Paying more than you expected? Let's talk it through

When signing up for Medicare, you might see a higher monthly bill than expected. Depending on your income, you could pay a higher share of Medicare. This surcharge is known as IRMAA, and we are here to answer any questions you have on what it means for your budget.

Introducing IRMAA and its purpose

Medicare Part B and Part D provide important coverage for many beneficiaries, but higher-income individuals may be required to pay an additional premium known as the Income-Related Monthly Adjustment Amount (IRMAA). The purpose of IRMAA is to ensure that those with higher incomes pay a larger share of their Medicare costs.

Who is affected by IRMAA and how is it calculated?

IRMAA is based on a beneficiary's modified adjusted gross income (MAGI), which includes any taxable Social Security, Railroad Retirement benefits, and other types of income. It is determined by the Centers for Medicare & Medicaid Services (CMS) each year and typically applies to individuals with incomes above certain thresholds.

How is IRMAA applied?

IRMAA is typically deducted from a beneficiary's Social Security benefits. However, suppose a beneficiary does not receive Social Security benefits, or their income exceeds the threshold set by CMS. In that case, they may be required to make an additional payment to cover the IRMAA. This amount is then applied to their Medicare Part B and/or Part D premiums.

How does the Social Security Administration determine if someone needs to pay an additional premium for Medicare Part B or Part D coverage?

The Social Security Administration uses the individual's modified adjusted gross income (MAGI) to determine if they must pay an additional premium for Medicare Part B or Part D coverage. MAGI includes any taxable Social Security, Railroad Retirement benefits, and other types of income reported on tax returns.

What are the income thresholds that trigger IRMAA payments?

The MAGI used to calculate IRMAA is based on prior-prior year taxes. See the charts below for the income thresholds in 2023, based on your 2021 taxes.

Here's Part B:

Medicare Part B IRMAA Chart 2023

And here's Part D:

Medicare Part D IRMAA Chart 2023

How can beneficiaries appeal their IRMAA determination?

If a beneficiary disagrees with their IRMAA determination, they can file an appeal. The process involves submitting documents to support lower income or filing status and/or providing proof of certain financial exemptions such as institutionalization or disability. It is important to note that the appeal must be filed within 60 days from the date on the letter received from the Social Security Administration. For more information on the appeals process, please visit the Medicare website.

Tips on reducing your Medicare premiums with IRMAA in mind

If your income is above the threshold for IRMAA and you want to minimize your out-of-pocket expenses, there are a few tips that may help reduce your Medicare premiums. First, consider switching to an Advantage plan if available in your area. These plans typically offer lower premiums and may be more cost-effective than Original Medicare. Additionally, consider speaking to a tax professional about ways to lower your taxable income so you can avoid or reduce IRMAA payments. Finally, if you are enrolled in Medicare Part D coverage, compare prices among plans to find the one with the lowest premium and best drug coverage.

Questions to ask when considering a Medicare plan with higher premiums due to IRMAA

If your income is above the IRMAA threshold and you are considering a Medicare plan with higher premiums due to IRMAA, here are some important questions to ask:

• What additional coverage or services does this plan offer that would be beneficial?

• Will my out-of-pocket costs be lower if I switch to this plan?

• Are there any additional costs associated with the plan that I should be aware of?

• Is it possible to switch plans if I decide this one is not right for me?

By asking these questions, you will be better informed when making your decision, so you can find a Medicare plan that meets your needs.

Conclusion

IRMAA is an additional premium that some Medicare beneficiaries are required to pay for their Part B and/or Part D plans to ensure those with higher incomes are paying a larger portion of their healthcare costs. If you are concerned about paying beyond your budget for your Medicare plan, talk to an expert at Fair Square Medicare. Our team of experts can help you find the best plan for your unique situation.