Do you have a higher than average income and are on Medicare or expecting to enroll in Medicare soon? You will likely need to pay for a Medicare surcharge which is called IRMAA (Income Related Monthly Adjustment Amount) if you have a higher income. In this blog, we will discuss how IRMAA is calculated, how to apply an appeal, and whether can IRMAA is avoided.
What Is IRMAA?
IRMAA is Income Related Monthly Adjustment Amount and IRMAA’s monthly charge is an increased premium charge to those who have a higher income for their Medicare Part B outpatient services and Part D which is prescription drug coverage. Medicare Part B and Part D have monthly premiums that you must pay for insurance coverage. Standard Medicare Part B premium (170.10$) is paid by everyone, but your Part D premium can vary and depends on which Part D drug plan you choose.
When you apply for Part B and Part D the Social Security Office will look at your income from two years ago and decide about IRMAA. If your annual income is reported on your IRS tax return your Medicare premiums will likely be adjusted higher using this IRMAA determination. In other words, your Medicare Part B and Part D monthly premiums will be higher in comparison to other Medicare beneficiaries. IRMAA is usually added to your monthly premiums a couple of months later because SSA takes the time to calculate if your income is high enough to affect your Part B and Part D monthly premiums.
How Is IRMMA Calculated?
The center for Medicare and Medicaid Services or CMS and Social Security determines Medicare beneficiaries’ eligibility for IRMAA payments by calculating each beneficiary’s Annual Modified Adjusted Gross income. This is your adjusted gross income from your tax return with some deductions added back. The government recalculates your annual modified adjusted income from the last two years. This means that your 2023 income would determine your IRMAA surcharge for 2025.
Deductions that are added back to your income to determine your Annual Modified Adjusted Gross Income include non-taxable Social Security payments and all your passive income or loss. For example, if your tax return income is from 91 000$ to 114 000 dollars your Part B monthly premium cost will be 238.10$ instead of 170.10$.
However, your IRMAA status can change each calendar year due to your income change or change in the income table.
Can I File An Appeal For An IRMMA Surcharge?
Yes, you can file an appeal for an IRMAA surcharge. If is determined that you need to pay an IRMAA surcharge you’ll receive an initial notice from Social Security and that notice will include information on how to request a new determination and you can appeal if you think that calculation was in some way incorrect. For example, if you amend your previous tax return due to a change of life events and now you have a lower income or other life-changing events like the death of a spouse or a divorce, if you start working part-time, have stopped working, etc.
To request a new determination you’ll need to file an SAA-44 Medicare IRMAA life-changing event or go to the Social Security Office in person.
Can I Avoid An IRMAA Surcharge?
To avoid the IRMAA surcharge you can avoid activities that can influence your income in the next to years before applying for Medicare, but for that, you’ll need to plan ahead. For example, if you sold a house two years prior and enroll in Medicare you will pay for an IRMAA surcharge because selling it made your income much higher and you maybe didn’t even realize that you’ll be under IRMAA determination until it is time to enroll in Medicare program.
Lots of Medicare beneficiaries also think that they can avoid an IRMAA surcharge if they enroll in the Medicare Advantage plan ( Part C) instead of Original Medicare. But, this isn’t true. You can’t avoid the IRMAA surcharge with the Medicare Advantage plan if you have a higher income and are determined to pay for it.
If you have additional questions about Medicare costs, call us or text us today. Our experienced Medicare agents in Jersey Insurance Solutions will be happy to help!
Thomas M. Brzezinski is one of the founding partners of WMAG William & Michael Advisor Group LLC and Jersey Insurance Solutions. He has been involved in the insurance industry for over ten years and specializes in developing client relationships that last a lifetime.
