by John Paré
About this time each year we provide you with details regarding annual adjustments in the Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Medicare programs. In 2019 approximately 67 million Americans will see a slight cost-of-living (COLA) increase (2.8 percent) in their benefit amounts. Thus, come January, monthly checks will be a few dollars higher.
The 2019 amounts appear below along with some concepts which are always good to know about the Social Security and Medicare programs if you want to understand your rights. The COLA adjustment (if any) is based upon the consumer price index (CPI-W), which measures the inflationary rate against the wages earned by the approximately 173 million workers across the nation over the previous four quarters starting with the third quarter of the previous year. Okay, here are the numbers.
FICA and Self-Employment Tax Rates: If you have a job, you know that you do not bring home everything you earn. 7.65 percent of your pay, for example, is deducted to cover your contribution to the Old Age, Survivors, and Disability Insurance (OASDI) Trust Fund and the Medicare Hospital Insurance (HI) Trust Fund. Specifically, 6.20 percent covers OASDI, and 1.45 percent is contributed to the HI Trust Fund. Additionally, your employer is required to match this 7.65 percent for a total of 15.30 percent.
For those who are self-employed, there is no “employer” to match the 7.65 percent. Thus, a self-employed individual pays the entire 15.30 percent of her income. These numbers will not change in 2018 whether an individual is employed or self-employed. As of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes not including the above amounts.
For the OASDI Trust Fund, there is a ceiling on taxable earnings, which was $128,400 per year in 2018 and will jump to $132,900 in 2019. Thus, for earnings above $132,900, there is no 6.20 percent deducted for OASDI. As for Medicare, there is no limit on taxable earnings for the HI Trust Fund.
I always like to compare the OASDI Trust Fund to an insurance policy. You have to pay a premium to participate. Therefore, to qualify for Retirement, Survivors, or Disability Insurance benefits, an individual must pay a minimum amount of FICA taxes into the OASDI Trust Fund by earning a sufficient number of calendar quarters to become fully insured for Social Security benefits.
In 2018 credit for one quarter of coverage was awarded for any individual who earned at least $1,320 during the year, which means that an individual would have needed to earn at least $5,280 to be credited with four quarters of coverage. In 2019 the amount increases to $1,360 for one calendar quarter or $5,440 to earn four quarters of coverage for the year.
A maximum of four quarters can be awarded for any calendar year, and it makes no difference when the income is earned during that year. Basically, the taxes you pay into the OASDI and HI Trust Funds are your premiums to participate in the Social Security and Medicare programs.
The total number of quarters required to be eligible for benefits depends on the individual’s age. The older the individual, the more quarters are required. Furthermore, a higher average income during an individual’s lifetime means a higher Social Security or SSDI check when benefits start. Remember the above quoted numbers for quarters of coverage to become fully insured are only minimum amounts.
This concept is often misunderstood. The amount of earnings required to use a trial work month is based not upon the earnings limit for blind beneficiaries, but rather upon the national average wage index. In 2018 the amount required to use a TWP month was only $850, and this amount will increase to $880 in 2019.
If you are self-employed, you can also use a trial work month if you work more than eighty hours in your business, and this limitation will not change unless expressly adjusted.
The earnings limit for a blind beneficiary in 2018 was $1,970 per month and will rise to $2,040 in 2019. Remember this is not the TWP amount. This is to say that the TWP can be exhausted even if your income is well below $2,040 per month. See the above information about the TWP.
In 2019 a blind SSDI beneficiary who earns $2,041 or more in a month (before taxes but after subtracting unincurred business expenses for the self-employed, subsidized income for the employed, and impairment-related work expenses) will be deemed to have exceeded SGA and will likely no longer be eligible for benefits.
In January of 2019 the average amount of SSDI benefits for a disabled worker is estimated to rise by about $34 to $1,234. Pursuant to the Social Security Act, a cost-of-living adjustment occurs automatically when there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W indicated an inflationary rate of 2.8 percent between the third quarter of 2017 and the third quarter of 2018. Thus, there is a corresponding COLA increase in 2019 and an increase in monthly benefit amounts.
The federal payment amount for individuals receiving SSI in 2018 was $750 and will increase to $771 in 2019, and the federal monthly payment amount of SSI received by couples will rise from $1,125 to $1,157.
In 2018, the monthly amount was $1,820 and will increase to $1,870 in 2019. The annual amount was $7,350 and will be $7,550 in 2019. The asset limits under the SSI program will remain unchanged at $2,000 per individual and $3,000 per couple.
Signed on December 19, 2014, the ABLE Act will have a significant impact on resource limits associated with the SSI and Medicaid programs for those who were blind or disabled by the age of twenty-six. Traditionally, SSI beneficiaries have been required to adhere to strict resource limits: such as a maximum of $2,000 in the bank for an individual receiving SSI benefits. Under the ABLE Act, however, the amount on deposit in an ABLE Account can be much higher.
ABLE Account contributions must be designated specifically for purposes such as education, housing (with a cautionary warning to follow), employment training and support, assistive technology, health, prevention and wellness, financial management, legal fees, and funeral and burial expenses. The required implementing regulations are being enacted in most states. Check with your financial institution of choice for a status of ABLE Act regulations in a specific state.
As to the warning about ABLE Account contributions for housing, it is important to note that SSI beneficiaries may still face the traditional $2,000 resource limit for ABLE Account funds designated for housing. Thus, SSI beneficiaries should consider the many other purposes not subject to the traditional resource limits when making ABLE Account contributions. Because there are also tax advantages associated with ABLE accounts, both SSDI and SSI beneficiaries should consult a financial advisor about establishing an ABLE Account.
Medicare Deductibles and Coinsurance: Medicare Part A coverage provides hospital insurance to most Social Security beneficiaries. The coinsurance amount is the hospital charge to a Medicare beneficiary for any hospital stay. Medicare then pays the hospital charges above the beneficiary’s coinsurance amount.
The Part A hospital inpatient deductible was $1,340 in 2018 and increases to $1,364 in 2019. The coinsurance charged for hospital services within a benefit period of no longer than sixty days will remain at $0, as it has for the past several years. From the sixty-first day through the ninetieth day, the daily coinsurance amount was $335 per day in 2018 and will rise slightly to $341 in 2019. Each Medicare beneficiary has sixty lifetime reserve days that may be used after a ninety-day benefit period has ended. Once used, these reserve days are no longer available after any benefit period. The coinsurance amount paid during each reserve day used in 2018 was $670 and in 2019 will be $682.
Part A of Medicare pays all covered charges for services in a skilled nursing facility for the first twenty days following a three-day in-hospital stay within a benefit period. From the twenty-first day through the one hundredth day in a benefit period, the Part A daily coinsurance amount for services received in a skilled nursing facility was $167.50 for 2018 and will rise just slightly to $170.50 in 2019.
Most Social Security beneficiaries have no monthly premium charge for Medicare Part A coverage. Those who become ineligible for SSDI can continue to receive Medicare Part A coverage premium-free for at least ninety-three months after the end of a trial work period. After that time the individual may purchase Part A coverage. The premium rate for this coverage during 2018 was $422 monthly and increases to $437 in 2019.
The annual deductible amount for Medicare Part B (medical insurance) in 2018 was $183 and will rise to $185 in 2019. The Medicare Part B monthly premium rate for 2018 was $134 per month and will rise to $135.50 in 2019. For those receiving Social Security benefits, this premium payment is deducted from your monthly benefit check. Individuals who remain eligible for Medicare but are not receiving Social Security benefits due to work activity must directly pay the Part B premium quarterly—one payment every three months. Like the Part A premiums mentioned above, Part B is also available for at least ninety-three months following the trial work period, assuming an individual wishes to have it and, when not receiving SSDI, continues to make quarterly premium payments.
Programs That Help with Medicare Deductibles and Premiums: Low-income Medicare beneficiaries may qualify for assistance through four Medicare Savings Programs. We will discuss three of them here and leave the fourth one alone because (to qualify for it each year) you must already be on it, and you know who you are. Note: the amounts below may change in 2019. We begin with the Qualified Medicare Beneficiary program (QMB) and the Specified Low-Income Medicare Beneficiary program (SLMB).
To qualify for the QMB program in 2018, an individual’s monthly income could not exceed $1,032, and a married couple’s monthly income could not exceed $1,392. To qualify for the SLMB program in 2018, an individual’s monthly income could not exceed $1,234, and a married couple’s monthly income could not exceed $1,666.
Both the QMB and SLMB programs are administered by the Centers for Medicare and Medicaid Services in conjunction with the states. The rules vary from state to state, but the following can be said: As of 2018, resources (such as bank accounts or stocks) could not exceed $7,560 for one person or $11,340 per couple.
Under the QMB program, states are required to pay the Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) premiums, deductibles, and coinsurance expenses for Medicare beneficiaries who meet the program’s income and resource requirements. Under the SLMB program, states pay only the full Medicare Part B monthly premium. Eligibility for the SLMB program may be retroactive for up to three calendar months.
The third program, known as the Qualified Disabled and Working Individuals (QDWI) Program, pays Part A premiums only and has resource limits of $4,000 for one person and $6,000 for a married couple. As to these programs, resources are generally things you own. However, not everything is counted. Examples of things that don’t count include the house you live in, one car, a burial plot (or $1,500 put aside for burial expenses), and furniture.
If you qualify for assistance under the QMB program, you will not have to pay the following: Medicare’s hospital deductible amount, the daily coinsurance charges for extended hospital and skilled nursing facility stays; the Medicare Part B (Medical Insurance) premium, the annual Part B deductible; and the coinsurance for services covered by Medicare Part B, depending on which doctor you go to (these services include doctor services, outpatient therapy, and durable medical equipment). If you qualify for assistance under the SLMB program, you will be responsible for the payment of all of the items listed above except for the monthly Part B premium, depending on your circumstances.
If you think you qualify but you have not filed for Medicare Part A, contact Social Security to find out if you need to file an application. Further information about filing for Medicare is available from your local Social Security office or Social Security’s toll-free number 800-772-1213.
Remember that only your state can decide if you are eligible for help from the QMB or SLMB program and also that the income and resource levels listed here are general guidelines, with some states choosing greater amounts. Therefore, if you are elderly or disabled, have low income and very limited assets, and are a Medicare beneficiary, contact your state or local Medicaid office (referred to in some states as the Public Aid Office or the Public Assistance Office) to apply. For more information about either program, call the Centers for Medicare and Medicaid Services (CMS) on its toll-free number 800-633-4227, or visit Medicare.gov.