Medicare, the Retiree Plan, and a One-Time Capital Gain
Eleanor, 67, retired at 65 and enrolled in Medicare Parts A and B. She kept her former employer's retiree health plan, which pays secondary to Medicare and includes creditable prescription drug coverage. She never joined a standalone Part D plan. In January she had a five-day inpatient stay for pneumonia, followed by 30 days of skilled nursing facility rehabilitation. For that year the Part A inpatient deductible is $1,676 and the SNF coinsurance for days 21–100 is $209.50 per day. Her Part B premium is based on a 2023 MAGI of $210,000 from a one-time rental property sale, and she asks whether an SSA-44 appeal will lower it. She is also considering dropping the retiree plan for Medigap Plan G.
1. Calculate Eleanor's Medicare cost-sharing for the hospital stay and the SNF stay, and explain who pays what.
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Break the episode into two benefits:
Inpatient hospital, 5 days (Part A)
- Part A deductible: $1,676 - she pays, once per benefit period
- Days 1–60 coinsurance: $0
- Hospital subtotal: $1,676
Skilled nursing facility, 30 days (Part A)
- Days 1–20: covered in full, $0
- Days 21–100: $209.50 per day coinsurance
- Days 21–30 = 10 days × $209.50 = $2,095
- SNF subtotal: $2,095
Total Medicare cost-sharing: $1,676 + $2,095 = $3,771.
Medicare pays the rest of the approved amounts. Note what is not covered: she must have a qualifying 3-day inpatient stay (not observation) before SNF coverage begins, and SNF coverage requires skilled care, not custodial care.
Who absorbs the $3,771? Her retiree plan pays secondary - it may cover some or all, depending on its terms. A Medigap Plan G would cover the Part A deductible and the SNF coinsurance, but Plan G does not cover the Part B deductible.
2. Can Eleanor now buy Medigap Plan G with guaranteed issue, and should she drop the retiree plan?
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Timing problem. The Medigap open enrollment period is a one-time six-month window beginning the month she is 65 and enrolled in Part B. Eleanor is 67, so that window closed long ago.
Outside guaranteed-issue windows, insurers may medically underwrite: they can charge more or decline her outright. Guaranteed issue after the open enrollment period is limited to specific triggers - losing creditable coverage (including employer or retiree plan termination), moving out of a plan's service area, or a Medicare Advantage plan leaving the area. Simply preferring Plan G is not a trigger.
Should she drop the retiree plan? Probably not without a guaranteed-issue trigger. Risks:
- She may not qualify for Medigap at all.
- Dropping retiree coverage is typically irreversible - she cannot re-enroll later.
- The retiree plan includes creditable drug coverage; dropping it for a standalone Part D plan without checking formularies and network could cost more.
The exception: if the employer later terminates retiree coverage, that is a guaranteed-issue event, and she should apply within the state's window (commonly 63 days).
3. Will an SSA-44 appeal reduce her income-related premium, and does she owe a Part D late enrollment penalty?
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IRMAA. Medicare premiums are based on MAGI from two years prior - 2023 income sets her current-year Part B and Part D premiums. At $210,000 she is well above the single threshold and pays an income-related surcharge on both Parts B and D.
An SSA-44 appeal requires a qualifying life-changing event: work stoppage or reduction, marriage, divorce, death of a spouse, loss of income-producing property due to a disaster, or employer bankruptcy. A voluntary one-time capital gain from selling a rental property is not on the list - she chose to realize that gain. So the appeal will likely be denied, and she pays the surcharge for the year.
However: the surcharge is not permanent. IRMAA is recalculated annually on the two-year lookback, so once the $210,000 year ages out of the lookback, her premium drops back automatically. She should file the SSA-44 only if her retirement itself reduced her income in a way that has not yet been reflected.
Part D penalty. No penalty applies. The retiree plan's drug coverage is creditable, which means it is at least as good as standard Part D. Creditable coverage prevents the late enrollment penalty, which is otherwise 1% of the national base beneficiary premium per month without creditable coverage, added permanently.
Caution: if she drops the retiree plan and goes 63 days or more without creditable drug coverage, the penalty clock starts and follows her for life.