Your income may impact what you pay for Medicare, thanks to a 2003 provision called the income-related monthly adjustment amount (IRMAA).
In most circumstances, the government pays roughly 75% of your Part B and/or Part D coverage. IRMAA, designed to strengthen the financial stability of Medicare, shifts a portion of the government cost to those who earn more.
Medicare enrollees with a modified adjusted gross income (MAGI) in excess of 85,000 can expect to pay surcharges between $54 and $325 per month per person for Medicare Part B (hospitalization) and between $13 and $74.80 per month per person for Part D (prescription drug) premiums.
You can determine if IRMAA applies by calculating your modified adjusted gross income (MAGI) from two years ago and referencing it in this chart. Most people’s MAGI is close to their adjusted gross income (AGI) although it can be higher or lower depending on the deductions that are added back in.
IRMAA isn’t technically part of your plan premium, so you won’t pay your provider. Instead, IRMAA is paid to Medicare (the Centers for Medicare and Medicaid Services). The premium will likely be taken directly out of your Social Security check.
Your MAGI may include one-time only income, such as capital gains, the sale of property, withdrawals from an Individual Retirement Account (IRA) or conversion from a traditional IRA to a Roth IRA. One-time income will affect your Medicare premium for only one year.
It is best to consult with an expert who can help with strategies to eliminate or reduce your IRMAA payments. The ABA Insurance Program has the resources to answer these questions and others as you enroll in Medicare.
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