If you're what Medicare calls a "high earner," you'll likely pay a surcharge for both Part B and Part D.
While Medicare is not based on how much you earn the way Medicaid is, your income can impact the amount you pay for premiums. If Medicare has labeled you a high-income beneficiary, your premiums might be higher due to the Income-Related Monthly Adjustment Amount, or IRMAA. IRMAA only impacts your premiums for Medicare Part B and Medicare Part D.
What is the Income-Related Monthly Adjustment Amount?
The majority of people on Medicare will pay $164.90 per month for their Medicare Part B premium in 2023. This is around 25% of the total premium cost, with Medicare paying the remainder. However, higher income beneficiaries pay a larger portion of this premium depending on their Modified Adjusted Gross Income (MAGI). This can be 35, 50, 65, or 80 percent depending on your income. Higher income refers to anyone whose MAGI is more than $97,000 per year (filing single or married filing separately) or $194,000 per year (married filing jointly).
Since there is no standard Part D monthly premium (as plans are sold by private insurers), the IRMAA surcharge is based on the national base beneficiary premium. In 2023, this is $32.74.
Even if you pay your Medicare Part D premium another way, the Part D IRMAA surcharge comes out of your social security benefits. If you do not collect social security benefits, then the bill comes from a relevant federal agency, such as the Centers for Medicare & Medicaid Services (CMS).
The table below shows the IRMAA surcharge for different income levels.
Income-Related Monthly Adjustment Amount (IRMAA) 2023
Filing Individual | Married Filing Jointly | Married Filing Separately | Part B Premium | Part D Surcharge |
|---|---|---|---|---|
$97,000 or less | $194,000 or less | $97,000 or less | $164.90 | Your plan premium |
$97,000+ to $123,000 | $194,000+ to $246,000 | Not applicable | $230.80 | $12.20 |
$123,000+ to $153,000 | $246,000+ to $306,000 | Not Applicable | $329.70 | $31.50 |
$153,000+ to $183,000 | $306,000+ to $366,000 | Not Applicable | $428.60 | $50.70 |
$183,000+ to $500,000 | $366,000+ to $750,000 | $97,000+ to $500,000 | $527.50 | $70.00 |
$500,000 and above | $750,000 and above | $500,000 and above | $560.50 | $76.40 |
IRMAA only affects monthly premiums; your deductibles, coinsurance/copay, and any other out-of-pocket expenses remain the same.
Remember that if you have a Medicare Advantage plan (Medicare Part C) you still have to pay your Part B premium, so you would still have the surcharge. You also have to pay the Part D surcharge so long as you have prescription drug coverage through Medicare, whether it be a MA-PD or standalone Part D plan.
What is included in modified adjusted gross income?
MAGI is your household's adjusted gross income, including tax-exempt interest income and certain deductions. Your adjusted gross income is your gross income, excluding allowable deductions (IRA contributions, student loan interest, etc.). To get your MAGI, you simply add back some of these deductions, which include, but are not limited to:
● Adoption expenses
● Partnership losses
● Passive income or losses
● Rental property losses
● Deductions for taxable social security and IRA payments
Depending on how these additions impact your MAGI, you may have to pay higher Part B and D premiums.
How does Medicare determine IRMAA?
As stated above, whether you pay higher premiums depends on your monthly adjusted gross income. Medicare uses the income reported to the IRS two years prior, so for 2023 they would use the income tax return filed in 2022 for the 2021 tax year. If Social Security has determined you need to pay a higher premium, you receive a letter detailing what your premium will be and why.
You only have to pay the IRMAA surcharge for the Medicare plan you have, meaning if you only have Part B you only pay the Part B surcharge. If you were to sign up for Part D later, the extra amount is automatically added and you are not notified. Less than 5% of all Medicare beneficiaries have to pay the IRMAA surcharge.
What happens if your income changes?
Because the IRMAA charge is based on your income two years prior, it is entirely likely that your income has changed, especially if you have retired since filing. If you currently make more, the charges will update for the relevant tax years. If you currently make less, you may be wondering how to get your premiums to a more comfortable level for your current income. Luckily, you can appeal the surcharge if you experience a "life-changing event", which include:
● An employer pension plan went through significant change, such as cessation or termination
● An event outside your control leads to loss of income (i.e., natural disasters)
● Change in marital status (getting married, divorced, death of spouse)
● You or your spouse stopped working or saw a reduction in work hours
If you have experienced any of these life changing events, you can fill out the Medicare Income-Related Monthly Adjustment Amount Life-Changing Event form, or Form SSA-44. You will also need to provide documentation of the life-changing event, but this is the best way to get your premiums back to a comfortable level.
What are Medicare Savings Plans?
Medicare has four different savings plans designed to help you pay your Medicare costs, based on income and resource limits. Resources include:
● Bonds
● Checking and savings accounts
● Stocks
Not included in resources are:
● One vehicle
● Your home
● Household furniture
● Personal items
● Up to $1,500 in burial expenses and/or a prepaid burial plot
The below information on savings plans is for the contiguous United States. Beneficiaries in Hawaii and Alaska have slightly higher limits.
Qualified Medicare Beneficiary (QMB) Program
Monthly income and resource limits for this program are:
● $1,153 monthly income; $8,400 in resources filing individually
● $1,546 monthly income; $12,600 in resources married filing jointly
Specified Low-Income Medicare Beneficiary (SLMB) Program
Monthly income and resource limits for this program are:
● $1,379 monthly income; $8,400 in resources filing individually
● $1,851 monthly income; $12,600 in resources married filing jointly
Qualifying Individual (QI) Program
Monthly income and resource limits for this program are:
● $1,549 monthly income; $8,400 in resources filing individually
● $2,080 monthly income; $12,600 in resources married filing jointly
Qualified Disabled and Working Individuals (QDWI) Program
Monthly income and resource limits for this program are:
● $4,615 monthly income; $4,000 in resources filing individually
● $6,189 monthly income; $6,000 in resources married filing jointly
If you qualify for the QMB, SLMB, or QI savings programs, you also qualify for Extra Help.
Additional Resources
Speak with a Licensed Insurance Agent
M-F 8:00am-10:00pm | Sat 9:00am-6:00pm EST
