Are you considered high-income by Medicare? If so, you’ll have to deal with Medicare IRMAA. Many people don’t understand how Medicare IRMAA works, much less how to appeal it, so they end up with unexpected and sometimes unnecessary costs. If that’s you, don’t worry. We’re here to help.
This article will teach you how to understand and appeal Medicare IRMAA. We’ll first explain what Medicare IRMAA is, how it’s calculated, who is affected by it, then teach you how to appeal it. Let’s get started.
How to Understand and Appeal Medicare IRMAA
As promised, we’re going to show you how you can appeal an IRMAA if you’re assessed one by Medicare. But first, let’s explain what IRMAA is, and how it’s calculated.
What is an IRMAA?
IRMAA stands for Income Related Monthly Adjusted Amount. Basically, if your income is above a certain level, Medicare may require you to pay an extra amount in addition to your Part B or Part D premium.
How Medicare Premiums Work
Let’s start at the beginning. When you get involved in the Medicare system, you’ll realize there are four major parts to Medicare, Medicare A, B, C, and D. Medicare Part A is everything related to inpatient services, Part B is for outpatient and doctor services, Part C is Advantage plans, and Part D is prescription drug plans.
Out of these four Medicare parts, A is the only one that is zero premium (in other words, it won’t cost you anything). As long as you’ve paid into the Medicare tax system for at least 40 quarters, which is 10 years of work, there will be no premium assessed to you for Medicare Part A. But everything else in Medicare (Part B, C, and D) will carry a premium.
The Part B premium, which is $170.10 a month as of 2022, comes directly out of your Social Security check (or they bill you quarterly for it). Part C (Advantage plan) premiums range anywhere from about zero to $49 a month, and Part D (drug plans) usually are anywhere between $13 to $79 dollars per month.
Ninety-three percent of the Medicare population will pay these base premium costs. However, the remaining seven percent will have to pay an IRMAA (a surcharge added because of your high-income bracket).
How Is an IRMAA Calculated?
As we mentioned earlier, IRMAA is based on your income. Now, if you’re starting Medicare in 2022, your 2019 income will be assessed to determine if you’re in the IRMAA income bracket.
Here’s how it works: When you apply for Medicare, Medicare notifies the IRS. The IRS will then access your numbers from two years ago and determine your modified adjusted gross income amount. They calculate this by adding tax-free interest income into your adjusted gross income. Then they send these numbers to Medicare to determine whether you qualify for the IRMAA surcharge.
If your modified adjusted gross income from two years ago is $87,000 or less, you won’t have to worry about paying the IRMAA. You’ll only deal with base premium amounts. Again, 93 percent of all people are in the base-premium-amount bracket. However, if the IRS sees that your modified adjusted gross income from two years ago exceeded $87,000, you’re going to have an IRMAA.
If you file taxes as a couple, your modified adjusted gross income can reach $174,000 before you have to worry about an IRMAA. If, as a couple, you exceed this amount, you will be assessed an IRMAA.
Let’s look at an example.
If you and your spouse’s modified adjusted gross income reached $230,000 in 2019. The IRS will send those numbers to Medicare and you and your spouse will have an IRMAA.
Thanks to the IRMAA, you’ll both have to pay extra for your premiums. The IRMAA for Part B premiums is exactly double the regular Part B premium amount of $170.10. So both you and your spouse will pay $340.20 for Part B premiums.
The IRMAA also affects your Part D premiums. In our example, you will be required to pay an extra $31.50 each month (or $175/year) for your Part D premiums. This amount will vary based on your specific income level, but again, for this example, your modified adjusted gross income was $230,000 in 2019, so the IRMAA for Part D is $31.50 per month.
Appealing an IRMAA
Sometimes after being assessed an IRMAA, people retire or experience a life-changing event so the original IRMAA assessment no longer reflects the reality of their income. When and if this happens, you can appeal the IRMAA and (if you win the appeal) will no longer have to pay an IRMAA.
In order to appeal an IRMAA, a qualifying, life-changing event has to occur in your life. There are only eight events Medicare considers as qualifiers for a reassessment of an IRMAA.
- Marriage
- Divorce/Annulment
- Death of Your Spouse
- Work Stoppage
- Work Reduction
- Loss of Income-Producing Property
- Loss of Pension Income
- Employer Settlement Payment
If one or more of these events takes place in your life, you may qualify to drop the IRMAA. For the sake of time, we’re not going to look at each of the eight qualifying events, but we will explore the two most common ones–work stoppage or work reduction.
If you retired or experienced a work reduction (semi-retired) since the IRS calculated your income bracket, and the original amount no longer reflects your income, you can ask them to look ahead and project your income for the new tax year.
You’ll have to give the date of your life-changing event (in this case retirement or work-reduction) and they will then calculate your new projected income. If that new amount has come down and is below $87,000 (if you’re single) or $174,000 (if you file as a couple), then you will win your appeal and will no longer have to pay an IRMAA.
Conclusion
IRMAA stands for Income Related Monthly Adjusted Amount and is an extra charge added to high-income individual’s Medicare Part B and D premiums. Only about seven percent of the Medicare population has to worry about paying an IRMAA. If you are assessed an IRMAA, but then later experience a life-changing event and your income no longer reflects the IRMAA-bracket, you can appeal the assessment and potentially get the extra charges dropped. If you win the appeal, you will no longer have to pay extra for your Part B and Part D premiums.
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.