Medicare surcharge for high income earners
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Medicare is the health insurance program offered by the U.S. government to citizens aged 65 and older who are eligible based on their Social Security earnings record or their spouse’s eligible earnings record. Medicare Part A, referred to as hospital insurance, is typically free. Medicare Parts B and D, which cover medical services and prescription drugs, come at a cost.
Increased Premium Costs
Medicare Part B and D premium costs depend on income level. For example, in 2024, a single individual with a modified adjusted gross income (MAGI) of $103,000 or less will pay the standard monthly Part B premium of $174.70 and Part D premium of $55.50. A married couple with a MAGI of $206,000 or less will pay the standard monthly Part B and D premiums per person.
Once MAGI is greater than $103,000 for a single individual or $206,000 for a married couple, Part B and D surcharges kick in. Surcharges range anywhere from $69.90 to $419.30 per month for Part B premiums and $12.90 to $81.00 for Part D premiums. Full information on the income tiers and related premium increases can be found on the www.medicare.gov website.
It’s important to note the Social Security Administration (SSA) has developed six MAGI tiers that determine your Part B and D premium costs. The tiers are referred to as cliffs, and a MAGI of just $1 over a threshold will push you into the next tier. For example, if you file as single and have an income of $103,001, you will be pushed into the next tier and will pay the full surcharge amount accordingly ($69.90 increase for Part B and $12.90 for Part D per month).
Initial Determination Notice
How do you know for sure if you’ll pay Medicare surcharges? Once the SSA receives income information from the IRS, it sends an initial Income Related Monthly Adjustment Amount (IRMAA) determination notice to those affected. The notice includes information about the determination of surcharges and rights to appeal. That’s right—individuals do have the opportunity to appeal the surcharges if certain situations apply!
Premium Reduction Is Possible
SSA bases surcharge determination on MAGI from tax returns two years prior. There are plenty of situations where someone’s income may have been much higher two years previous than the current year, and SSA recognizes this. Here are the seven reasons a surcharge reduction might be approved:
- Death of a spouse
- Marriage
- Divorce or annulment
- Work reduction
- Work stoppage (retirement)
- Loss of income from an income-producing property
- Loss or reduction of certain pension income
If any of these reasons apply, filing form SSA-44 (Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event form) soon after receiving the initial determination notice is suggested. If married and both spouses receive an initial determination notice, both spouses need to file form SSA-44. Mail the completed form along with required supporting documentation to the local SSA office or take it in personally if planning to meet with a representative. After receiving form SSA-44, the amount of time it takes SSA to approve or deny the request can vary widely. Form SSA-44 can be found on www.ssa.gov website.
Summary
Many Medicare recipients are unaware of the option to challenge IRMAA surcharges. Successfully appealing a surcharge could result in savings of anywhere between $990 and $6,000 per year, per individual. Even if your situation doesn’t perfectly fit into one of the seven categories outlined earlier, it might not hurt to file form SSA-44 and ask for a surcharge reduction!
Abby VanDerHeyden, CFP, is a Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Abby at AVanDerHeyden@bedelfinancial.com.