Are You Eligible for a Refund of Your Medicare Surcharge?

One of the biggest surprises for some new Medicare recipients is having to pay far more in premium costs than they ever imagined.

Higher-earning recipients often have to pay surcharges on their Medicare premiums, which are known as income-related monthly adjustment amounts, or IRMAAs. These charges apply to both Part B (the part of Medicare that covers outpatient care like doctor visits) and Part D (prescription drug coverage).

More than 5 million Americans are subject to IRMAAs, according to The Wall Street Journal. In 2023, IRMAAs kick in for single tax-return filers whose modified adjusted gross income (MAGI) is more than $97,000 and joint filers whose MAGI is more than $194,000.

Retirees who receive Social Security typically see the money come straight out of their monthly benefit payment. Seniors who have not yet applied for Social Security are billed for the extra charge.

These surcharges can amount to more than you expect. The WSJ notes that the IRMAA income brackets are “cliffs”:

“This means even one extra dollar can bring a much higher premium. For example, a couple who had $246,000 of 2021 income owes total Part B premiums of about $5,540 for 2023. That rises to $7,913 if their 2021 income was $246,001.”

In other words, in the example above, earning $1 extra can end up costing you $2,373.

However, the WSJ reports that some people who receive these surcharges might be able to successfully appeal them.

IRMAA surcharges are based on your income two years prior. So, a 2023 IRMAA would be based on your 2021 income. If your income has fallen significantly in the past two years, you might want to appeal the surcharge and see if you can get it eliminated.

The WSJ profiled John Davidson, a retired financial technology (fintech) consultant who had a one-time large income spike in 2021. He successfully appealed his IRMAA surcharge, but it took more than a half-year and many conversations with Social Security representatives.

There are several reasons you might be approved for an IRMAA refund, according to the WSJ:

• A spouse’s death
• Marriage
• Divorce or annulment
• Work reduction
• Work stoppage, such as retirement
• Loss of income from income-producing property
• Loss or reduction of some types of pension income

If you want to appeal an IRMAA, the Social Security Administration has a form on its website that you can fill out to get the ball rolling.

If you are younger and want to avoid future IRMAAs, a little advance planning can help. For example, tax-free income from Roth IRAs and health savings accounts does not count when calculating an IRMAA — at least under current law.

For more on getting the most out of Medicare, learn about the “6 Medicare Mistakes To Avoid for a Healthy Retirement.”