Most Medicare participants receive Part A (Hospital) with no monthly premium. Medicare B (Medical) charges a standard base premium to all participants, currently $144.60/month. Some Social Security benefit recipients have an additional monthly premium deducted for Medicare Part D, the optional prescription drug coverage available to Medicare recipients.
Higher-income recipients must also pay a surcharge for Part B. Dubbed the Income-Related Monthly Adjustment Amount (IRMAA), the additional premium requires involuntary extra “contributions” from some Social Security recipients. There is no added benefit attached to IRMAA charges, and it is not voluntary. Further, the participant does not have to be wealthy to be charged more than the base rate under IRMAA.
It gets worse. There is also a surcharge for higher-income Medicare recipients to cover Medicare Part D, the prescription drug coverage. This charge is particularly egregious, as it is applied regardless of whether they choose to be covered by Part D. Many Social Security recipients purchase independent drug coverage from private providers. They pay their private premiums and use only the private system, never relying on Medicare Part D.
Pay attention here if your income has dropped. IRMAA is applied to a Social Security recipient’s account based on an income tax return that is over a year old. Every year, many people of Medicare age experience a dramatic drop in income. Without taking action, they will have to pay the surcharges during a period that could strain their reduced cash flow. These people are not without recourse.
Social Security Form SSA-44 is used by people who have had a life-changing event resulting in a decrease in income to make a formal written appeal to the Social Security Administration for relief under IRMAA. Form SSA-44 is easy to find online, easy to complete, and can save Social Security recipients a significant amount of money. Some reasons for decreased income include:
- Marriage or Divorce
- Death of a spouse
- Work stoppage (retirement, layoff, etc.)
- Loss of income-producing property
- Loss of pension income
- Employee settlement payment was non-recurring
If you experience a substantial decline in income and are paying IRMAA surcharges, it is up to you to take action. After a year, Social Security will find you and make the reduction, but you will have paid the IRMAA adjustment for a year, with no recourse but to wait. Excess payments will not be refunded to you. There is a limited time to file the SSA-44 and receive any repayment.
In our financial planning practice, we meet many people who have no idea what they are actually receiving from, and paying to, Social Security, on a monthly basis. They are only aware of their monthly deposit amount (the net income). Please check your benefits at ssa.gov, even if you have not previously established an account. There you can get a comprehensive earning record, an explanation of your Social Security Benefits and Medicare costs, and a link to the SSA-44 if needed.
Knowing what to do can save you a lot of money.
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