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Medicare May Update Fraud Victim Income Rules

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What You Need to Know

  • The project could affect Medicare beneficiaries who get income-linked benefits and are victims of fraud.
  • Some high-income fraud victims can already cite the impact of the fraud when asking regulators to cut their Medicare Part B bills.
  • Regulators could make victims of more types of fraud eligible for Medicare Part B cost cuts.

The Social Security Administration could change the way it handles the effects of fraud and theft on people who are using income-linked Medicare features.

The agency already considers certain types of fraud when calculating the “income-related monthly adjustment amount,” or IRMAA, for a Medicare beneficiary.

The agency is now thinking about building new types of fraud into IRMAA calculations.

The federal Office of Management and Budget has given the public a glimpse of the IRMAA fraud definition project in a project review item published on a government regulation tracking website.

Medicare and IRMAA

Most Medicare enrollees have paid their Medicare Part A hospitalization benefits premiums by paying payroll taxes in their working years, or they are getting Medicare Part A coverage at no charge because of the payroll taxes their spouses or former spouses have paid.

Some relatively high-income enrollees do have to pay income-adjusted amounts for Medicare Part B hospitalization and physician services coverage, and for Medicare Part D prescription drug coverage.

This year, for example, a single client with modified adjusted gross income of $88,000.01 to $111,000 would face a $59.40 Medicare Part B monthly premium adjustment, according to a Social Security Administration form that explains how to address “life-changing events” when calculating an IRMAA.

A married client who files separately, lives with a spouse during part of the tax year, and has modified adjusted gross income over $411,999.99 could face a monthly adjustment of $356.40.

Monthly income-related adjustments for Medicare Part D prescription drug premiums could range from $12.30 to $77.10.

Life-Changing Events

The Social Security Administration handles Medicare eligibility determinations.

Medicare beneficiaries can ask the agency to change the monthly premium adjustments to reflect the impact of “life-changing events.”

The list of life-changing events now includes marriage; divorce or annulment; the death of a spouse; work stoppage; work reduction; loss of pension income; an employer settlement payment; or loss of income-producing property.

The item for loss of income-producing property can include the effects of fraud on the value of the property.

The life-changing events form describes who can report a property-related life-changing event this way:

You or your spouse experienced a loss of income-producing property that was not at your direction (e.g., not due to the  sale or transfer of the property). This includes loss of real property in a Presidentially or Gubernatorially-declared disaster area, destruction of livestock or crops due to natural disaster or disease, or loss of property due to arson, or loss of investment property due to fraud or theft

The IRMAA Fraud Definition Project

The Social Security Administration seems open to hearing from the public about how it should update consideration of the impact of fraud in connection with IRMAA calculations.

“We are seeking information from the public on the type of information to consider when contemplating potential changes to our regulations concerning life-changing events resulting from fraud or criminal theft to respond to new types of fraud,” officials say in the project abstract. “This information will help us provide more effective relief to adversely impacted beneficiaries.”

The project was first included in the government’s regulatory agenda this past spring.

OMB is now reviewing an advanced notice of proposed rulemaking related to the project. OMB review of a notice means that the notice could appear in the Federal Register, a government regulation publication, in the next few months.

Before any changes could take effect, the Social Security Administration would have to post a request for information; review any submissions from the public; draft regulations or guidance; complete work on the regulations or guidance; and implement any changes.

In some cases, federal agencies implement proposed procedure changes quickly. In other cases, they may take decades to implement proposed changes, or shelve proposed changes and leave procedures as is.

What the Project Means

Eventually, adjustments to the life-changing event rules could affect agents, brokers and advisors who help clients with questions about IRMAA.

Any adjustments could also have an indirect effect, by influencing how other federal, state and commercial organizations set the rules for how they respond to consumers who say they are facing hardship due to fraud or theft.