Barron’s Article: Higher Medicare Premiums / How to Contain Them / Investing Tactics

hank

One more reason to like Roths ….. ISTM

Excerpt: IRMAA is short for income-related monthly adjustment amount. It frequently surprises retirees because it is tacked on to standard Medicare premiums for people with incomes above certain cutoff points. Although it is aimed at higher-income retirees, “you don’t have to be rich to fall into the penalty box,” notes Denver financial planner Phil Lubinski.

This year, IRMAAs hit individuals with modified adjusted gross incomes of more than $91,000, and for couples, more than $182,000. Instead of paying the standard annual Medicare premium of $2,041.20, higher-income individuals are paying from $3,006 to $7,874.40. Couples can pay double that.

Each year, Medicare charges are reset based on the income that people reported two years earlier. Even retirees who never had a problem can be blindsided by an IRMAA after an unusually high-income year.

Ignorance isn’t bliss in such cases. People can often make income adjustments before year end to dodge an IRMAA threshold, such as selling losing investments to offset capital gains. Cutting income by as little as a penny can slice almost $1,000 off an individual’s annual Medicare premiums at the lowest levels, and thousands at higher levels.

Source / Barron’s https://www.barrons.com/articles/medicare-premiums-taxes-irmaa-51671059739
(Link may or may not work.)

Disclaimer - Not an expert on this - or even well informed. Highly recommend the article.

yogibearbull

It was a good article overall.

A couple of more points:

Beware of the trap that Medicare MAGI = AGI + muni interest. MAGI has many definitions, but the one that matters here is the one used by Medicare. A web search can only confuse.

Even at the highest IRMAA, the Medicare premiums are subsidized. The basic Medicare premium is really a great deal, but we do pay for it partially via payroll taxes.

catch22

I can't access the article.

IRMMA has been discussed prior here......but to add this, too,

How long does the Irmaa surcharge last?
Unlike late enrollment penalties, which can last as long as you have Medicare coverage or are considered a Medicare beneficiary, the IRMAA is calculated every year. You may have to pay the adjustment one year, but not the next if your income falls below the threshold.Dec 2, 2022

ADD: Part B and D IRMMA accessible page.........a decent overview from December, 2022.

msf

Even at the highest IRMAA, the Medicare premiums are subsidized. The basic Medicare premium is really a great deal, but we do pay for it partially via payroll taxes.

The Medicare premium is applied to Part B coverage (care providers) only. As you wrote, it covers roughly 25% to 85% of the cost of the insurance, depending on IRMAA. Most of the rest comes from general tax revenue, not payroll taxes. Part B is subsidized coverage.

Part A expenses (hospitals and skilled nursing facilities) are covered almost completely (90%) by payroll taxes. No premiums. (A small number of people pay an additional premium for Part A coverage; those who elect to receive coverage but have not paid into the system for at least 40 quarters.)

Whether that is a subsidy is a matter of opinion. Just as I would not call Social Security (funded by payroll taxes) subsidized, I do not consider Part A subsidized.

Part D, like Part B, is largely (3/4) paid for with general tax revenue.

https://www.kff.org/medicare/issue-brief/faqs-on-medicare-financing-and-trust-fund-solvency/

sma3

You can reduce your IRMAA if you income falls below the threshold the next year by filing a form with social security.

However, you have to have filed your income tax for the year before to use that for the data, so the earliest you can ask for a reduction is probably April. By the time it is reviewed and granted, you will have probably paid 50% of the higher amount. I don't think they will make it retroactive for the months that have gone past.

msf

Medicare beneficiaries with an IRMAA who meet certain criteria can request that we make a new initial determination of their IRMAA.

NOTE: The original IRMAA decision takes effect and continues until we make a new initial determination. If we make a new initial determination in the beneficiary’s favor, we retroactively refund the excess IRMAA amount paid.

https://secure.ssa.gov/poms.nsf/lnx/0601101050