I'm trying to understand how Net Healthcare Expenses on the Tabular Projections page is calculated. What are the components that make up the total? I ask because the numbers I have under Expenses/Healthcare don't seem to match the total. Thanks.
@vertume This is the total of any automatically calculated Medicare premiums and manually specified premiums and out-of-pocket costs minus any ACA subsidies.
Stuart
I have the same question of understanding how the Net Healthcare Expenses on the Tabular Projections page is calculated, so I'll ask my question in this thread. This is for a year in which I turn 65 in October, so I have 9 months of ACA premiums, and 3 months of (auto-calculated) Medicare Part B premiums. On the EXPENSES\HEALTHCARE page I have the following inputs (see attached screengrab):
Period 3 Insurance Premiums: $223 (this is my ACA premiums for 9 months)
Period 5 Insurance Premiums Beyond Calculated Values: $450 (this is my Part C and Medigap premiums for 3 months)
Auto-Calculate Medicare Premiums: checked
Assume ACA health insurance when eligible? In Period 3? : checked
Long Term Care (LTC) Annual Cost: $1218
Long Term Care (LTC) Start Age: 64
On the Tabular Projections \ Expenses Page, the following results are shown for the first year:
Medicare Premiums (Parts B & D): $494 (My understanding is that this is the auto-calculated Part B Premiums)
Net Healthcare Expenses: $1777
ACA Subsidy Amount: $211
I would then expect the Net Healthcare Expenses to be:
494 + 223 + 450 + 1218 - 211 = 2174
What am I missing in this calculation?
Thanks, Doug
@d-ruthsbcglobal-net Doug, I respectfully request that you send me (to mail@pralanaconsulting.com) a representative export file and I'll be happy to explain the numbers; however, I am on vacation for the next two weeks but will respond as quickly as I can.
Stuart
@d-ruthsbcglobal-net I believe you have to put your full year premiums for ACA (without subsidies!!) and Medicare and let Pralana do the math for the partial year for both when you turn 65. Pralana uses annual/yearly costs. Some of those numbers, like LTC, look very low to me.
Another mistake people commonly make is to not fill in the second lowest silver cost plan for their zip code. Go to https://www.healthcare.gov/see-plans/#/ or your state exchange, fill out the quickie form (where you don't have to actually give all your personal info as if applying) and get a list of the *unsubsidized* costs for silver plans only (use the filters) and sort them by cost. Choose the second lowest.
Other obligations kept me from this issue for the past month. Thanks to those who responded.
@hines202 Bill, you were indeed correct about me not entering full-year premiums for ACA and Medicare premiums. Also, I don't remember if I had correctly entered the SLCSP, but I have reviewed that, and entered it, also for the entire 12 months. My LTC premiums were in fact $1218/year in 2023 ($101.50/month), thanks to purchasing the policy in 2012, through my employer at the time, with an inflation rider. LTC premiums were updated in early 2024 to $124.85/month ($1498/year).
This exercise is just a sanity check on PRC calculations and ensuring I understand how to correctly enter data, and how various numbers are derived, before I start doing some Roth Conversion scenarios. Because I'm also checking account balance growth, year to year, and comparing PRC calculated account balances vs reality, I'm using my account balance figures for the year 2023, so I have complete year-start and year-end balances. Hence I'm using the 2023 version of PRC so that I have correct tax rate and standard deduction figures for 2023.
The total for Net Healthcare Expenses on the Tabular Projections tab still does not quite agree with my expected calculations, by a delta of $234, so I'm probably missing some contribution to it. Below, I've repeated my earlier post with updated figures and updated screenshot.
This is for a year in which I turn 65 in October 2023, so I have 9 months of ACA premiums, and 3 months of (auto-calculated) Medicare Part B premiums, and Part D and MediGap premiums.
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EXPENSES\HEALTHCARE PAGE INPUTS: (SEE ATTACHED SCREENSHOT)
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Period 3 Insurance Premiums: $18105 (this is my annualized ACA premiums, for my Bronze plan, before subsidies, of which I will only be paying for 9 months)
Period 5 Insurance Premiums Beyond Calculated Values: $1800 (this is my annualized Medicare Part D and MediGap premiums, of which I will only be paying for 3 months)
Auto-Calculate Medicare Premiums: box is checked
2021 MAGI: $44178
2022 MAGI: $41352
Assume ACA health insurance when eligible? In Period 3? : box is checked
ACA Second Lowest Cost Silver Plan (SLCSP) Premium: $20358 (this is the total for 12 months)
Long Term Care (LTC) Annual Cost: $1218
Long Term Care (LTC) Start Age: 60
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TABULAR PROJECTIONS \ EXPENSES PAGE, FOR FIRST YEAR (2023):
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Medicare Premiums (Parts B): $466 (My understanding is that this is the auto-calculated Part B Premiums, presumably for the final 3 months after having turned 65)
ACA Subsidy Amount: $6119 (Presumably the subsidy amount for the 1st 9 months prior to turning 65. Assuming the PRC-calculated MAGI agrees with the MAGI on my FORM 8962, Line 2a, this would be the figure on Form 8962, line 24, Total PTC, correct?) (NOTE that there is a discrepancy here, but I'll ask about that in a separate forum post.)
Net Healthcare Expenses: $9828
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But I expected the calculations for Net HealthCare Expenses to be:
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NetHealthCareExpenses =
$ 466 : Medicare Prems (Pts B)
+ $ 1218 : LTC Prems
+ $ 1800 * 3 / 12: Medicare Prems (Part D & MediGap, last 3 months)
+ $18105 * 9 / 12: ACA Prems (first 9 months)
- $ 6119 : ACA Subsidy (first 9 months)
_______________________________________
$ 9594 : NetHealthCareExpenses
So a difference of $234 ($9828 - $9594) between what PRC calculates and my expected calculation.
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I'll separately email Stuart an updated export file since he previously asked for that.
Unrelated to how PRC calculates healthcare expenses, if you turn 65 in October 2024, you can take up to 3 months after the month of your birthday before you need to start Medicare coverage. This means you can sign-up for Medicare in December 2024 and have coverage start in January 2025, thereby saving you money by only paying the lower ACA costs (if they are indeed lower) for the final 3 months of 2024.
@d-ruthsbcglobal-net I'm sorry to have take so long to get to this. The issue is that your expectation is based on an approximation of 9 months on ACA insurance and 3 months on Medicare, but your birthday is actually October 7. That changes the fractions. You're on ACA for 76.4% of the year and Medicare for 23.5% of the year, and that results in the $234 difference you're trying to track down.
Stuart
@smatthews51 Thanks Stuart for your response. I'll make a few followup comments and observations to Stuart's response for the benefit of those who may have similar questions as mine and come across this thread. Stuart's response correctly explains the source of the discrepancy, but does raise a followup issue/question.
Based on my entered birthday of October 7, in the year 2023, October 7 is the 280th day of the year. Given 365 days in the year 2023, then the percentage of days after (and including) October 7 is 23.5616%, and the percentage before (and not including) October 7 is 76.4384%, as Stuart pointed out. Applying those percentages respectively to my Medicare premiums ($1800) and my ACA premiums ($18105), the figure for NetHealthCareExpenses then agrees with the PRC-computed amount ($9828). So that mystery/question has been resolved. However, I believe there is an issue with using these figures for PRC's calculation of the ACA and Medicare premiums for the year, and thus the computed value of NetHealthCareExpenses.
Medicare always starts on the 1st of the month, not on your birthday. Which month depends on when you filed your initial application. If your birthday is NOT on the first of the month, AND you signup in the 3 months prior to your birth month, THEN Medicare coverage will start on the 1st day of your birth month, in my case 10/1/2023. So with 10/1/2023 as my Medicare start date then the percentage of days of Medicare coverage is 25.2055% and the percentage of ACA coverage is 74.7945%. It's reasonable for PRC, lacking information on when you applied for Medicare, to assume Medicare starts on the 1st day of your birth month, October in my case. Note that IF your birthday is on the 1st of the month, THEN your coverage will start on the 1st day of the previous month.
However, the bigger issue, I think, is that Medicare and ACA premiums for the year, are based on 12 equal monthly premiums, so even using the ratio of days covered based on the 1st of the month, would result in incorrect computations for the ACA and Medicare premiums. Instead of the above percentages based on your birthday, the percentages should be based on the ratio of months of coverage for both Medicare and ACA, in my case 25% and 75% respectively.
I believe I'm correct on the above, but if not, am certainly open to being corrected.
I realize in the grand scheme of things, this is a small issue/discrepancy, and only affects the one year in which you sign up for Medicare. Just mentioning it for those who are as anal as I am on some things 😜 , and in case Stuart wants to clean that up.
Doug
@d-ruthsbcglobal-net You're correct, and it is a very small thing, especially in the context of this long-range planning tool mapping out decades into the future, the rest of your life. It's just not going to be down to the dollar for things. The idea is all things taken into account (market volatility, inflation, etc), all variables considered, what are the odds you'll be successful. A whole lot will happen between now and then, legislative changes (Secure 1 and secure 2 upended a lot of planning!) will happen. If you're on the razor's edge, these small things are important and count. I recommend building in cushion to account for small discrepancies.
