Will the Medicare IRMAA increase your cost for Medicare Part B &D when you enroll in Medicare?

When you apply for Medicare, you are enrolling in a government-sponsored health insurance program, supported by U.S. taxpayers. Most people enroll at the time they turn 65, though plans are available for individuals with certain disabilities or qualifying chronic illnesses, too. 

However, even though Medicare is taxpayer supported, enrolling in it does not mean that you are not obligated to pay certain costs out of pocket. Of course, you will face certain costs of care like copayments, coinsurance or deductible obligations. But there is also the question of paying a regular premium for portions of your coverage, namely your Part B and Part D coverage. 

Not every Medicare recipient will pay the same premium for their coverage, and some will be subject to an Income-Related Monthly Adjustment Amount (IRMAA) charge that will increase their premiums compared to those in lower income brackets. Therefore, it’s important to understand how the IRMAA works, and how you might expect your Medicare premiums to rise as a result. 

Understanding Medicare Premiums 

Your Medicare premium is the cost you pay for your policy. Though you have paid the federal Medicare tax while you were working, the premium is a separate cost that you are still obligated to pay once you start receiving Medicare coverage. 

The most basic form of Medicare coverage is Original Medicare, and before you can tap into any more expansive Medicare benefits, you must have this coverage. It offers: 

• Medicare Part A, which covers hospital care like inpatient stays, surgeries and related expenses. 

• Medicare Part B, which you would use to pay for everyday medical costs like checkups, immunizations, and outpatient care. 

Generally, you qualify for Medicare Part A at a $0 premium (depending on your payroll tax filing history), while the lowest cost you will pay for Part B coverage will be $148.50. 

Additionally, if you want coverage for certain services not covered by Original Medicare, you might have to buy expanded Medicare benefits offered through the private insurance market. One of these is Medicare Part D coverage, which pays for standard prescription drugs, and which Original Medicare does not automatically cover. While Part D plans are affordable, their prices will vary based on the insurer from which you choose to buy your policy. 

You must pay all of your Medicare premiums regularly in order to maintain your coverage, and most people have their Part B premiums deducted from their regular Social Security checks. Part D premiums can be paid directly to your insurer, and many people opt for automatic payments. 

However, you can never assume that what your neighbor pays for Medicare Part B & Part D will be identical to what you pay. If you are subject to an Income-Related Monthly Adjustment Amount (IRMAA) charge, then you can expect your premium to be higher proportionally. 

Understanding the IRMAA 

Depending on your income tax filings, you might be required to pay more for your Part B & Part D premiums. Generally, those with the highest incomes will have to pay the most for their coverage.  

Medicare defines IRMAA pricing within the following tiers: 

Source: eHealth “What Are Medicare Part D IRMAA and Part B IRMAA?” 

Your IRMAA is included as part of your Part B premium, based on your income bracket above. However, because your Part D premium will vary based on the plan you choose, you must pay the premium and the IRMAA separately. While you will pay your premium directly to your insurer, you must make your IRMAA payment to the Medicare system.  

The thing to remember about IRMAAs is that yours will be determined based on your tax return from two years previous. For example, if you have an IRMAA in 2021, then it was determined based upon your 2019 taxes and income. As a result, IRMAAs can change from year to year, and there is an appeals process to allow you to dispute IRMAA charges if necessary. 

In the end, IRMAA charges can impact your overall cost burden for Medicare. However, they are still prices that will fluctuate, and that will help sustain the Medicare system over time. Just speak to one of our agents to learn more about your cost obligations within the program.