ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President.


The 2003 Medicare Prescription Drug Act not only brought Medicare Part D into existence, but made significant changes to the way in which Medicare Part B premiums are calculated. Beginning in 2007, about 1.5 million seniors will be required to pay higher premiums under a new means test. Part B covers doctor's visits and outpatient care. Means testing will not apply to Medicare Part D premiums.

Currently, premiums are set at a level equal to 25% of the estimated Part B spending in any given year, with the other 75% paid by the government. Under the means-tested provision, the government subsidy will be reduced for higher income individuals. For the wealthiest individuals, the subsidy will decline from 75% to 20%. The change will be phased in over three years, with the premiums calculated on a sliding scale based on annual gross income. The means test will apply to single individuals with annual adjusted gross incomes greater than $80,000, and couples with annual adjusted gross incomes greater than $160,000.

To illustrate the effect of the means testing, the 2006 Part B premium is $88.50 per month, and this premium is expected to rise to at least $98.20 in 2007. Individuals with annual incomes from $80,000 to $100,000 will pay approximately $111.20 per month, those with annual incomes from $100,000 to $150,000 will pay approximately $130.70 per month, those with annual incomes from $150,000 to $200,000 will pay approximately $150.10 per month, and those with annual incomes over $200,000 will pay $169.50 per month. These estimates are provided by the Centers for Medicare and Medicaid Services. When means testing is fully phased in by 2009, individuals with annual incomes over $200,000 may pay as much as $314.60 per month. This is more than three times the premium for individuals with annual incomes less than $80,000.

In preparation for means testing in 2007, the Internal Revenue Service will release tax return information to the Social Security Administration (SSA). This will allow the SSA to identify beneficiaries that will be subject to the means testing. The premium will be based on adjusted gross income, with some modifications, and the premium will be based on income from the two tax years prior to the year SSA determines the individual’s eligibility for means testing. Modified adjusted gross income from a tax year more recent than what the IRS provides will be used when:

• The beneficiary experiences a major life-changing event;

• The major life-changing event in question results in a significant reduction in the individual's adjusted gross income;

• The beneficiary requests that the SSA use a more recent tax year's modified adjusted gross income; and

• The beneficiary provides evidence of the event and evidence of the reduction in modified adjusted gross income.

Life-changing events include the death of a spouse, marriage, divorce, full or partial work stoppage, loss of income from income-producing property (when the loss is not at the beneficiary's direction), and certain losses or reduction of pension benefits. Beneficiaries will be able to use the new SSA-44 from to report life-changing events when the form becomes available.

This change to the calculations for the Medicare Part B premium represents a significant shift in philosophy regarding Medicare, and it illustrates the need for careful planning. Seniors may want to adjust their financial and tax plans so that they can minimize the effect of this change. The attorneys at The Estate Planning & Elder Law Firm, P.C. can assist seniors with reviewing and updating their financial, tax and estate plans to respond to changes in the law and the client's circumstances.


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The Estate Planning & Elder Law Firm, P.C.

The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter. The Estate Planning & Elder Law Firm, P.C. thanks the law firm of Hook Law Center for their input to this newsletter.

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