As you already know, means testing has become a new tax collection tool wielded by the federal government and affects what Medicare beneficiaries pay for their Part B and Part D premiums. Another article in this edition reprises information about the 2016 means testing levels.
The Medicare Income-Related Monthly Adjustment Amount (called IRMAA) looks back at the Modified Adjusted Gross Income (MAGI) from your filed income taxes of two years prior. The payment can be adjusted year-by-year based on changes in your MAGI reported on your taxes from two years in the past.
In March 2015, legislation was passed (MACRA) that will, beginning in 2018, amend the thresholds and amounts paid for each IRMAA tier. There will still be five tiers, with the baseline and lowest tier remaining unchanged. The upper three tiers will have compressed threshold limits. In addition, the rates of the upper two tiers will be increased, meaning, all in all, more people with higher incomes will end up paying higher IRMAA amounts. After 2020, these tiering arrangements and means tested amounts will be indexed annually to inflation. ("Higher Incomes" will mean MAGI over $133,500 for single, $267,00 for joint)
Recall that Medicare must each year determine a Medicare Part B premium so as to retain the ratio of cost paid to about 80 (federal budget) to 20 (individual premiums, deductible). The IRMAA concept takes the cost attributable to the individual portion (monthly actuarial rate) and adds an additional percentage of that total on top of the baseline Part B premium.
Can you do anything to reduce your means testing amount? In fact, Form SSA-44 allows you to appeal the Part B/D rate determination based on several factors that may affect your life. These “qualifying life changing events” are (whether impacting you or your spouse)::
1) Marriage or divorce/annulment;
2) Work hours reduction or work stoppage (this applies to retirement, or being laid off);
3) Loss of income producing property (including due to catastrophic circumstances);
4) Death of spouse;
5) Loss of pension income;
6) Employer settlement payment
In addition, if you file an amended tax return that might impact your MAGI from one or two years previous, make certain that Social Security has accounted for that. You should always review your annual Part B premium in light of your circumstances to make sure you are being charged the correct premium.