Medicare's income-related surcharge: Did you know you can appeal that?
The look-back rules are tricky, but high-income surcharges can be reversed when income falls
An especially onerous feature of Medicare is the Income Related Monthly Adjustment Amount (IRMAA) - a surcharge tacked on to Medicare Part B premiums for enrollees with modified adjusted gross income over certain levels. It’s not that I object to progressivity in public policy - I don’t. But here, you simply are paying more to Medicare and get absolutely nothing in return. This uneven treatment erodes the basic proposition of social insurance - we all pay in at the same rate (or nearly the same) and pretty much get the same back in benefits. (I have the same worry about Medicare’s complicated marketplaces for prescription drugs and Advantage plans, as detailed here).
But I digress. Did you know that you can appeal IRMAA in certain cases - mainly when your life circumstance change? The list of qualifying events include marriage, divorce, death of a spouse and either work stoppage or work reduction. I emphasize those last two circumstances since they are the most typical.
IRMAA brackets are defined by a modified-adjusted-gross-income formula that includes the total adjusted gross income on your income tax return plus tax-exempt interest income. The determination is made using the most recent tax return made available by the IRS to the Social Security Administration. For example, the IRMAA you pay in 2020 is based on the adjusted gross income reported on your 2018 tax return.
Let’s say you retire this month and enroll in Medicare for 2021. If your income was sufficiently high in 2018, the IRMAA will be applied - and it is not trivial. Here’s the schedule for next year:
However, if you expect your income to fall below these triggers in 2021, you can request a reconsideration using this Social Security Administration form.
For more details, see this thorough review from My Federal Retirement.
By the way, fall enrollment is still underway. If you have not re-shopped your Part D or Advantage coverage, you have until this coming Monday December 7th. Here’s why that is worth some of your time this weekend.
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