What are the Medicare IRMAA Brackets 2023

IRMAA Rates 

In retirement, when it comes to your health coverage, especially after the age of 65, there is only one option and that happens to be Medicare.

Federal law, through the Affordable Care Act, states that everyone must have health coverage. If they do not have this coverage, then they could face a penalty for not doing so.

Furthermore, federal regulations, since 1965 with Congress passing the Medicare Act, state that in order to receive any Social Security benefit you must also accept Medicare when eligible.

Failure to enroll into Medicare when eligible results in the immediate forfeiture of all current, future and even any past collected Social Security benefits.

Yes, you are reading that correctly. If you are receiving Social Security and you do not accept at least Medicare Part A AND you are already collecting Social Security benefits you have to pay back every $1.00 you received from Social Security…by law.

Eligibility for Medicare is defined as the point when you become age of 65 or older and you no longer have creditable health coverage through an employer or spouse’s employer.

But, please keep in mind, for most people within the United States, Medicare, if you are properly insured and utilize the system prudently, is a fantastic form of health coverage.

The main problem with Medicare, unfortunately, is that it is not free as there are costs associated to it.

Medicare is broken up into parts as it is known as the alphabet of health coverage. The Parts and Costs of Medicare in 2023, according to Medicare.gov, are:

• Part A – covers hospitalization
  • Part A costs include:
  • There are no premiums for those who qualify through income taxes when they were employed.
  • Hospital Stays
    • $1,600 deductible per benefit period.
    • $0 for the first 60 days of each benefit period.
    • $400 per day for days 61–90 of each benefit period.
    • $800 per “lifetime reserve day” after day 90 of each benefit period (up to a maximum of 60 days over your lifetime).
    • 20% Co-pay for Home Healthcare.
  • Skilled Nursing
    • $0 for the first 20 days of each benefit period.
    • $200 per day for days 21–100 of each benefit period.
    • All costs for each day after day 100 of the benefit period.
  • All costs associated to Part A can be covered by certain types of Supplemental (Medigap) Plans.
• Part B – provides coverage for attending physicians.
  • Part B costs include:
    • $164.90 – the monthly premium.
      • Everyone enrolled must meet this premium
      • The Part B premium is automatically deducted from any Social Security benefit being received.
    • $226.00 annual Deductible.
    • 15% Excess Charge if attending physician does not accept Medicare coverage
    • 20% Co-pay for certain types of services like mental health and outpatient services.
  • All costs associated to Part B, with the exception of the Part B Deductible in most states, can be covered by certain types of Supplemental (Medigap ) Plans.
• Part D – prescription drug coverage.
  • Part D coverage is provided by health insurers who determine all costs and regulated by the Centers for Medicare Services (CMS), costs may include.
    • Premium, on a national average the premium for coverage is $47.05 a month
    • Deductible, the maximum deductible that may charged is $505.00 for the year.
    • Co-pays for medications. This cost is determined by the medications you may be prescribed and the plan you may choose.
  • Please note with Part D there are wide variety of plans available, and many plans may be much lower than the national average.
  • It is strongly recommended that you meet with a healthcare professional or use Medicare’s Plan Finder before making any Part D Plans selection.
• Supplemental Plans (Medigap) – provides coverage for the gaps in Part A and B and may extend coverage for hospital stays
  • Supplemental Costs are determined by the private health insurers who administered the plans and all plans are regulated by CMS.
  • On a national average, Plan G Medigap Plans, which are the most robust Plans available, costs $187 a month
  • Please note that there are a wide variety of plans available in your area and many of them may be much more affordable.
  • It is strongly recommended that you meet with a healthcare professional or use Medicare’s Plan Finder before making any selection.
• Part C or Medicare Advantage Plans – administered by private health insurers who are regulated by CMS
  • All costs associated by these Plans are determined by the private health insurer.

With the passing of legislation through Congress Medicare Part B and Part D premiums may be based on your income. If you have generated too much income in any given year you may be subject to a surcharge on top of your Part B and Part D premium.

This is known as Medicare’s Income Related Monthly Adjustment Amount or IRMAA.

The Code Federal Regulations defines as IRMAA as:

“An amount that you will pay for your Medicare Part B and D coverage when your modified adjusted gross income is above the certain thresholds”.

IRMAA can be considered to be yet another tax on income.

When it comes to Medicare’s IRMAA the key is income or more to the point having the wrong type of income.

According to Social Security’s Handbook the definition of Income for IRMAA is:

Your “adjusted gross income plus any tax-exempt interest or everything on lines 2a and 11 of your 2022 IRS tax form 1044”.

Examples of the wrong type of income that is used in determining IRMAA are:

Wages, taxable Social Security benefits, Pension and Rental Income, Capital Gains, Dividends, and any distribution from any tax-deferred investments like a Traditional 401(k), IRA, 403(b) or Qualified Annuity.

Examples of what does not count as income for IRMAA are:

Roth Accounts, Life Insurance, Health Savings Accounts (HSA’s), 401(h) Plans, Certain Non-Qualified Annuities and Home Equity.

According to Social Security’s Program Operations Manual system (POMS) IRMAA can only impact those who are enrolled into:

• Medicare Part B,
• Medicare Advantage Plan w/ prescription drug coverage (MA-PD),
• Medicare Advantage Plan w/o drug coverage,
• Medicare prescription drug plan (PD) AND
• Who have a modified adjusted gross income (MAGI), above the threshold for their tax filing status.

For some people there is a belief that if a person has chosen a Medicare Advantage Plan then, regardless of their income, IRMAA will never be a factor and unfortunately this is just simple misunderstanding.

This misunderstanding may arise from the fact that for many Medicare Advantage Plans there is no monthly premium amount. In fact, there are more than a few of these plans that have no cost at all, unless care is actually received.

Because of these $0.00 monthly premium amount plans many people believe that they will still have to pay nothing if they do generate too much income in any given year.

The reality is that by law everyone who wants to purchase a Medicare Advantage Plan must first enroll into Medicare Part B.

Once enrolled into Medicare Part B, regardless of the coverage selected, that premium must be paid.

For those who are already receiving Social Security benefits the Medicare Part B premium will be paid automatically from that benefit.

For those who are not receiving Social Security benefits they will be billed accordingly. If they so choose to not pay that bill in a timely manner then they will void their coverage in not only Part B, but also the Medicare Advantage Plan they may have picked.

Please note that in 2023 there a few Medicare Advantage Plans that will rebate that Part B premium for those enroll into that type of plan. Unfortunately, they will still have to pay their Medicare Part B premium first.

IRMAA is broken down in thresholds that each a corresponding surcharge. The more income one has the greater the surcharge on top of their Part B and D premiums they will receive.

In 2023 the IRMAA Brackets are as follows:

By law the IRMAA Thresholds, at least the first 4 of them are supposed to adjust on annual basis based on the Consumer Price Index for Urban Consumers or the CPI-U from a year-to-year point ending every August.

If the CPI-U increases and or decreases within that time period, then the first 4 IRMAA thresholds are supposed to increase or even decrease by that percentage.

Please keep in mind that for the 2023 IRMAA Thresholds CMS used the change of CPI-U from 2021 to 2022 as the information for 2023 is not actually known yet.

In 2021 the CPI-U was 265.447 while in 2022 the average CPI-U for those 12 months was 285.848. This is a 7.69% increase in the CPI-U.

The IRMAA Thresholds in 2022 were:

The IRMAA Thresholds in 2021 were adjusted upwards by that amount and then rounded down to the nearest $1,000 to end with $97,000.

The calculation to determine the IRMAA Threshold was:

1^st IRMAA Threshold – $91,000 X 1.0769 = $97,997.90, rounded down to $97,000.

2^nd IRMAA Threshold – $114,000 X 1.0769 = $122,766.60 rounded up to $123,000.

3^rd IRMAA Threshold – $142,000 X 1.0769 = $152,919.80 rounded up to $153,000.

4^th IRMAA Threshold – $170,000 X 1.0769 = $183,073 rounded down to $183,000.

With the creation of the Bi-Partisan Budget Act of 2018 by Congress the 5^th IRMAA Threshold is not scheduled to adjust for inflation until 2028.

But what if the CPI-U goes down?

Since the inception of the IRMAA Thresholds in 2003 the CPI-U has never decreased, but with the unprecedented increase in inflation within the United States, which is being addressed at the time of this writing, that may in fact happen.

Since October of 2022 the CPI-U has decreased month after month. If this is to continues and the 12-month average is lower than it was from 2022 then the IRMAA Thresholds may in fact decrease – though this has never since 1954.

Medicare’s Income Related Monthly Adjustment Amount or IRMAA is something every person should be made aware of and have planned for.

According to the Medicare Board of Trustees the bulk of Medicare premiums, Parts B and D are projected to inflate by close to 6.00% for at least the next 8 years.

Within 10 to 15 years these surcharges, as they are paid directly out of Social Security benefits being received may be more harmful than many think.

Our Healthcare Retirement Planner software is designed to streamline the retirement planning process for financial professionals. By providing an efficient way to calculate IRMAA costs, our tool helps you save time and focus on other aspects of your clients’ retirement plans.

• Faster calculations: Our software quickly calculates IRMAA costs based on your client’s income and tax filing status, eliminating manual calculations and potential errors.
• User-friendly interface: The intuitive design of our platform makes it easy for financial professionals to input data and generate results with minimal effort.
• Data integration: Seamlessly integrate our calculator into your existing financial planning tools or CRM systems for a more streamlined workflow.
• Easy to Understand Reports: Export reports to easily share with your clients
• Tax and Surcharge Modeling: see how different types of income affects both taxes and your surcharges.

In addition to simplifying the calculation process, using our Healthcare Retirement Planner can also help improve communication between you and your clients. With clear visuals that illustrate how IRMAA costs impact their overall retirement plan, you can effectively convey complex information in an easily digestible format. This enables clients to make informed decisions about their healthcare expenses during retirement while ensuring they are prepared for any potential changes in Medicare premiums due to income fluctuations. To learn more about how our software can benefit both you as a financial professional and your clients’ retirement planning experience, visit the features page. Streamlining retirement planning processes can help financial professionals save time and resources, allowing them to focus on other areas of their clients’ needs. Automated calculation of IRMAA costs is the next step in streamlining this process even further.

• Ability to Run multiple comparison reports

• Easy to Understand Overview
• Quick IRMAA Indicator
• SimpleTax and Surcharge Display

• Detailed year by year reporting of income and expenses