Richard Quinn | Feb 5, 2023
I’M AMAZED BY the opinions expressed by some retirees about the Medicare premium surcharge known as IRMAA, short for income-related monthly adjustment amount. Is it really unfair for higher-income older Americans to pay larger premiums for Medicare Part B and Part D? Many people think so.
IRMAA was part of 2003’s Medicare Modernization Act and took effect in 2007. The threshold at which IRMAA kicks in for a couple is four times higher than the median household income for Americans age 65 and older. Yet here are just two—out of many—complaining comments I saw on Facebook. Both have been slightly edited:
- “If I pay more for health care, I expect to get more. With IRMAA’s impact on Medicare premiums, this is not true.”
- “IRMAA is designed to fault the wealthy for being successful because ‘they can afford to pay more.’ Raising the premium on higher earners to pay for the same services does not make sense. It should be the same for all people no matter what.”
The idea of taking more from some taxpayers—or giving more back to them—based on income is hardly unique to Medicare. The federal income-tax code is progressive, meaning those with higher incomes pay a higher percentage of their income in taxes. Similarly, the Affordable Care Act subsidizes health insurance based on income. (A digression: Those subsidies don’t always seem to go to the right people. Two bloggers I’ve come across report a seven-figure net worth—and yet they pay less than $40 a month for family health insurance coverage.)
Moreover, roughly 25% to 30% of large employers charge employees for health insurance premiums based on their salary level. At my old employer, we structured retiree premiums based on a combination of years of service and salary. Nobody seemed to complain about that.
The federal government subsidizes Medicare premiums. IRMAA merely reduces the size of that subsidy for some Medicare recipients. According to Medicare’s trustees, about 4.8 million beneficiaries paid a Part B IRMAA premium, or about 8% of Medicare Part B recipients.
More than half of Americans feel the wealthy don’t pay their fair share in taxes. Yet it seems that many retirees, even though they have an income that’s four times or more the average, don’t think they should be considered wealthy.
Originally appeared in HumbleDollar.com
We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions. Those who are financially prudent will most likely enjoy success, even if events don’t always go their way.
QUINNSCOMMENTARY 
I have some thoughts on this.
If I were to go to the grocery store, should I have to pay a different price for an apple based on my income? It is the same apple for everyone.
When I was working, the health insurance plans that were offered costed the union employees the same. It didn’t matter that one was a new hire with a family of 4 or a 20-yr worker top-step making 6 figures with a family of 4. I hated this but understood why. Now there were some family planning choices that could have been made and at other times you might be a new hire because you got laid off from somewhere else, somewhere you had 20 years which you could not have planned for.
But as far as the IRMAA goes, you can plan for your retirement and if everybody listened to you, they would have saved first. They would have the money for the premiums. Instead the savers are getting penalized for doing the right thing.
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Some of us saved for a lifetime, and, took reduced wages to qualify for a defined benefit pension, and receive employer matching contributions to our retirement savings plan. Then the government changes the taxation of Social Security benefits and adds IRMAA layers. At a minimum, Congress should have excluded from the IRMAA calculation all accrued benefits as of the effective date of the change – so that the new tax only applied prospectively. .
I can accept applying it prospectively, but, Congress has gotten into the habit of making changes with retroactive effect, and, as a result, they are crap.
Remember the TRA’86 “Success Tax”, where they would have a 15% surcharge on qualified plan benefits in excess of $150,000 a year. No grandfather, no transition, etc.
The SECURE change in non-spouse survivor benefit taxation? No grandfather, no transition.
Remember, individuals with higher wages throughout their working careers are already crapped on when it comes to Medicare – individuals can qualify for non-contributory part A coverage, and become dual eligible for Medicare and Medicaid (to lower part B and part D costs) where they might have paid less than $1,000 in FICA-MED taxes!
Last year, less than 50% of Americans paid income taxes. States like NY and NJ and CA are learning that as you concentrate the taxation on higher income individuals, they are moving to Florida, Texas, etc. The rest of us respond like Dave 70128 and lower productivity, working hours, etc. to do our best to avoid the surcharges.
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Some very good comments and perspectives on the issue of IRMAA. Like everything else the government does, it could have been handled differently but it is as stands.
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Sorry Richard, this is one time I don’t agree with you. I got hit by IRMAA a few years ago as a result of doing some consulting work for my former employer. Since then, I have limited the amount of consulting work I will do because of IRMAA. I AM NOT WEALTHY just because some government agency thinks that I need to be penalized for plying my former trade.
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I don’t see it as a penalty. You could add $30,000 to $60,000 single or married in added income and still pay only about $70.00 a month more in premium.
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I pay a bit more for my health insurance based on my salary. I’m fine with it (not that I have a choice), but at a prior employer, my annual raise put me above the threshold to pay more and the increase was about the same as my raise. That hurt a bit and I would have been better off with a smaller raise that year. Go figure.
The basic issue is that people don’t like being charged a different price for the same item than someone else. It’s like a type of loss aversion.
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