Understanding Medicare’s Income-Related Monthly Adjustment Amount (IRMAA)
Medicare is a federal health insurance program that provides coverage to millions of Americans aged 65 or older, those with disabilities, and people with End-Stage Renal Disease (ESRD). The program is funded by payroll taxes, premiums, and general revenue.
While most people pay standard Medicare Part B premiums, some individuals with higher incomes are required to pay more. This additional charge is known as the Income-Related Monthly Adjustment Amount (IRMAA).
In this article, we’ll explore what IRMAA is, how it works, and what you can do to manage your Medicare costs.
What is IRMAA?
The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge that some Medicare beneficiaries pay based on their income. IRMAA applies to both Medicare Part B (Medical Insurance) and Medicare Part D (Prescription Drug Coverage).
IRMAA is designed to help fund the Medicare program by requiring beneficiaries with higher incomes to pay a larger share of the program’s costs.
Who Pays IRMAA?
Not all Medicare beneficiaries are subject to IRMAA. The additional charge is only applied to individuals with higher incomes.
The income thresholds for IRMAA are based on your Modified Adjusted Gross Income (MAGI), which is your income plus any tax-exempt interest you may have earned. The income thresholds are adjusted annually, so it’s important to check each year to see if you may be subject to IRMAA.
For 2021, the income thresholds for IRMAA are as follows:
Individuals with a MAGI of $88,000 or less, or married couples filing jointly with a MAGI of $176,000 or less, pay the standard Medicare Part B premium of $148.50 per month.
Individuals with a MAGI between $88,000 and $111,000, or married couples filing jointly with a MAGI between $176,000 and $222,000, pay a Part B premium of $207.90 per month.
Individuals with a MAGI between $111,000 and $138,000, or married couples filing jointly with a MAGI between $222,000 and $276,000, pay a Part B premium of $297.00 per month.
Individuals with a MAGI between $138,000 and $165,000, or married couples filing jointly with a MAGI between $276,000 and $330,000, pay a Part B premium of $386.10 per month.
Individuals with a MAGI over $165,000, or married couples filing jointly with a MAGI over $330,000, pay a Part B premium of $475.20 per month.
In addition to the above, individuals with a MAGI over $88,000, or married couples filing jointly with a MAGI over $176,000, may also be subject to an IRMAA charge for their Medicare Part D prescription drug coverage.
How to Manage Your IRMAA Costs
If you’re subject to IRMAA, there are several ways you can manage your Medicare costs:
Plan ahead: If you know your income will be higher than usual, you can plan ahead and adjust your budget accordingly. Consider talking to a financial advisor or accountant to help you plan.
Request a new initial determination: If you experience a life-changing event, such as retirement, divorce, or the death of a spouse, you may be able to request a new initial determination to have your IRMAA recalculated based on your new income.