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What is the income-related monthly adjusted amount (IRMAA)?
For 2023, high-income beneficiaries – earning over $97,000 a year – pay an IRMAA surcharge that’s added to their Part B and Part D premiums and determined by income from their income tax returns two years prior.
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Medicare beneficiaries with incomes above a certain threshold are charged higher premiums for Medicare Part B and Part D. The premium surcharge is called an Income-Related Monthly Adjustment Amount, or IRMAA. Here’s our overview of how IRMAA works.
In 2022, IRMAA surcharges apply to individual Medicare beneficiaries who earn more than $91,000, and to couples who earn more than $182,000. For 2023, these limits are projected to increase to roughly $97,000 and $194,000, respectively.
The IRMAA limits are based on income earned two years prior to the coverage year in question, since that’s the last income tax return that the IRS has on file. So a person enrolling in Part D coverage for 2022 would pay an IRMAA surcharge if their 2020 tax return shows an income in the surcharge range (but there’s an appeals process people can use if they have experienced a life change that has reduced their income since then).
Although very few Medicare beneficiaries pay IRMAA surcharges, the effect on premiums is significant for those who do. The standard Part B premium in 2022 is $170.10/month. But for those subject to IRMAA, the Part B premium ranges from $238.10/month to $578.30/month. And for Part D, the IRMAA surcharge amounts to an extra $12.40/month to $77.90/month, in addition to the regular premium for the plan you select.
The higher premiums for Part B took effect in 2007, under the Medicare Modernization Act. And for Part D, they took effect in 2011, under the Affordable Care Act. Medicare premiums cover only a small fraction of the cost of providing coverage, and the IRMAA rules were created to ensure that beneficiaries with the means to do so are required to pay a larger share of the cost of their coverage.
Beneficiaries’ premiums only cover about 26% of the cost of Part B, and about 17% of the cost of Part D (and that’s with IRMAA surcharges in effect for beneficiaries with high incomes). Most of the cost of Part B and Part D is covered by general revenues, and the IRMAA surcharges help to spread that cost to beneficiaries who can afford to pay a larger share of the cost of their coverage.
There have been a few recent changes that affect high-income Medicare beneficiaries:
We don’t yet have concrete details from CMS; the final number often isn’t published until November, just weeks before the start of the year. But the Medicare Trustees Report, which was published in June 2022, projects that the standard Part B premium will remain unchanged at $170.10/month in 2023 (People subject to IRMAA will pay more). The lower-than-expected costs for Aduhelm, a new Alzheiemer’s drug, are resulting in savings that the federal government plans to use to keep part B premium increases modest or non-existent in 2023.
CMS has projected that the average Part D premium will decrease slightly, to $31.50/month, in 2023. But there is always significant variation in Part D premiums from one plan to another, so there are a wide range of options for enrollees. And as is the case for Part B, beneficiaries subject to IRMAA pay more for their Part D coverage.