Personal finance

New retirees may face surcharges for Medicare premiums. Here’s how to appeal paying extra if your income has dropped

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For some new retirees, there’s an extra step needed when it comes to signing up for Medicare.

That is, you may need to appeal so-called income-related adjustment amounts, or IRMAAs, if your income as a new retiree is lower than when you were working. Those extra charges kick in for higher-income Medicare beneficiaries and are in addition to what they pay in monthly premiums for Part B outpatient care coverage and Part D prescription drug coverage. (Part A, which covers inpatient care, typically comes with no premium.)

The surcharge is based on income information from your most recent tax return available — typically from two years earlier — which may not accurately reflect your income as a new retiree.

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How much Medicare surcharges could cost you

For 2022, IRMAAs kick in for individuals with modified adjusted gross income of more than $91,000. For married couples filing joint tax returns, the surcharges start above $182,000. The extra charges increase at higher income thresholds. (See charts below.) 

The surcharge for Part B ranges this year from $68 to $408.20, depending on income. Based on this year’s standard monthly premium of $170.10, that results in IRMAA-affected beneficiaries paying premiums ranging from $238.10 to $578.30.

For Part D, the surcharges for 2022 range from $12.40 to $77.90. That’s in addition to any premium you pay, whether through a stand-alone prescription drug plan or through a Medicare Advantage Plan, which typically includes Part D coverage. Those premiums can vary among plans.

The Centers for Medicare & Medicaid Services has not yet announced 2023 amounts for various costs associated with the program, including income thresholds for IRMAAs or the exact amount of the surcharge associated with each bracket.

This year, 5.3 million Medicare beneficiaries paid Part B IRMAAs and an estimated 6.8 million will do so in 2023, according to the latest Medicare trustees report. For Part D, 4.5 million beneficiaries are subject to IRMAAs this year and an estimated 5.8 million will pay the surcharge in 2023.

Wait for a ‘benefit determination letter’ before appealing

If you think your new income would result in paying no surcharge or at least paying less, it’s worth appealing. However, requesting the change is generally not something you can do ahead of your Medicare coverage kicking in or before the Social Security Administration sends you a “benefit determination letter.”

“Often we see beneficiaries get a bill for the standard premium just after the Part B enrollment, and then they get a second bill weeks later with the addition of the IRMAA,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

“Since the Social Security Administration is not making that initial determination in time for the IRMAA to even make its way on the first premium bill, you don’t want to be trying to ask for reconsideration of a decision that has yet to be made,” Roberts said.

The process to prove that your current income is lower involves asking the Social Security Administration to reconsider their assessment. You have to fill out a form and provide supporting documents.

Suitable proof may include a more recent tax return (if one is available), a letter from your former employer stating that you retired, more recent pay stubs or something similar showing evidence that your income has dropped.

The required form has a list of “life-changing” events that qualify as reasons for reducing or eliminating the IRMAAs, including marriage, death of a spouse, divorce, loss of pension or the fact that you stopped working or reduced your hours.

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