Planning for Medicare and adequate healthcare coverage is central to retirement planning. Often, unknown Medicare surcharges lurk for those over certain income thresholds. This post discusses those fees, thresholds, and your options for reducing them.
What is a Medicare Surcharge?
Medicare surcharges (also known as income-related monthly adjustment amount or IRMAA) increase the premiums paid for Part B and D. Medicare Part B and D premiums start at a base amount, then go up based on your Modified Adjusted Gross Income (MAGI) on a two-year lookback. That means for 2023, your Medicare Part B and D premiums are based on your MAGI from 2021.
2023 Medicare Part B and D Premium Surcharges
If your income is over these thresholds, even by one dollar, your premiums increase. As you can see from the table above, this can significantly increase your monthly premiums. This underlines the importance of regular, proactive tax planning. You can calculate your Part B Premium using this calculator from Medicare.gov.
I am subject to a surcharge; what can I do about it?
You can request a reconsideration of the initial determination amount with the Social Security office.
If you have experienced a life-changing event that has significantly modified your income since the two-year lookback that the premiums were based on, you may be able to request a new calculation. Life-changing events include:
- Marriage, divorce/annulment, the death of a spouse
- A work reduction, retirement, layoff
- Loss of pension income or income-producing property
You may also be eligible to request reconsideration if the information the Social Security office had when calculating your IRMAA was incorrect:
- You filed an amended return with the IRS
- You have a more recent tax return that shows you’re receiving a lower income.
How to appeal
Once you receive the Medicare premium notice (typically in October), you can request a reconsideration of the initial determination by submitting Form SSA-44 or making an appointment with the Social Security office. You’ll need to provide documentation of the change.
With my client families, the most common reasons that spark the need for a new calculation are:
- Retirement (income reduction due to loss of paycheck)
- The loss of pension or annuity income (a fixed term amount that has expired)
- The depletion of an inherited IRA (100% ordinary income they were taking on an expedited distribution due to the SECURE Act and no longer receive), or
- The loss of a spouse (reducing household Social Security/Pension income, move to single tax table).
Because this is a two-year lookback, you must also appeal the second year. In the third year, the premium will reflect your adjusted income. Filing this request can save thousands of dollars over those two years. Learn more about premium appeals at the US Department of Health and Human Services.
Medicare is one of many complex and nuanced planning opportunities impacted by your income. You can learn more by reviewing our post Medicare: Understanding Coverage Options and Costs. If you want a thought partner to explore your unique picture, I welcome the conversation.