Did you know that high-income earners may pay more on their Medicare Part B (Medical) and Part D (Prescription Drug) premiums? These surcharges are called income-related monthly adjustment amounts, also called IRMAA.
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What is the Income Related Monthly Adjustment Amount (IRMAA)?
IRMAA is a Medicare high income premium added to the standard Parts B and D Medicare premiums. IRMAA does not impact other Medicare costs like Part A, Part C (without a prescription drug plan), and out-of-pocket costs.
The Social Security Administration (SSA) decides whether you are subject to IRMAA based on your modified adjusted gross income (MAGI) from two years prior. For instance, for 2022, SSA checks tax data from 2020.
The following qualifies you for IRMAA in 2022:
- A single taxpayer whose MAGI exceeds $91,000
- A married couple whose jointly-filed MAGI exceeds $182,000
- A married couple (filing taxes separately) whose MAGI exceeds $91,000 each
SSA recalculates IRMAA yearly. Therefore, for years when your income falls below the threshold, you will not be paying this Medicare extra premium. Also, your IRMAA contributions may vary yearly, depending on your financial circumstances.
If you are eligible for IRMAA, the SSA will send you two letters. The first is the pre-determination notice. You should contact the SSA within ten days to clarify any errors. Then, you will receive a second letter – the IRMAA initial determination notice.
How does IRMAA affect your premiums?
Part B Premium
Let’s start with Part B. The standard monthly premium for Medicare Part B is $164.90 (in 2023). But with IRMAA, your monthly Part B premium will could be higher.
This article will show you the IRMAA Part B table. The rates vary depending on your tax filing status and income.
| Individual Filing | Joint Filing | Income-Related Monthly Adjustment Amount | Monthly Premium |
|---|---|---|---|
| Less than or equal to $97,000 | Less than or equal to $194,000 | $0.00 | $164.90 |
| Greater than $97,000 and less than or equal to $123,000 | Greater than $194,000 and less than or equal to $246,000 | $65.90 | $230.80 |
| Greater than $123,000 and less than or equal to $153,000 | Greater than $246,000 and less than or equal to $306,000 | $164.80 | $329.70 |
| Greater than $153,000 and less than or equal to $183,000 | Greater than $306,000 and less than or equal to $366,000 | $263.70 | $428.60 |
| Greater than $183,000 and less than $500,000 | Greater than $366,000 and less than $750,000 | $362.60 | $527.50 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | $395.60 | $560.50 |
Part D Premium
Next, let’s discuss Part D. A prescription drug plan can be a standalone plan to Original Medicare or bundled in a Medicare Advantage plan.
If you need to pay for IRMAA, your Medicare additional premium will be adjusted according to the table below depending on your tax filing status and income from two years prior. This cost is in addition to your Part D premium.
Refer to this IRMAA Part D table details. Just like Part B IRMAA, your Medicare extra premium depends on your filing status and income.
| Individual Filing | Joint Filing | Income-related monthly adjustment amount |
|---|---|---|
| Less than or equal to $97,000 | Less than or equal to $194,000 | $0.00 |
| Greater than $97,000 and less than or equal to $123,000 | Greater than $194,000 and less than or equal to $246,000 | 12.20 |
| Greater than $123,000 and less than or equal to $153,000 | Greater than $246,000 and less than or equal to $306,000 | 31.50 |
| Greater than $153,000 and less than or equal to $183,000 | Greater than $306,000 and less than or equal to $366,000 | 50.70 |
| Greater than $183,000 and less than $500,000 | Greater than $366,000 and less than $750,000 | 70.00 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | 76.40 |
How do you pay for IRMAA?
Your Part B and Part D Medicare extra premium (IRMAA) is automatically added to your monthly Medicare premiums.
Your premiums are deducted if you are receiving retirement benefits from Social Security or the Railroad Retirement Board.
However, if you have no retirement benefits, Medicare will send you a monthly bill. You have the option of paying through your bank, Medicare Easy Pay, by credit card, or by mailing a check or money order.
If your employer or a third-party system (like a retirement system or teacher’s union) pays your Part D premiums, you must pay this additional Medicare premium separately. That’s because your Part D IRMAA goes to Medicare, not to your private insurer.
Similarly, if you enroll in a Medicare Advantage (Part C) plan, you pay your IRMAA to Medicare directly rather than to your private insurer.
But remember – if you neglect to pay your IRMAA, you could lose your Part B and Part D coverage.
So, if you think that IRMAA does not apply to you, you should appeal as soon as you receive your predetermination notice. Or, if a life-changing event significantly lowered your income, you should proactively appeal your case.
How can you appeal an IRMAA determination?
There are two valid reasons to appeal IRMAA – a life-changing event or a miscalculation due to erroneous tax information.
Life-Changing Event
If your income is significantly lowered due to a life-changing event, you can appeal for a reduction (or removal) of IRMAA.
Here are eight situations that qualify as life-changing events:
- Marriage
- Divorce/Annulment
- Death of your spouse
- Work stoppage
- Work reduction
- Loss of income-generating property due to a disaster or other events beyond your control
- Decrease or loss of pension
- Employer settlement payment due to employer’s closure, bankruptcy, or reorganization
You will need to file Form SSA-44. The SSA will require documents to prove lower income – for example, your marriage certificate, your spouse’s death certificate, and copies of pay stubs.
Tax-related Adjustments
If you think that the SSA used erroneous tax data to determine IRMAA, contact them directly. The following situations may have happened:
- The IRS provided incorrect tax data to SSA
- SSA used tax data from more than two years ago
- You have an amended tax return on the same year that SSA determined your IRMAA
You will need a signed copy of your tax return or a transcript from the IRS to prove your case.
If your appeal was approved, the SSA would adjust (or eliminate) your Medicare high income premium.
However, if SSA denied your appeal, there is a formal appeal process called the Decision by Office of Medicare Hearings and Appeals (OMHA).
Are there other factors that could impact your IRMAA?
Since IRMAA is a Medicare high income premium, your income determines your eligibility.
Consider these before making financial decisions:
- The Secure Act extends the minimum age for receiving Required Minimum Distributions (RMDs) to age 72. This delay may reduce your IRMAA since your RMD is not yet income.
- The Secure Act also allows contributions to your Individual Retirement Account (IRA) after age 70 ½ if you are still earning an income. But once you start withdrawing from qualified funds like IRA, 401(k), or 403 (b), these become taxable income; thereby, increasing your Modified Adjusted Gross Income (MAGI).
- If your income is reduced by at least one tier or level because of a life-changing event, it is a good idea to appeal. The SSA may adjust your premiums based on your expected income this year.
- Your annual income increases whenever you sell real estate or engage in transactions that result in a significant capital gain.
- Whether you contribute to a Medicare Savings account (MSA). Withdrawals are tax-free as long as the funds are spent on qualified healthcare costs. These accounts lower your taxable income.
- If you don’t need your RMD to live on, consider donating to a charitable organization. By doing this, your RMD will not be part of your taxable income.
- Assess tax-free income streams like reverse mortgages.
Summary of Medicare Advantage Open Enrollment Period
Since IRMAA surcharges can be substantial, it is critical to consider the various factors that can impact your IRMAA. Finally, appealing an IRMAA determination is essential if your income falls because of significant life changes.
