Indexing will slow
the rise in Medicare premiums for some retirees
Sep
16, 2019 @ 2:17 pm By Mary Beth Franklin
For the first time
in a decade, the income brackets used to determine Medicare premium surcharges
for high-income retirees will be indexed to inflation starting Jan. 1. As a
result, some retirees may experience a reduction in their Medicare surcharge
costs next year.
Beginning Jan. 1,
the income related monthly adjustment amount brackets used to determine
high-income surcharges for individuals and married couples will be indexed to
the consumer price index based on the 12-month CPI change from September 2018
through August 2019.
In August,
inflation increased 1.7% over the previous 12 months, according to the CPI data
released last Thursday.
As a result, the
income brackets used to determine Medicare surcharges in 2020 will increase by
1.7%, rounded to the nearest $1,000.
In general, that
means income tiers will increase by $1,000 to $3,000 for individuals and by
$2,000 to $6,000 for married couples filing jointly, according to a new analysis by Health View Services, a
leading provider of retirement health care cost data for the financial services
industry. Medicare premium surcharges for 2020 will be based on income reported
on 2018 federal tax returns.
Currently, there
are six income tiers that determine high-income surcharges for Medicare Part B,
which covers doctors' fees and outpatient services, and Medicare D, which
covers prescription drugs.
Individuals with
modified adjusted gross income of $85,000 or less, and married couples with
joint MAGI of $170,000 or less are not subject to IRMAA surcharges in 2019.
They pay the standard Medicare Part B premium of $135.50 per month. MAGI
includes adjusted gross income plus any tax-exempt interest from municipal
bonds.
In 2019,
individuals with incomes above $85,000 and married couples with joint income
above $170,000 pay combined Medicare premiums and surcharges
ranging from $189.60 per month to $460.50 per month per person.
The income
thresholds that determine who pays the Medicare surcharges have been fixed at
their current levels since 2011. As a result, a growing share of beneficiaries
have been subject to the income-related premiums over this time period.
But in 2020 and
subsequent years, the income thresholds will be indexed to general price
inflation, except for the top-level income thresholds of $500,000 for
individuals and $750,000 married couples filing jointly that were added in
2019. Those top tiers will be indexed to inflation starting in 2028.
HealthView's new
white paper analyzes the impact of indexing through several case studies. For
example, a single, healthy 65-year-old woman who lives to age 89 with $100,000
in current annual income and starts retirement in the second IRMAA income tier
($85,001-$107,000 in 2019) would save more than $50,000 on the surcharge over
her lifetime with inflation indexing, according to the white paper. Her
lifetime surcharge would be $201,432, compared to $253,516 without indexing.
"Lower
surcharges from indexing seem like welcome news," said Ron Mastrogiovanni,
CEO of Health View Services.
But he warned that
reduced revenues from Medicare surcharges as a result of indexing could put
added pressure on the Medicare Trust Fund,
which is expected to run dry in 2026 unless Congress acts.
"We believe
that given pressure on the Medicare Trust Fund, retirees should expect additional changes and cost
shifting to make up for lost revenue," Mr. Mastrogiovanni
said.
The white paper
also highlights how important it is for advisers and clients to understand the
impact of required minimum distributions on surcharges and other events that
can impact MAGI in retirement, as well as the opportunities to manage and even
reduce surcharges by incorporating financial products in portfolios that don't
count toward MAGI.
For example,
distributions from Roth IRAs and Roth 401(k)s are tax-free, as are
distributions from health savings accounts used to pay for qualified medical
expenses in retirement. Distributions and loans from cash value life insurance,
proceeds from a reverse mortgages and direct qualified charitable
distributions also do not affect income taxes.
Although the
Centers for Medicare and Medicaid Services have not yet announced new Part B
premiums for 2020, the latest Medicare Trustees' Report forecast an increase of
$8.80 per month in the Medicare Part B premium in 2020, to $144.30.
In addition,
high-income premium surcharges in 2020 will be based on the following new IRMAA
brackets for individuals, according to the HealthView Services analysis.
New IRMAA brackets for individuals
|
2020
brackets
|
2019
brackets
|
|
|
1st
tier
|
$86,000 or less
|
$85,000 or less
|
|
2nd tier
|
$86,001-$109,000
|
$85,001-$107,000
|
|
3rd
tier
|
$109,001-$136,000
|
$107,001-$133,500
|
|
4th tier
|
$136,001-$163,000
|
$133,501-$160,000
|
|
5th
tier
|
$163,001-$500,000
|
$160,001-$500,000
|
|
6th tier
|
Above $500,000
|
unchanged until 2028
|
The new 2020
brackets for married couples filing jointly will be as follows, according to
HealthView Services.
New IRMAA brackets for couples filing
jointly
|
2020
brackets
|
2019
brackets
|
|
|
1st
tier
|
172,000 or less
|
$170,000 or less
|
|
2nd tier
|
$172,001-$218,000
|
$170,001-$214,000
|
|
3rd
tier
|
$218,001-$272,000
|
$214,001-$267,000
|
|
4th tier
|
$272,001-$326,000
|
$267,001-$320,000
|
|
5th
tier
|
$326,001-$750,000
|
$320,001-$750,000
|
|
6th tier
|
Above $750,000
|
no change until 2028
|
medicare says first tier married/ joint is 174000, not 172000
ReplyDeletehttps://www.federalregister.gov/documents/2019/11/13/2019-24440/medicare-program-medicare-part-b-monthly-actuarial-rates-premium-rates-and-annual-deductible
ReplyDeleteMedicare Part B Income-Related Monthly Adjustment Amounts
ReplyDeleteSince 2007, a beneficiary’s Part B monthly premium is based on his or her income. These income-related monthly adjustment amounts (IRMAA) affect roughly 7 percent of people with Medicare Part B. The 2020 Part B total premiums for high income beneficiaries are shown in the following table:
Beneficiaries who file
individual tax returns with income: Beneficiaries who file
joint tax returns with income: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $87,000 Less than or equal to $174,000 $0.00 $144.60
Greater than $87,000 and less than or equal to $109,000 Greater than $174,000 and less than or equal to $218,000 57.80 202.40
Greater than $109,000 and less than or equal to $136,000 Greater than $218,000 and less than or equal to $272,000 144.60 289.20
Greater than $136,000 and less than or equal to $163,000 Greater than $272,000 and less than or equal to $326,000 231.40 376.00
Greater than $163,000 and less than $500,000 Greater than $326,000 and less than $750,000 318.10 462.70
Greater than or equal to $500,000 Greater than or equal to $750,000 347.00 491.60
Premiums for high-income beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:
Beneficiaries who are married and lived with their spouses at any time during the year, but who file separate tax returns from their spouses: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $87,000 $0.00 $144.60
Greater than $87,000 and less than $413,000 318.10 462.70
Greater than or equal to $413,000 347.00 491.60
Thanks. I've been looking for this. Do you have the part D IRMAA table for 2020?
DeleteYes. This takes you to the CMS posting: https://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-deductibles
Deletehttps://www.cms.gov/newsroom/fact-sheets/2020-medicare-parts-b-premiums-and-deductibles
ReplyDelete