It’s not uncommon for Medicare premiums to increase every year. But for some higher-earning Medicare Part B and Part D beneficiaries, a 2020 change to Medicare Income-Related Monthly Adjust Amounts (IRMAA) could result in savings on their Part B and/or Part D premiums.
Starting January 1, 2020, the surcharge that is tacked onto Part B and Part D premiums for higher income earners will be indexed to the Bureau of Labor Statistics' Consumer Price Index for Urban Consumers (CPI-U).
The change is anticipated to reduce the number of beneficiaries who are subject to this extra charge for 2020 Medicare premiums.
What is an IRMAA for Medicare?
Most Medicare beneficiaries pay the standard Part B premium. Beneficiaries who have a Part D plan typically pay a monthly premium for their drug coverage.
- The standard premium for Medicare Part B in 2019 is $135.50 per month.
- Part D premiums are sold by private insurers so there is no “standard” premium. The weighted average premium for a standalone Part D prescription drug plan in 2019 was $39.63 per month.1
But beneficiaries with higher reported incomes may pay an additional fee on top of their Part B and/or Part D premium. This is known as the Income-Related Monthly Adjusted Amount, or IRMAA.
The income that makes a beneficiary subject to the IRMAA is based on the modified adjusted gross income reported on their taxes from two years prior.
For example, beneficiaries who pay the IRMAA added to their Medicare premiums in 2019 are doing so based on the income they reported on their 2017 tax returns.
The chart below shows how IRMAA amounts for Medicare Part B and Part D premiums in 2019.
| 2017 Individual tax return | 2017 Joint tax return | 2017 Married and separate tax return | 2019 Part B premium | 2019 Part D premium |
|---|---|---|---|---|
|
$85,000 or less |
$170,000 or less |
$85,000 or less |
$135.50 |
Your plan premium |
|
More than $85,000 and up to $107,000 |
More than $170,000 and up to $214,000 |
N/A |
$189.60 |
You plan premium + $12.40 |
|
More than $107,000 up to $133,500 |
More than $214,000 up to $267,000 |
N/A |
$270.90 |
Your plan premium + $31.90 |
|
More than $133,500 up to $160,000 |
More than $267,000 up to $320,000 |
N/A |
$352.20 |
Your plan premium + $51.40 |
|
More than $160,000 up to $500,000 |
More than $320,000 up to $750,000 |
More than $85,000 up to $415,000 |
$433.40 |
Your plan premium + $70.90 |
|
More $500,000 |
More than $750,000 |
More than $415,000 |
$460.50 |
Your plan premium + $77.40 |
What will the Medicare IRMAA be in 2020?
The chart below shows the expected IRMAA income brackets for 2020 Medicare Part B and Part D premiums.
| 2020 (based on 2018 individual tax return) | 2020 (based on 2018 joint tax return) |
|---|---|
|
$86,000 or less |
$172,000 or less |
|
More than $86,000 and up to $109,000 |
More than $172,000 and up to $218,000 |
|
More than $109,000 up to $136,000 |
More than $218,000 and up to $272,000 |
|
More than $136,000 up to $163,000 |
More than $272,000 and up to $326,000 |
|
More than $163,000 up to $500,000 |
More than $326,000 up to $750,000 |
|
More $500,000 |
More than $750,000 |
This will mark the first time in a decade that the tax has been indexed to inflation.
What does this mean for Medicare beneficiaries in 2020?
As you can see by comparing the 2019 and 2020 charts above, indexing IRMAA’s income brackets according to the CPI-U will increase the minimum income amount for each bracket.
What kind of effect will that have on beneficiaries and the Medicare program itself?
- Because the income required for each tax bracket is increased, fewer people may potentially enter into the first IRMAA bracket. The change will also delay how quickly Medicare beneficiaries may cross into a higher IRMAA bracket.
- If fewer people are paying the IRMAA for their Part B premiums – or if they are paying a lower rate than they would have otherwise – Medicare’s trust fund will receive less funding from IRMAA payments.
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