Strikes Me as Fair – if you are paying income based (IRMAA) Medicare premiums, you are quite fortunate

Richard Quinn, 12:43 pm ET

THE FEDERAL government’s Centers for Medicare and Medicaid Services just announced the new income-based Part B and Part D premiums for 2022. Many people aren’t happy.

Next year’s basic Part B premium jumps to $170.10 a month, in part because Congress artificially limited this year’s premium increase to only 25% of the true amount. It’s time to play catchup—and deal with rising health care costs.

But a small group of seniors will pay more than $170.10 a month—sometimes much more. At issue is IRMAA, short for income-related monthly adjustment amount, the Medicare premium surcharges for higher-income retirees. In 2022, these surcharges start at a modified adjusted gross income of $91,000 for single individuals and $182,000 for couples.

Like most people, I dont like paying more than I have to for anything. But let’s be realistic: The median household income for Americans ages 65 to 74 is $46,360 and, for those over age 74, it’s $54,058. For a couple to pay IRMAA premiums in 2022, they need an income that’s more than three times these medians.

I, too, would like to be paying only the standard Medicare Part B premium. But what I like more—and truly appreciate—is being in such an enviable position that I have to pay a lot more for Medicare than the vast majority of my fellow seniors.

If you’re one of those Americans who supports the fair share rhetoric directed at the super-wealthy, keep in mind this principle should apply to everyone. Most out-of-pocket health care costs, and even most health care insurance premiums, are highly regressive. They dont care how much you earn. A young family with modest income can have a $5,000 deductible and pay $500 a month in premiums, just like the wealthy family two towns over. Seniors have good health care coverage and, overall, relatively modest costs. Why not make Medicare premiums a bit progressive?

Call me naive, but I don’t think it’s right for well-off older Americans to employ financial strategies that avoid or minimize IRMAA premium surcharges—things like doing Roth conversions in their 50s and early 60s, so their modified adjusted gross income later looks modest for IRMAA purposes.

Among some Facebook groups I follow, people are obsessed with IRMAA and view it as unfair—something to avoid as a part of retirement planning. My contention: We may not like those extra Medicare premiums taking a chunk out of our Social Security check—but they strike me as fair.

Source: Strikes Me as Fair – HumbleDollar

7 comments

  1. I retired in 2017. In 2018, I agreed to do a short consulting assignment for my former Vice President as he claimed that no one else in my former department was capable of doing it. Flash forward to December of 2019, I received a letter from Social Security informing me that because I had exceeded the IRMAA limit for 2018, my wife and I would be subject to Medicare Part B and Part D surcharges during 2020. I completely disagree with your premise that IRMAA is a “fair trade off”. It is in fact a disincentive for retirees to go back to work, even for brief periods of time.

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    1. are you saying the extra amount you earned in 2018 was offset by one year of IRMAA premiums? Do you disagree that premiums should be income based?

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  2. Selective pricing is the norm, not an aberration. The game is “worth” more to some than to others. Dirty little secret… senior discounts are not (entirely) for benevolent purposes. One size fits all pricing is not usually the most profitable. Lower prices for certain customers can more than pay for themselves by increased volume.

    https://en.m.wikipedia.org/wiki/Pricing_strategies

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  3. If we both decide to go to a football game, and you get charged double for a ticket to sit next to me – solely based on the fact that you make more money than me – is that fair? If it’s not, then why is IRMAA “fair”?

    IRMAA ensures that the amount we pay for Medicare – just like most other collections done by government at all levels – has absolutely nothing to do with costs and “fairness”. Nothing is fair when it comes to government.

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    1. Selective pricing is the norm, not an aberration. The game is “worth” more to some than to others. Dirty little secret… senior discounts are not (entirely) for benevolent purposes. One size fits all pricing is not usually the most profitable. Lower prices for certain customers can more than pay for themselves by increased volume.

      https://en.m.wikipedia.org/wiki/Pricing_strategies

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    2. So using that analogy you would discard the income tax brackets and have everyone pay the same flat amount even given most Americans would pay a much higher amount?

      The costs to provide Medicare are determined almost entirely by the cost and use of health care services. If there were no IRMAA for Parts B and D the basic premiums would be much higher or more general revenue would be used. Is that better?

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