The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge added to your Medicare Part B and Part D premiums if your income exceeds a certain threshold. This means that higher-income individuals pay more for their Medicare coverage than those with lower incomes. The Social Security Administration (SSA) determines whether you owe IRMAA based on your Modified Adjusted Gross Income (MAGI) from two years prior, as reported on your IRS tax return.
The thresholds and additional charges are adjusted annually. As of 2024, for example, individuals with a MAGI above $97,000 (or $194,000 for married couples filing jointly) will pay an IRMAA in addition to the standard Medicare Part B premium.
Here is a simplified overview of how it works:
Income Assessment: The SSA uses your MAGI from two years prior to assess your income. For example, in 2024, they will look at your 2022 income tax return.
Income Brackets: If your income exceeds the established thresholds, you'll be placed into one of several higher income brackets, each with an increasing IRMAA surcharge.
Premium Adjustment: Your Medicare Part B and Part D premiums are adjusted based on your income bracket, resulting in higher monthly premiums if your income is above the threshold.
Example Scenario:
If your 2022 MAGI was $120,000 (as a single filer), you'll fall into a specific income bracket for 2024, and your Part B premium will include an IRMAA surcharge in addition to the standard premium.
The primary purpose of IRMAA is to ensure that those who have a higher income contribute more towards the cost of their Medicare benefits.