Federal retirees who are enrolled in Medicare Part B (Medical Insurance) will shortly receive notices from the Center for Medicare and Medicaid Services (CMS) as to what they will be paying in Medicare Part B premiums during 2024. The Medicare Part B base monthly premium during 2024 will be $174.70 per month, an increase from $164.90 per month during 2023.
In order to bolster the Medicare Trust Fund, Congress as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003 introduced means-testing of Medicare Part B and Medicare Part D (prescription drug coverage) premiums. Starting in 2007, higher income Medicare Part B and Medicare Part D beneficiaries pay more in monthly premiums in the form of surcharges.
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These Medicare Part B and Part D surcharges are known as Income-Related Monthly Adjustment Amounts (IRMAAs). For Medicare Part B and Medicare Part D beneficiaries, IRMAAs are calculated by the Social Security Administration based on income-tax records. Since 2013, the number of Medicare Part B recipients owing Medicare Part B IRMAAs has doubled to 5.2 million during 2023.
The IRMAA surcharges are unpopular among the Medicare Part B beneficiaries who owe them. This is mainly due to the fact that most Medicare Part B beneficiaries have their monthly premiums deducted from their monthly Social Security check. Not only do IRMAAs reduce the amount of a monthly Social Security benefit, IRMAAs do not reduce the amount of Social Security benefits that are taxable.
Planning for IRMAAs
It is difficult to plan for IRMAAs, mainly because they are based on a Medicare Part B beneficiary’s income from two years earlier. In particular, IRMAAs are determined based on the beneficiary’s modified adjusted gross income (MAGI). MAGI is a beneficiary’s adjusted gross income (AGI) plus tax-exempt interest income.
The following charts summarize 2024 Medicare Part B monthly premiums based on a beneficiary’s 2022 MAGI:
It is important to note that IRMAA income brackets (income “tiers”) are “cliffs”. This means that only one extra dollar can result in a higher monthly Part B premium.
For example, a married couple who filed their 2022 federal income tax as married filing joint, and both of whom are Medicare Part B beneficiaries will each pay Medicare Part B premiums of $244.60 during 2024 if their 2022 MAGI was $258,000. But if their 2022 MAGI was $258,001, each will pay $349.40 during 2024 in Part B monthly premiums, a difference of $349.40 less $244.60 or $104.80 per month, $1,257.60 per year per spouse, and a total of $2,515.20 for both spouses.
Many Medicare Part B beneficiaries are not aware that IRMAAs can be appealed when a beneficiary’s MAGI decreases in the current year from what it was one year earlier.
Life changing events, such as work stoppage, divorce/annulment, work reductions, or loss of income-producing property can result in the Social Security Administration reducing, or perhaps eliminating any IRMAA, that a Medicare Part B beneficiary might be subject to, as shown in the following example.
Jeanne, age 67, retired from federal service on December 31, 2022. Jeanne’s 2022 MAGI consisted of a gross salary of $155,000, Social Security retirement benefits totaling $32,000, and investment income of $22,000, for a total MAGI of $209,000.
Jeanne enrolled in Medicare Part B in June 2023. Based on her 2022 MAGI of $209,000, Jeanne will pay Medicare Part B monthly premiums of $384.30 during 2024. However, Jeanne realized that in 2023 she is fully retired and that her MAGI will consist of a FERS annuity of $51,150 FERS, $34,000 in Social Security benefits and $15,000 of investment income, for a total MAGI of $100,150.
Jeanne appeals her 2024 Medicare Part B monthly premium (using Form SSA-44, see below). Since retirement is considered a “work stoppage”, the Social Security Administration reduced Jeanne’s 2024 Medicare Part B monthly premium to $174.70.
Medicare Part B beneficiaries can appeal their 2024 Medicare Part B premiums by downloading Form SSA-44 from the Social Security website, filling out the form and submitting the form to a Social Security office.
A copy of Form SSA-44 for 2023 is shown below. Note that Form SSA-44 for 2024 should be available sometime in December 2023.
Suggestions for Appealing IRMAAs
The following are some suggestions for appealing IRMAAs:
Medicare Part B typically takes effect at age 65. IRMAAs are first calculated based on MAGI when a beneficiary was age 63. This should be remembered when scheduling Roth IRA conversions that will increase MAGI.
Be fully aware of the reasons for reduced IRMAAs.
There are seven reasons for reduced IRMAAs, namely:
(1) Death of a spouse;
(3) Divorce or annulment;
(4) Work reduction;
(5) Work stoppage, such as retirement);
(6) Loss of income from income producing property; and
(7) Loss or reduction of certain pension income.
When in doubt, request an IRMAA reduction.
If the reason for requesting an IRMAA reduction is in a “gray area” but seems that the reason may result in some “sympathy”, a Medicare Part B beneficiary is advised to go ahead and appeal. In one case, a Medicare Part B beneficiary faced higher IRMAA after selling a second home to pay medical bills for a gravely ill spouse. After seeing the bills, a Social Security Administration (SSA) representative approved a reduced IRMAA.
A phone call to the SSA may only be required when it comes to simple cases. Some Medicare Part B beneficiaries may want to consider making an appointment for a face-to-face visit to an SSA office if circumstances are more complex. For example, if a beneficiary filed an amended federal income tax return as a result of a decrease in taxable income, the beneficiary should bring a copy of the amended return to the meeting. It is also important to remember that if both spouses are enrolled in Medicare Part B, then each spouse typically has to file for new determination or appeals. This is the case even if the spouses file a married filing joint return.