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Seven Ways You Can Avoid Higher Medicare Premiums

Changes in income, marital status, work hours and other life events can exempt enrollees from surcharges


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Most people who enroll in Medicare Part B, which covers doctor visits, diagnostic tests and other outpatient services, pay a standard monthly premium, $174.70 in 2024. But if your household income is above a certain amount, you may have to pay more than the basic monthly fee. If the government says your monthly tab is going to be higher, there are ways to appeal that decision.

The added charge, known by the acronym IRMAA (income-related monthly adjustment amount) was included in the 2003 Medicare Modernization Act, designed to help financially stabilize the program. According to the Centers for Medicare & Medicaid Services (CMS), about 8 percent of Medicare beneficiaries are subject to these higher premiums.

“The idea is that people with higher levels of income should be paying more,” says Alex S. Seleznev, a wealth management specialist and certified financial planner.

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CMS decides each year how much higher-income Medicare recipients will have to pay; the Social Security Administration (SSA) determines who must make those added payments.

The added charge is based on a beneficiary’s modified adjusted gross income (MAGI), which is your total adjusted gross income plus any tax-exempt interest that you report on your federal 1040 tax form. For example, individuals with annual incomes of $103,000 are subject to a higher premium in 2024, while the income threshold for joint filers is $206,000.

Here’s the tricky part: The SSA doesn’t use your most recent tax return to figure out whether you have to pay higher premiums. It looks back two years. That means the income on your 2022 tax return — filed in 2023 — will determine what you’ll have to pay in 2024.

Depending on your annual income, the amount you’ll have to pay above the standard Part B premium could range from $66.90 to $419.30 a month next year. The high-income charge also applies to Part D prescription drug coverage, and those extra charges could range from $12.90 to $81 a month, also based on your 2022 income. Part D plan premiums vary widely, depending on what plan you pick and where you live. These surcharges apply whether you are enrolled in original Medicare (Parts A and B) or a Medicare Advantage plan.

If the SSA decides you will have to pay a higher premium, the agency will send you a letter telling you how the surcharge was calculated, what to do if you believe the information used to calculate the premium adjustment is incorrect and what to do if your income has been reduced or you’ve had what the government calls a “life-changing event.”

To discuss your case, you can visit an SSA office or call the SSA toll-free number (800-772-1213). To request that your payment adjustment be reconsidered, you’ll need to file a Medicare IRMAA LIfe-Changing Event form (Form SSA-44).  

Here are the seven life-changing events that can exempt you from the premium surcharges:

1. Death of a spouse, which significantly reduced your income. 

The SSA will need proof of the death and an estimate of your new income.

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2. Marriage.

The SSA will need proof that you got married and an estimate of your joint income. For example, you may have had to pay a surcharge based on your individual income, but you might no longer face a higher premium if you got married and your joint income doesn’t exceed the high-income threshold for joint filers.

3. Divorce or annulment.

The SSA will need proof of your change in marital status, as well as an estimate of your reduced income.

4. Work reduction.

Some examples of this are if you partially retired or changed from full-time to part-time employment. Documentation can include an employer statement, pay stubs showing a change in hours, corporate minutes, record of a business transfer or your statement that your hours have been reduced. 

5. Work stoppage.

Some examples of this would be if you retired or were laid off or your business or corporation was sold. The SSA says proof of such changes include an employer statement, a retirement letter, corporate minutes, record of a business transfer or sale or a statement from you regarding your work stoppage.

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6. Loss of income from property for reasons beyond your control.

Such as a natural disaster, arson or theft. Income-producing property can include real property (such as rental homes or farmland), crops, livestock and vehicles used for business.

7. Loss or reduction of certain kinds of pension income. 

The SSA has very specific requirements for this one: The pension must be a traditional defined benefit pension or a Cash Balance plan. And the loss of income must be as a result of a plan failure or termination or because the pension stopped based on a decision you made in the past — for example, if you took a 20-year annuity rather than a lifetime pension when you retired 20 years ago and that has paid out. The SSA will generally require a letter from the pension plan administrator and possibly a copy of the plan description.

You can also try to make the case that Social Security used outdated or incorrect information when calculating your surcharge. For example, you filed an amended tax return for the year the SSA is using to make an IRMAA decision, or the IRS supplied the SSA with an older tax return and you want to use a more recent one that will show you receive a lower income than reported.

If your exemption request is rejected, you can ask the SSA to reconsider. If you disagree with the reconsideration decision, the next step is to ask for a hearing. Hearings are held before an administrative law judge in the Department of Health and Human Services’ Office of Medicare Hearings and Appeals. Learn more from this SSA publication.

Because these income surcharges are calculated every year, your status can change if your income goes up or down. For example, you could pay the surcharge for just one year if your income temporarily bumps you into high-income territory. That could include having capital gains from stock sales, doing a Roth IRA conversion or getting a profit from a property sale — none of which qualify as IRMAA exceptions.

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