Some Medicare Premiums Reflecting IRMAA Surcharge

The increase may only be temporary for some, but others are seeing big changes in their Medicare bills. Plan ahead for this additional cost.

Have you started seeing a separate invoice from Medicare, in addition to the deductions taken from your monthly Social Security benefit? If so, Kiplinger’s recent article, “How Changes in Income Affect Medicare Premiums,” says this is happening because you are now subject to the Medicare high-income surcharge, or the “Income-Related Monthly Adjustment Amount (IRMAA).”

The bill should indicate “IRMAA.” This means that a senior must pay this surcharge, because his modified adjusted gross income, plus tax-exempt interest income, was higher than $85,000 if single or $170,000, if married filing jointly on his last tax return on file (usually 2017 for 2019 premiums).

This surcharge ups the monthly Medicare Part B premiums from the standard $135.50 in 2019 to a range of $189.50 to $460.50 per month, depending on income. Medicare Part B (medical insurance) is part of Original Medicare. Part B covers medical services and supplies that are medically necessary to treat a health condition. This can include outpatient care, preventive services, ambulance services and durable medical equipment.

In addition, if a senior has Medicare Part D prescription-drug coverage, he may also have to pay an extra $12.40 to $77.40 per month, in addition to his Part D premiums. If a senior and his spouse file jointly and are both receiving Medicare benefits, they’ll both be subject to the high-income surcharge.

If a senior’s income has dropped since 2017 because of certain life-changing events, like marriage, divorce, death of a spouse or retirement, he can ask to have his Medicare premiums based on more recent income, which could reduce or eliminate the surcharge. The senior must file Form SSA-44 with the Social Security Administration, along with evidence of the eligible life-changing event (such as a statement from your employer with the date of your retirement) and an estimate of your reduced income for the year.

If a senior’s income was unusually high in 2017 for other reasons (e.g., because he sold investments for a profit or rolled money over from a traditional IRA to a Roth), he won’t be able to get his premiums reduced this year. However, the senior may go back down next year when his premiums will be based on his 2018 income.

This is an unexpected cost that can pinch a retirement budget, if there’s no room for surprises. If you don’t have a cushion for extra expenses, consider dialing down some spending to create some financial breathing room for yourself. This may not be your only surprise cost in years to come.

Reference: Kiplinger (February 19, 2019) “How Changes in Income Affect Medicare Premiums”