Medicare is the federal program providing health insurance benefits to a majority of Americans age 65 and older. The twin pillars of Medicare are Part A for hospitalization-related benefits, and Part B, which deals with doctor office visits, outpatient surgery, and related services. Private insurance companies offer a variety of “supplemental” plans to augment Part A and B benefits.
How much does Part A cost?
For most Medicare enrollees, there is no monthly premium for Part A benefits. This is because during one’s working years, a portion of their Social Security, or FICA taxes, were applied to Medicare Part A. Enrollees who do not have at least 40 quarters (10 years) of Social Security contributions themselves or through a spouse will have to pay premiums for Part A coverage.
How much does Part B cost?
The financing of Medicare Part B expenses is shared between program enrollees and the federal government. Traditionally, the Medicare enrollee’s portion has been set at 25% of the average per capita Part B expenditures. For 2017, this amounts to a monthly premium of $134.00. Typically, Part B premiums increase each year because of higher program costs (inflation). Certain Medicare enrollees are exempt from all or part of these premium increases through what is known as the “Hold Harmless” provision (not discussed in this article).
Can Part B premiums ever be more than the base amount?
Yes. Until 2007, all Medicare beneficiaries enrolled in Part B paid the same premium. The Medicare Modernization Act of 2003 included a provision requiring higher-income beneficiaries to pay a greater share of the part B premium beginning in 2007. This feature of the program is referred to as the Income Related Monthly Adjustment Amount, or IRMAA.
Who is impacted by IRMAA?
In 2015, approximately 6% of Medicare beneficiaries were paying higher Part B premiums because of IRMAA. This is determined by looking at tax returns filed 2 years prior to the current year. For instance, 2017 Part B premiums will be based on 2015 tax returns to determine whether an IRMAA adjustment is required.
How much is an Income Related Monthly Adjustment?
It depends upon one’s tax filing status and their Modified Adjusted Gross Income (MAGI), which is gross income plus any tax-exempt interest. In 2017, IRMAA begins at $85,000 in income for single filers, and $170,000 in income for joint filers. Depending upon MAGI, the IRMAA adjustment ranges from $53.50 to $294.60 per month, plus the Part B base premium of $134.00 per month. For joint filers, each spouse receiving Medicare benefits will pay the higher premium.
Does IRMAA affect any other Medicare premiums?
Yes. The Part D component of Medicare deals with prescription drug coverage. It is one of the supplemental benefits referred to in the opening paragraph. In 2011, a Part D income-related premium was established by the Affordable Care Act. It ranges from $13.30 to $76.20 per month, and is based on the same filing status and MAGI guidelines as the Part B IRMAA. The maximum IRMAA premium increase for 2017 would be $294.60 + $76.20 = $370.80 per month, or $4450 annually.
What can you do about IRMAA?
Over time, IRMAA will likely be eliminated. Many people enroll in Medicare after they’ve retired, and consequently have less income as a retiree than they did as a full time employee. If their gross income falls below the thresholds of $85k (single) or $170k (joint), the premium adjustment will eventually drop off.
Social Security also allows individuals impacted by IRMAA to request an income redetermination under specific circumstances. Examples include: changes in income because of a change in marital status, a reduction in work hours, or retirement. Documentation supporting the request must be submitted along with the proper forms. If the redetermination request is approved, any previous IRMAA payments will be refunded.
Refer to the Social Security website, SSA.gov for more information on this topic. Look for a brochure titled Medicare Premiums: Rules for Higher-Income Beneficiaries.
Do you need to talk to someone regarding Medicare?
Medicare is a valuable program for the 65 and up crowd. However, there are a lot of procedures and guidelines most people are not familiar with. Helping folks navigate the Medicare Maze is all I do. Please reach out with any questions you may have.