If you are approaching Medicare and have a higher income, you may hear the term IRMAA. It stands for Income-Related Monthly Adjustment Amount. Despite the long name, the basic idea is fairly simple: some people with income above certain levels may pay an added monthly amount for Medicare Part B and Medicare Part D.
IRMAA can be surprising because it is based on income from a past tax return, not always on what you earn today. If you recently retired, lost income, or experienced another major life change, the amount may not reflect your current financial situation. In some cases, you may be able to ask Social Security to review it.
What is Medicare IRMAA?
Most people who enroll in Medicare Part B pay the standard Part B premium. Medicare Part B generally helps cover doctor visits, outpatient care, preventive services, durable medical equipment, and other medical services.
People with higher incomes may pay the standard Part B premium plus an extra amount called IRMAA. A separate IRMAA amount may also apply if you have Medicare Part D prescription drug coverage.
This added cost is not a separate insurance plan. It is an adjustment to your Medicare costs based on income. The money is paid to Medicare through Social Security, Railroad Retirement benefits, or direct billing, depending on your situation.
IRMAA may apply whether you get drug coverage through a stand-alone Part D plan or through a Medicare Advantage plan that includes prescription drug coverage. The Part D plan premium and the Part D IRMAA amount are generally separate charges.
How does Medicare decide who pays IRMAA?
Social Security generally uses the most recent federal tax return information available from the IRS. In many cases, that means Medicare uses income from about two years earlier.
For example, your Medicare costs for one year may be based on the tax return you filed two years before. This timing can catch people off guard. You may have earned more while working full time, then retired and started Medicare later with a lower income.
The income figure used is called modified adjusted gross income, often shortened to MAGI. For IRMAA purposes, this generally includes your adjusted gross income plus tax-exempt interest income. Social Security looks at whether you filed your tax return individually, jointly with a spouse, or under another filing status.
Income thresholds and IRMAA amounts can change from year to year. They may also be different for individuals and married couples filing jointly. It can be helpful to review the current information when you are planning for Medicare.
Which parts of Medicare can have an IRMAA charge?
IRMAA may affect two parts of Medicare:
- Medicare Part B: You may pay the regular Part B premium plus a monthly IRMAA amount.
- Medicare Part D: You may pay your plan’s premium, if it has one, plus a separate monthly Part D IRMAA amount.
Medicare Supplement insurance, also called Medigap, does not have an IRMAA charge. A Medicare Supplement plan may have its own premium, which can vary by carrier, plan, location, age, and other factors. However, buying a Medigap plan does not remove a Part B or Part D IRMAA obligation.
Similarly, a Medicare Advantage plan may have its own premium and cost-sharing rules. If you are subject to Part B or Part D IRMAA, enrolling in a Medicare Advantage plan generally does not eliminate that adjustment.
Why might your IRMAA amount seem too high?
Because IRMAA usually relies on older tax information, it may not match your current finances. This can happen after a major change in your life or income.
Social Security may consider an IRMAA appeal when you have had a qualifying life-changing event that reduced your income. Examples may include:
- Retirement or a reduction in work hours
- Marriage, divorce, or the death of a spouse
- Loss of an income-producing property because of a disaster or other event outside your control
- Loss, reduction, or termination of certain pension income
- An employer settlement payment that was reduced or lost
Simply having lower income than the tax year Social Security used may not always be enough by itself. You generally need to show that a qualifying event occurred and that it caused your income to decrease.
Can you appeal a Medicare IRMAA decision?
Yes, you may request a new decision if you believe the income information is outdated because of a qualifying life-changing event. Social Security commonly uses Form SSA-44, called the Medicare Income-Related Monthly Adjustment Amount Life-Changing Event form, for this purpose.
You may need to provide documents that support both the life event and your lower income. Depending on your situation, examples may include a letter from an employer showing retirement, a pension statement, a marriage certificate, a divorce decree, a death certificate, or a more recent tax return.
It is generally wise to keep copies of everything you submit. If Social Security approves the request, it may adjust your IRMAA based on newer income information. If it does not approve the request, there may be additional appeal steps available. Social Security can explain the process and deadlines that apply to your case.
What should you do when you receive an IRMAA notice?
Read the notice carefully. It should explain the income information used, the added amount you may owe, and your appeal rights. Do not ignore it, even if you think it is incorrect.
First, compare the income listed in the notice with your tax return. If the tax information itself is wrong, you may need to address that with the IRS. If the tax return was correct but your income has dropped because of a qualifying event, consider whether an SSA-44 request makes sense.
It can also help to look ahead. If you are retiring soon, selling a business, taking large retirement account withdrawals, or making other income changes, these events may affect future Medicare costs. A tax professional can help explain possible tax consequences. A Medicare agent can help you understand how IRMAA fits into your overall Medicare coverage choices.
IRMAA is only one part of your Medicare decision
IRMAA can matter, but it should not be the only factor when choosing coverage. You may also want to consider your doctors, prescription drugs, expected medical needs, budget, travel habits, and comfort with provider networks and out-of-pocket costs.
Original Medicare paired with a Medicare Supplement plan may offer broad provider access for people who value flexibility. Medicare Advantage plans can offer another way to receive Medicare benefits, often with network-based care and plan-specific cost-sharing. The right fit depends on your needs, available plans, and local options.
If you have questions about IRMAA, Medicare Supplement coverage, or how your choices fit together, Eric can offer free, no-pressure help as you sort through your Medicare options.