Medicare Part B and Appealing High Premiums

There is no monthly premium for Medicare Part A (hospital insurance) for most individuals including federal employees. An individual who has at least 10 years of Medicare Part A employment in which they paid the Medicare hospital insurance tax (HIT) (equal to 1.45 percent of an employee’s wages and matched by the employer) and paid into to the Medicare Part A Trust fund, is “fully insured” for Medicare Part A purposes.

This means that the individual is eligible to enroll in Medicare Part A upon reaching his or her 65th birthday at no premium cost. The individual is also eligible to enroll in the other parts of Medicare including Medicare Part B (medical insurance). Unlike Medicare Part A, individuals enrolled in Medicare Part B (called Medicare Part B “beneficiaries”) must pay a monthly premium.

This column discusses how much Medicare Part B beneficiaries pay each year in monthly premiums.

SEE ALSO:

• How Medicare Works and Minimizes Federal Retiree Medical Expenses
• Medicare Open Enrollment Period: What Does It Mean for Federal Retirees?
• Understanding the Three Enrollment Periods for Medicare and the Late Enrollment Penalty
• Deciding on the Right Choice for Medicare Enrollment
• What Federal Retirees Need to Know About Medicare Part D

Medicare Part B Monthly Premiums

In general, what a Medicare Part B beneficiary pays in monthly premiums each month in any given year depends on the individual’s Modified Adjusted Gross Income (MAGI) from two years ago. This means that Medicare Part B beneficiaries will pay monthly premiums during 2023 based on the beneficiaries’ 2021 MAGI.

For the first time in a decade, the Center for Medicare and Medicaid Services (CMS) announced that premiums for Medicare Part B beneficiaries will be lower in 2023 than in 2022. Part B premiums will decrease to $164.90. The annual Part B deductible will also decrease to $226 in 2023, from $233 during 2022.

The reason that the 2023 Medicare Part B premiums will decrease is because the 2022 Medicare Part B premiums included a contingency margin to cover projected Medicare Part B spending for Aduhelm, a new drug meant to treat Alzheimer’s disease. Lower than projected spending on Aduhelm and other Part B items and services resulted in much larger reserves in the Part B account of the Supplementary Medical Insurance (SMI) Trust Fund.

This fund can be used to limit future Part B premium increases. The decrease in the 2023 Part B premium aligns with a CMS recommendation in May 2022 that excess SMI reserves be passed along to Medicare Part B beneficiaries.

Those Medicare Part B beneficiaries who had higher income (and therefore higher MAGI) during 2021 will pay more in 2023 monthly Medicare Part B premiums. The higher premiums are the result of something called “Income Related Monthly Adjustment Amounts (IRMAA).” Please keep in mind that the IRMAA is based on the beneficiary’s MAGI from two years prior to the current year. Table 1 and Table 2 present Medicare Part B monthly premiums for 2023.

Table 1: Summary of 2023 Medicare Part B monthly premiums for single and married beneficiaries filing jointly with their spouse

Table 2: Premiums for high-income beneficiaries who are married and who lived with their spouse at any time during the taxable year but who file a married filing separate return

The following three examples illustrate the cost of Medicare Part B premiums during 2023:

Example 1. Randi is a federal annuitant aged 67 and enrolled in Medicare Parts A and B. During 2021, Randi’s MAGI was $135,700.
Randi’s 2021 MAGI of $135,700 puts Randi is in the third Medicare Part B “income tier bracket” for 2023. Randi will therefore pay $329.70 each month during 2023 as her Medicare Part B premium.

Example 2. Dan age 67 and Melissa age 66 are a retired married couple, both of whom are retired from federal service. Both are enrolled in Medicare Part B. During 2021, Dan’s and Melissa’s joint tax return showed a MAGI of $426,340. Since Dan’s and Melissa’s 2021 MAGI was between $366,00 and less than $750,000, Dan and Melissa are in the fourth Medicare Part B “income tier bracket” for 2023. This means that both Dan and Melissa will pay $527.50 in Medicare Part B monthly premiums during 2023.

Example 3. Doris is age 70 and files married filing separate. She is enrolled in Medicare Part A and Medicare Part B. During 2021, Doris’ MAGI was $115,000. Since Doris’ tax filing status is married filing separate and her 2021 MAGI was $115,000, Doris is in the second Medicare Part B “income tier bracket” for 2023. This means she will pay $527.50 in Medicare Part B monthly premiums during 2023.

How Does a Medicare Part B Beneficiary’s Drop in Income Affect the IRMAA?

The federal government is using the best income information it can in order to determine the IRMAA. However, the federal government understands the system is flawed due to the delay in reporting and processing tax returns. The federal government will review tax returns at the end of each year to determine IRMAAs for the following year.

For example, the federal government in December 2022 will send out 2023 IRMAA letters to higher earners; namely, to those Medicare Part B beneficiaries in the second and above Medicare Part B income tier brackets.

A recipient of an IRMAA letter is eligible to appeal the IRMAA if the recipient had a life changing event that resulted in a decrease of income in the current year. This means a recipient of an IRMAA letter in December 2022 but whose income decreased significantly during 2022 as a result of a life changing event, thereby causing the beneficiary’s Medicare Part B “income tier bracket” to decrease, can appeal the IRMAA. Table 3 summarizes “life-changing events” for IRMAA appeals to reduce the amount of the IRMAA and therefore the Medicare Part B premiums.

Table 3. Life Changing Events for Appealing IRMAAs

If any federal annuitant is currently enrolled in Medicare Part B, or who will be enrolling in Medicare Part B for the first time in 2022, and who has a life changing event during 2022 that will result in their income decreasing to a lower income tier in 2022 compared to 2021, should complete and submit Social Security Administration Form SSA-44 (Medicare Income-Related Monthly Adjustment Amount) in December 2022 after receiving their IRMAA notice.

A portion of Form SSA-44 is presented below:

It is possible that an individual during 2022 may need to appeal the IRMAA twice, once for the initial enrollment in Medicare Part B sometime during 2022 and again in December 2022 for 2023 due to the delay in tax returns timing and processing.

The following example illustrates:

Example 4. Carol, age 65, enrolled in Medicare Part B for the first time on June 1, 2022. At that time, Carol filed an appeal via Form SSA-44 for her 2022 IRMAA which was based on her 2020 MAGI. In December 2022, Carol may have to file an additional appeal for her 2023 IRMAA, based on her 2021 MAGI.