As you near retirement, you may assume that once Medicare kicks in, your medical insurance premiums will stay fixed. However, if your income exceeds a specific threshold, you may have to pay more for Medicare Part B or D coverage due to a surcharge referred to as the income-related monthly adjustment amount (IRMAA). Here’s more information about how IRMAA affects Medicare premiums.
How is IRMAA Calculated?
The Social Security Administration (SSA) analyzes your most recent tax return to determine whether you must pay the IRMAA surcharge in addition to your existing monthly premium amount. Because of timing, this can often be your tax return from two years prior.
If the SSA finds you must pay a higher premium, they use a sliding scale based on your modified adjusted gross income (MAGI) to determine how much more you will pay. MAGI is your total adjusted gross income plus any tax-exempt interest income you have received in a tax year.
Note that Medicare Part B pays for doctor visits, outpatient care and related services, while Medicare Part D is related to your prescription drug coverage.
2023 IRMAA Brackets
The IRMAA 2023 threshold for married couples is $194,000. For any other filing status, it’s $97,000.
Once you cross these thresholds, you will pay more for coverage. How much more depends on how much you exceed these numbers. The SSA provides a chart to show you what you can expect in 2023.
The SSA calculates your IRMAA every year. So, while you may be subject to the surcharge one year, you may not the following year. If the SSA applies the IRMAA surcharge, they will let you know the amount in writing.
How Will IRMAA Affect My Premiums?
Usually, Medicare pays 75 percent of the Medicare Part B and D premiums, and you pay 25 percent. If you exceed the income threshold, you may pay anywhere from 35 percent to the total cost.
For example, if you are filing taxes as a married couple and make between $194,000 and $228,000 in 2023, you will see on the 2023 chart that your Part B premium will increase by $65.90. Your Part D premium will go up by $12.20.
What If I Don’t Think I Should Be Subject to IRMAA?
If the income listed on your most recently available tax return was much higher than what you are currently making or receiving, you can inform the SSA of the change in your finances.
For example, if you are now divorced, laid off or making less money than you were when your taxes were filed, and you can document this, you can appeal the surcharge. Complete the Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event form to ask the SSA to reassess the imposition of IRMAA.
You can also appeal the SSA’s decision if there was a change in your income that doesn’t necessarily constitute a life event. For example, if the IRS accepted an amended tax return for the year the SSA is using to calculate your IRMAA, you may be able to get the SSA to change its decision. If the SSA gets erroneous information about you from the IRS, this may also be a reason to appeal.
There are a few different ways to appeal the SSA’s IRMAA determination. You can submit an appeal in any of the following ways:
Speak to a Professional
If you have questions about IRMAA and your particular circumstances, we encourage you to speak with an experienced elder law attorney. Timing is important, so if you are in need of professional guidance, contact us as soon as possible after you receive notice of the IRMAA surcharge.