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Medicare Part B & D Income-Related Monthly Adjusted Amount
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What is IRMAA?
IRMAA is an acronym for "Income-Related Monthly Adjusted Amount." With IRMAA, there is a higher premium charged by Medicare Part B and Medicare Part D to people who have higher earnings. The income-related monthly adjustment amount or IRMAA applies to your Part B and Part D premiums. With the Affordable Care Act, there were many changes to the Medicare program, including a new Part D premium adjustment for individuals who reported higher incomes on their tax returns. IRMAA payments go directly to Medicare, even if you pay monthly premiums to an insurance company for Medicare Advantage or Part D prescription drug coverage.
How does IRMAA work?
IRMAA, Income-Related Monthly Adjusted Amount, is calculated every year. To determine your costs, the Social Security Administration uses the most recent tax return provided by the IRS. Since the government cannot tell how much money you will make, they use tax returns from two years ago. For example, for 2020, they would use 2018's tax returns. All income is calculated towards the income-related monthly adjusted amount, regardless of what you are making currently. As with other bills, if you do not pay your premiums, you can lose your coverage. Below, we will break down the different parts that IRMAA affects.
IRMAA Part B
Part B Medicare involves most doctor services, outpatient therapy, durable medical equipment. For 2020, the standard Part B premium amount is $144.60. Generally, most people pay the standard Part B premium amount. With Part B, you pay a premium each month. Your Medicare Part B premium will be automatically deducted from your benefit payment through social security or railroad retirement board benefits each month. If you are not receiving retirement benefits each month from social security or the railroad retirement board, you can pay your bill in other ways. You have the option of paying your bill online through your bank or institution or signing up for Medicare Easy Pay, so your payments are automatically deducted from your checking or savings account. You can also mail your payment to Medicare each month.
IRMAA Part D
Plan D revolves around prescription drug coverage. Most Medicare Prescription Drug Plans have a monthly fee that varies by different plans. With IRMAA Part D, those payments are paid separately to Medicare, and you are required to pay them regardless if a third party pays your Part D premium plans. Each month, you will receive a Medicare Premium Bill for your Part D IRMAA. You may pay a Part D income-related monthly adjustment amount if your modified adjusted gross income is above a certain number. Similar to Part B, they use the information from tax returns from two years ago.
What happens in the case of a life-changing event?
If a life-changing event has occurred that altered your financial situation, there are ways to navigate it. Life-changing events can include marriage, divorce, death of a spouse, work reduction, or any other condition that can impact your income. The Social Security Administration can make adjustments to your IRMAA cost or eliminate it completely, depending on the situation. There are multiple steps you need to take for the Social Security Administration to reduce your costs, which we will break down below. First, you need to fill out an IRMAA life event form. If you are unsure about questions on the form, you can contact the Social Security administration's number at 1800-772-1213, or you can go down to the office and have them assist you. With this form, the Social Security Administration wants proof of a life-changing event. For peace of mind, mail and fax the items listed below so that the Social Security Administration does not lose them. When you package everything, ensure that you designate that this paperwork is "urgent" on the envelope. There following are the four items suggested bringing as proof of this event:
IRMAA Life Event Form
First, you need to obtain and fill out a life-change event form so that you can notify the Social Security Administration of this event.
A copy of the page in the letter that you received from the Social Security Administration
Next, you need to obtain the page describing the year and income that the Social Security Administration is trying to penalize you for to raise your Medicare rates. Make a copy of that one page that shows the income you made in 2018; then, you can package that copy with the other items.
Estimated current year income
Moving forward, you need to write down your estimated income for 2020. You can type this up and incorporate you and your spouse's expected income. Income includes Social Security income, interests on savings, 401K, and more. At the bottom of the page, add the total income for you and your spouse. Highlight it with large font, so it is clear to the Social Security Administration.
Proof of life-event
Lastly, you need proof from your employer or another party that you have experienced a life-changing event that has had an impact on your income. Whether that comes in the form of a letter, an email, or another type of communication, it's necessary.