“My wife and I pay over $10,000 a year in Medicare Part B premiums while my neighbors only pay about $3,200 a year. What gives?”
By way of background, Medicare is the federal health insurance program for people who are age 65 or older. For most Medicare enrollees, the federal government pays 100% of the cost of Medicare Part A, which primarily covers hospital stays. The federal government then pays about 75% of the cost of Medicare Part B, which primarily covers doctor’s services and outpatient care.
For the past ten years, the Medicare Modernization Act has required “high income” Medicare enrollees to pay a surcharge for Part B coverage. Medicare calls this surcharge an “Income-Related Monthly Adjustment Amount”, IRMMA for short.
The rules require Medicare enrollees whose Modified Adjusted Gross Income (MAGI) is greater than $85,000 for single taxpayers, or $170,000 for married, filing joint taxpayers, to pay the surcharge. (Modified Adjusted Gross Income is a taxpayer’s Adjusted Gross Income plus any tax-exempt bond income).
To make it a little more confusing, the surcharge amounts for 2018 are actually based on a taxpayer’s MAGI amount from two years ago in 2016. This is how the Medicare Part B premiums break down in 2018.
IRMMA Medicare Part B Premiums in 2018
| Individual MAGI | Married Filing Joint MAGI | Part B Per Person Monthly Premium |
|---|---|---|
| $85,000 or less | $170,000 or less | $134.00 |
| Up to $107,000 | Up to $214,000 | $187.50 |
| Up to $133,500 | Up to $267,700 | $267.90 |
| Up to $160,000 | Up to $320,000 | $348.30 |
| $160,000 or more | $320,000 or more | $428.60 |
It’s important to notice how the brackets change, because just $1.00 more income can move you into a higher bracket. For example, if your MAGI was $267,701 rather than $267,700, your annual premiums increase to $961.00. In other words, $1.00 more income will cost you $961.00.
While some higher-income retirees will always be subject to IRMMA, others will find that IRMMA only affects them on occasion. Sometimes taxpayer’s income will decline due to what Medicare calls “life-changing events”. For example, suppose that in 2016 you were working full time, but you are now retired. As a result, your relatively high income from two years ago is no longer an accurate picture of your financial situation. In this case, you can send Medicare a form called a “Medicare Income-Related Monthly Adjustment Amount Life-Changing Event” which is used to request a reduction in IRMMA surcharges.
You should also note that Medicare Part D, which covers prescription drugs, also has an IRMMA.
IRMMA Medicare Part D Premiums in 2018
| Individual MAGI | Married Filing Joint MAGI | Part D Per Person Monthly Surcharge |
|---|---|---|
| $85,000 or less | $170,000 or less | Whatever the plan premium is |
| Up to $107,000 | Up to $214,000 | +$13.00 |
| Up to $133,500 | Up to $267,700 | +$33.60 |
| Up to $160,000 | Up to $320,000 | +$54.20 |
| $160,000 or more | $320,000 or more | +$74.80 |
At Goepper Burkhardt, we help our clients understand the complex Medicare rules and regulations. We also show them ways that they may be able to reduce their Medicare Part B and Part D premium surcharges.