Every year, Medicare premiums go up. But in 2020, some high-earning Medicare Part B and Part D beneficiaries could see a decrease in their Part B and/or Part D premiums.
The surcharge that is added to Part B and Part D premiums for higher income earners will be indexed to the Bureau of Labor Statistics’ Consumer Price Index for Urban Consumers (CPI-U) starting in 2020. IRMAA brackets weren’t previously indexed in this way.
What is IRMAA for Medicare?
An IRMAA is an Income-Related Monthly Adjustment Amount. It’s an extra charge that some Medicare beneficiaries have to pay for their Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage). The IRMAA is based on your modified adjusted gross income (MAGI). If your MAGI is above a certain amount, you’ll have to pay the IRMAA. The amount of the IRMAA is determined by the Centers for Medicare & Medicaid Services (CMS).The amount of the IRMAA is based on your annual income. If your income is above a certain level, you’ll have to pay a higher premium. The good news is that you can get help paying your IRMAA if you’re having trouble affording it.
If you have questions about your IRMAA, or if you need help paying for your Medicare premiums, contact your local Medicare office or the Social Security Administration.
How Is IRMAA Calculated?
Many people are not aware of how their Medicare insurance is calculated. If you are on Medicare, you may be required to pay an Income-Related Monthly Adjustment Amount (IRMAA). This is in addition to your regular monthly Part B and Part D premiums. So, how is IRMAA calculated?
Your full Medicare premium is how much it costs to cover the entire Medicare population. Divide that number by the number of people on Medicare. Then, add an additional amount. This is your IRMAA. In general, Medicare Part B costs $104.90 per month (as of 2019) for an individual, and $166.30 for a couple. Medicare Part D costs you nothing at all. What’s left is what is known as your “doughnut hole.” This is the gap in coverage that begins once you have spent $3,750 on covered drugs in a year.
Your out-of-pocket costs then are $2,700 for the following year. If you spend more than $5,000 on covered drugs in a year, you pay an extra 10% of your prescription costs.
People who have worked for employers with a “Cadillac” health plan often don’t realize how generous their coverage really is. They think they are paying full price when they are not. The employer pays all of their Medicare Part B and Part D premium costs.
It is gradually reduced to $2,000 per year. If you have spent more than that, then you will be responsible for the full cost of your prescription medications.
Income-Related Monthly Adjustments (IRMAA) refers to the new way Medicare Part B and Part D premium amounts are being calculated. The idea behind this is that people with higher incomes should be paying more for their insurance. People in lower income categories pay a flat rate. This new system can be confusing at first.
You can always call Medicare and speak to a customer service representative for help.