing question. When determining a plan’s funded status, it’s usually very simple to measure the current value of DB plan assets, but it’s not as simple to arrive at an answer for the liability side of the equation. When someone asks, “what’s my funded status,” the real question should be, “what’s the right measure of pension liability to use?” And, the answer is, it depends.

As we mentioned in our Pension Risk Study, it’s important to help plan sponsors clarify and identify which liability measure is appropriate to use given the situation. Here’s a quick summary of some of the most commonly used measures of liability for a variety of objectives, and the associated calculation bases and assumptions:

  • When determining the required contribution to the plan that will satisfy minimum funding rules, the PPA (Pension Protection Act of 2006) liability is the appropriate basis to use. While initially the liability number for required contribution purposes was determined based on a 2-year average of corporate bond yields, additional relief subsequent to PPA has effectively extended the 2-year averaging period to 25 years.
  • For accounting purposes, the Pension Benefit Obligation (PBO), the liability is determined using a spot rate based on the plan’s cashflows using double-A corporate bond yields.
  • To calculate Pension Benefit Guaranty Corporation (PBGC) premiums, the calculation is similar to the PPA basis noted above with one exception: there is no relief with respect to the averaging period; it remains at 2-years.
  • To measure the liability associated with a plan termination, generally, insurance company annuity rates are the basis to use. However, for plans that permit lump sum distributions, corporate bond yields are also used in the calculation.

Now, although each of these liability calculations is very important and each serves a different purpose, the key is to understand the various measures and uses to ascertain a holistic view of the plan’s finances.

In addition, it’s very important to consider discount rate and yield rate trends when performing financial forecasting. This is best accomplished by obtaining frequent market updates, such as the MassMutual Quarterly DB Market Commentary, and basing forecasts on the most current economic data available.

Here at MassMutual, our team of actuarial consultants are available to provide expert support and guidance to help sponsors and their financial intermediaries navigate this technical subject matter. We’d appreciate the opportunity to discuss ways we can help achieve plan sponsor goals with you. To learn more, please contact us today at DBSales@MassMutual.com or 1-800-874-2502, option #4.