IRMAA for Medicare

I know only one person named Irma, and I think she’s a wonderful lady. Unfortunately, a namesake of hers (with a slightly different spelling) isn’t quite so wonderful. Most folks who’ve been introduced to this other IRMAA would agree.

IRMAA stands for Income Related Monthly Adjustment Amount. And if you’ve spent much time looking around at the various provisions related to Medicare, the word “adjustment” raises your “bet I’ve gotta pay more” antenna. Which is exactly right, you’re gonna pay more.

What is IRMAA?

When the Medicare Modernization Act was passed in 2003, one of the provisions in that law was to require a sort of means-testing to the premiums paid for Medicare Part B (physicians) and Part D (prescription drugs). It was determined that the subsidization of Medicare costs by the government should be in part borne by folks who have income above certain levels. The income used to determine your IRMAA adjustment is from your tax return 2 years prior to the current year. So ancient history can come back to surprise you when you least expect it.

In today’s world, the 2018 premium for Medicare Part B is $134. However, due to a provision in the law, many enrollees pay only $130 for this benefit. The provision that reduced this group’s premium is all about the annual cost of living adjustments (COLAs) that are added to Social Security benefits. Effectively, the provision says that the annual adjustment to the Medicare Part B premium cannot be more than the rate of the COLA for that year.

In some years, there is no COLA – specifically, in 2010, 2011 and again in 2016. When that happens, the Medicare Part B premium for folks who are collecting Social Security cannot increase. Also, if the COLA is very low (as we sometimes see as well as the zero years), the Medicare Part B premium can only increase by the COLA amount and no more. This is known as the “hold harmless” rule. Click the link for an excellent technical explanation of the hold harmless rule.

The people who were actively collecting Social Security and enrolled in Medicare Part B in the previous year are the ones who are potentially protected by the hold harmless rule. IRMAA then is also applied, such that if the individual’s income is above a certain limit, hold harmless does not protect them. So we have 3 groups that are not protected by the hold harmless rule:

• those who start Medicare Part B in the current year
• those who were enrolled in Medicare Part B but not collecting Social Security
• those with incomes above the IRMAA limits

Part of the law requires that 25% of the projected cost of Medicare Part B is paid for by premiums paid by enrollees. Since the hold harmless rule limits participation by roughly 70% of all Part B enrollees, the remainder of the cost must be picked up by the 30% who fit into the groups above.

All of the unprotected groups start out with the standard $134 per month premium (for 2018). Then the IRMAA earnings limits apply. To make things progressive (such that the more money you make, the higher percentage of the overall cost you bear), there are five levels of adjustment that IRMAA can make:

These levels of adjustment are adjusted for cost of living every year, and often are adjusted more than a standard COLA in order to keep the costs covered. The expectation is that the levels of income will cover expenses at the following rates:

To calculate these premiums in future years, given what we know about the rates are expected to cover and the fact that the “standard” Medicare Part B premium covers approximately 25%, you can multiply the standard Part B premium by the multiplier in the table to come up with the rate.

IRMAA for Part D

The IRMAA adjustment for Medicare Part D is a bit different, in that you only know how much additional premium you’ll have to pay if IRMAA impacts you.

The rules are the same, so we have the same group of roughly 70% of all enrollees who are held harmless for increased Medicare Part D premiums. And the income levels are the same as well (at least that part is kept the same!). Since Medicare Part D premiums vary by the plan you’ve chosen from independent insurers (and not a prescibed amount like Medicare Part B), at each IRMAA income level there is an increase, or surcharge, applied to whatever your monthly Part D premium is.

Appeal of IRMAA

If you have had certain changes to your income over the succeeding two years (since the IRMAA income level used for this year’s adjustments), you may have a case for reconsideration of the IRMAA adjusment. Specifically, if you have had one of these change of life factors:

– spouse death
– marriage
– divorce
– income reduction
– work stoppage (includes retirement)
– loss or reduction of other types of income such as rental income or royalties
– loss or reduction of a pension income

Other than those factors, although it is your right to appeal an IRMAA determination (read that “increase”), there’s not a lot of hope that you’ll be able to fight IRMAA. Unless there’s an error of some type, such as an incorrect tax return, most other IRMAA determinations are upheld.

Keep in mind that these IRMAA adjustments are on top of any adjustments you’re subjected to because of late enrollment in either your Medicare Part B or Part D plan.