In the real world, inflation determines what you pay for goods and services. In the Medicare world, your income is the deciding factor in how much you’ll pay for your Part B and Part D Medicare premiums.
Every year the Social Security Administration sets inflation-adjusted income thresholds. The higher your income above those thresholds, the higher your Medicare premiums will be. It’s called an Income-Related Monthly Adjustment Amount (IRMAA). In plain English, it’s a pesky fee you have to pay every month for making too much money.
IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years ago. It’s calculated based on a Medicare-specific type of MAGI, which is different than MAGI the government uses for non-healthcare purposes.
Calculating MAGI
To calculate your current MAGI,
- Find your Adjusted Gross Income (AGI) on your tax return from two years ago
- Add in tax-exempt interest that has been earned or accrued
- Add interest from U.S. Savings Bonds used to pay for higher education
- If applicable, add earned income while living abroad and any income from specific sources not included in your AGI
The total amount represents your current MAGI specific to Medicare and IRMAA.
IRMAA Notification
If the Social Security Administration determines that you have to pay an IRMAA, they notify you by mail of the amount of your Part B premium and the amount of your Income-Related Monthly Adjustment Amount. It will include the annual notice of Social Security benefits (referred to as an initial determination). IRMAAs apply for only one year. You’ll be notified by SSA near the end of the current year if you have to pay an IRMAA for the following year.
I Object
But suppose you think the IRMAA is too high or there shouldn’t be one at all. What do you do? You can appeal. You can request that Social Security revisit its decision if you have experienced a life-changing event that caused an income decrease, or if you think the income information Social Security used to determine your IRMAA was incorrect or outdated. A lot could have changed between the two-year look back the government uses and what’s going on today. But appeals are only considered if you’ve had a life-changing event that caused an income decrease.
Life-changing events are defined as:
- The death of a spouse
- Marriage
- Divorce or annulment
- You or your spouse stop working or reducing the number of hours you work
- Involuntary loss of income-producing property due to a natural disaster, disease, fraud, or other circumstances
- Loss of pension
- Receipt of settlement payment from a current or former employer due to the employer’s closure or bankruptcy
- An amended return that changes the income Social Security counts
Events that result in the loss of dividend income or affect a beneficiary’s expenses, but do not affect the beneficiary’s modified adjusted gross income are not considered qualifying life-changing events.
You can make the case that Social Security used outdated or incorrect information when calculating your IRMAA if you:
- Filed an amended tax return with the IRS
- Have a more recent tax return that shows you are receiving a lower income than previously reported
How to appeal your IRMAA
If any of the listed circumstances applies to you, you can request a New Initial Determination, submit a Medicare IRMAA Life-Changing Event form, or schedule an appointment with Social Security. To get an appeal form, you can go into a nearby Social Security office, call 800-772-1213, or check the Social Security website.
If you don’t qualify to appeal
If you don’t qualify to request a new initial determination, but you still disagree with Social Security’s IRMAA decision, you can request a reconsideration. Keep in mind that there are no strict timeframes in which Social Security must respond to a reconsideration request.
- Complete a request to SSA for reconsideration. You’ll need form SSA 561.
- If your reconsideration is successful, your premium amounts will be corrected. If your reconsideration is denied, you can appeal to the Office of Medicare Hearings and Appeals (OMHA) level within 60 days of the date on the reconsideration denial. Follow the directions on the denial to file an appeal at the OMHA level. If you decide to appeal at the OMHA level, you may wish to contact a legal services organization or lawyer to help you with this or any further levels of appeal, but this is not required.
- You must submit any new evidence within 10 days of filing your OMHA level appeal. Contact OMHA for further instructions on submitting. You can ask OMHA for an extension if you are unable to submit new evidence within 10 days.
- If your OMHA level appeal is successful, your premium amount will be corrected. If your appeal is denied, you can choose to appeal to the Council within 60 days of the date on the OMHA level denial.
- If your Council appeal is successful, your Part B premium amount will be corrected. If the Council denies your appeal, you can choose to appeal to the Federal District Court within 60 days of the date on the Council denial.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
