Joanne (00:19):

If you have a higher annual income, you may have to pay more than what you expect for Medicare. So in today's episode, we'll be discussing how your income can impact what you pay for Medicare, and more importantly what you can do if this does apply to you.

Cameron (00:32):

But before we get started, we do want to remind everybody here that we operate Giardini Medicare, which is an independent insurance agency based out of Southeast Michigan. Although we're based in Michigan, we work virtually to help customers in about 13 states find the right Medicare coverage for them. Even if you choose not to work with us. We know that the information in this podcast will be helpful for your successful and stress-free transition to Medicare.

Joanne (00:57):

So, what is IRMAA? Let's get right into this and how is it determined. Well, let's start with what it stands for, what it actually is. IRMAA stands for income-related monthly adjustment amount. IRMAA impacts about 7% to 8% of all Medicare beneficiaries that are out there. IRMAA’s not the same as a Medicare penalty, often confused, but this is not a penalty even though it can certainly feel like a penalty since it may increase what you're going to pay for your Medicare premiums. But we tell our clients to think of it more like a tax, unfortunately. And reality, what's happening is that the government is actually subsidizing less of your Part B premiums.

Cameron (01:30):

Yeah. And determining IRMAA is all going to come down to what your modified adjusted gross income is going to be. What happens is the IRS will report your modified adjusted gross income or your MAGI from two years ago to the Social Security Administration. If they do not have your income from two years ago on file, they may send over three-year-old data to Social Security to determine if you're going to be subject to IRMAA. And when we talk about the modified adjusted gross income, of course, we are not tax experts, we're not CPAs. So take this with a grain of salt, but basically, your modified adjusted gross income is your tax-exempt interest plus your adjusted gross income. So you may wonder, how do you figure this out?

Cameron (02:18):

Well, of course, you can always talk to a CPA. Also, you can go to your form 1040 from the IRS. And if you're looking for 2022, you're going to have to go back two years as we talked about and look at your form 1040 from 2020. On that form, you can add your adjusted gross income, which is line 11 to your tax-exempt interest, which is line 2A on the form. And then that should give you your modified adjusted gross income as a reference. Now that we talked about what a modified adjusted gross income is, I'll have Joanne talk to you about the different thresholds for income and how they can impact your IRMAA.

Joanne (02:53):

Okay. And one little tip before we get into that don't forget, IRMAA is based on income, not net worth. So, you could literally have a net worth of $10 million, but your income's $70,000 per year. So you may fall under the lowest threshold.

Cameron (03:04):

It's all about what you're making.

Joanne (03:05):

Correct. So, I'll talk about the threshold. So, there are six levels of IRMAA, surcharges, taxes, whatever you would like to refer to them as, and they're based on how you file taxes, number one. So it could be a joint tax return or an individual tax return. Not going to get into every breakdown there. We will post these charts below, but if you are on an individual tax return with an income of $91,000 or less, or on a joint return with $182,000 or less, you will pay the base Medicare premium this year, which is, uh, $170.10/month. On the flip side, if you make more than $750,000 on a joint return or over $500,000 on an individual tax return, you're going to pay $578.30/month. So you can see there's a big range in between. Again, there are six different levels. That's the first one. And the last one that I just listed. And like we said earlier, it's connected to how much the government is subsidizing your premium for part B. So, in the lowest tier, those people are paying 25% of the total premium and in the top tier, you are going to be paying 85% of the total premium. 

Cameron (04:12):

That's the Part B premium as Joanne had mentioned. Now keep in mind there is one other category for people that file a married and separate tax return. So if that does apply to you, reach out to us and we can give you that data. It's just too much for this episode. And not only does IRMAA have thresholds that impact Part B, but there is also IRMAA that impacts Part D, which is your drug coverage. And it's important to note, this also applies to drug coverage you have with a Medicare Advantage plan. So, I know sometimes people think an advantage plan will get them out of IRMAA, and that's not the case. So with Part D at the low threshold, you don't have to pay any extra premium for your plan. But at the highest threshold, Joanne mentioned, you could pay an additional $77.90 cents per month added to your Part D premium. So, if you have a $10 plan plus $77.90 cents, suddenly, you're paying $87.90/month just for prescription coverage. 

Joanne (05:07):

And just to throw in too here, a lot of people misread the communications from the government. But when they get their IRMAA amount for Part D is in drugs and it says for example $32.10/month people think that they're buying an additional drug plan from the government and they're not. Okay, so just remember this is another surcharge.

Cameron (05:27):

It's just an added fee

Joanne (05:28):

But you're still going to be paying for that Part D plan. But sometimes, pretty often we hear that, well, I already got a drug plan from you. Why am I paying the government for one? You're not. You're paying a surcharge.

Cameron (05:38):

Okay. Exactly. So with that being said, the thresholds and how it's calculated, everyone wants to know, how do I appeal this? What do I have to do? So it's not technically an appeal in most circumstances. It's actually a new initial determination, and we'll get into this in much more detail. But basically, it all comes down to the fact that we often hear from clients that say, well, why do I have to pay more for my Medicare if my income is not even close to as high as it was two years ago? And the answer is, we have a solution for that. And you might not have to. So again, the first initial determination and what social security bases your premiums on for Medicare, it's going to be two-year-old data. And that's just because that's what is on file from the IRS for most people.

Cameron (06:20):

So in 2022, they are looking at 2020. So, what happens as far as your initial determination, first off, when everybody signs up for Part B and some type of prescription drug coverage, they will get billed from Medicare for the standard premiums. Even if you are going to get IRMAA, you're likely to get an initial bill that just has your base rate of $170.10/month on it. Then what happens is, if your IRS data shows that you're going to be impacted by IRMAA and you owe potentially more based on IRMAA, then you will get a pre-determination notice from Social Security. And it basically says, here is why IRMAA is going to apply. Here's what the amount is based on the information we have gathered. Then 20 days after you receive the predetermination notice, social security is going to send you what is called an initial determination notice, which is like the predetermination notice, but it does include appeal rights and advises you how to contact Social Security if you think you have a new initial determination possible based on some life-changing events that we'll talk about.

Joanne (07:27):

You know, and overall, a couple of things, those letters are confusing, they're kind of difficult to read, it's not really clear, but just understand you do have two components to pay. There's IRMAA and then your base rate always. Okay? And then overall, we also recommend waiting until you've received the initial determination notice before requesting a new initial redetermination. We know people are eager to submit the request as soon as they know it's going to come down the pipeline. But instead, just gather all your documents, get ready, and we will talk through that. If you go too fast, it's going to just confuse the system. Okay? Note that Social Security will send another initial determination for Part D if you sign up after Part B and you've not received a lower IRMAA amount.

Cameron (08:17):

Yeah, a lot of times people will sign up for their drug coverage after part B. So sometimes you think, oh, I got IRMAA for part B, but I got out of it for Part D. And it's not really the case, it's just taking more time for that data to get to Social Security and to get to you. And Joanne already said it, but if you're eager to appeal this, which of course you would be because it's going to save you a fair bit of money, just give it some time. If you do appeal it right away, right when you're applying for Medicare, there's no guarantee somebody's going to even look at it for weeks or months. So just give it time. Wait for that initial determination before requesting a new one.

Joanne (08:50):

So, Cam, why don't you just keep going with that? Start talking about how you do that. You know, you talked about the steps that we're going to take, but now a reality, what does reality look like when you start digging into these things when you’ve got your evidence, you're ready to go. 

Cameron (09:01):

Yeah, so you've gotten to the point where you know you are charged for IRMAA or you're basically subject to it, you know what goes into it, and you're just looking to figure out how do you request a new initial determination? That's what everyone wants to know. Most commonly, we help our clients lower their IRMAA due to having what is called a life-changing event. And I'm going to list off all the life-changing events. The first one right here is definitely the most common. It's two separate ones, but we will put them together. And that is work reduction or work stoppage. As we said, those are by far the most common because usually if you delay Medicare or if you're signing up for Medicare, it's because you're no longer working. And because of that, your income is probably lower than what it was two years ago from the data that the IRS is giving Social Security. So the other life-changing events are the death of a spouse, marriage, divorce or annulment, loss of income-producing property, loss of employer pension, or receipt of the settlement payment from a current or former employer. So now that I talked about the life-changing events and those certain things that may qualify you for a new initial determination, I'm going to have Joanne talk about what you're going to do to appeal or request a new initial determination with social security to help lower your IRMAA.

Joanne (10:18):

Right? So, those were the life events and those are kind of the “triggers”. Those are the things that you can actually go forward with and request that redetermination for those situations. And again, the most common that we're dealing with a lot in retirement. Either you went part-time so your income is going to be reduced or, you completely stopped working, which makes total sense. So now we'll talk about how you actually do that. So, the IRMAA appeals happen individually, so don't forget that if this is a joint case, you've got husband and wife in this case, you're both going to do these forms. So everything we're talking about does not apply to the two of you. It's going to apply to each person. Everything together, remember is very independent in Medicare land. So, this is going to be two separate forms.

Joanne (11:04):

These rates are going to affect both of you. So, if you're going to request that redetermination, make sure you're doing paperwork for each of you. What you're going to do is you're first going to complete a form called SSA 44, which is a social security official IRMAA, life-changing event form. And on this form, you'll want to select the life-changing event that you qualify for. Let's just go through this example of work stoppage and you're going to list the date that the event occurred. And the next really important step here is step number two on the form. You're going to want to fill in the amount that your income will be reduced because of the life life-changing event. So for example, if your IRMAA is based on 2020 income, since you're beginning Medicare in 2022, but your 2022 income is now lower because you stopped working during the year, you're going to want to put your estimated 2022 income in this section.

Joanne (11:52):

Okay? Now lots of different examples we could start throwing in. Know, you don't have to wait until tax filing season. So again, this is 2022 and we're saying that if you know your 2022 income is going to be less this year, you're going to do an estimate. This is not an official tax return. You're going to estimate what your income will be at the end of the year, and if it's lower, if it's one or two thresholds or three or who knows how many lower than what you've been assessed by the government, then you're going to fill out this form. But make sure you try and be as accurate as possible because Social Security Administration and Medicare are going to try to recoup the money they're owed if your income comes up being higher. And that happens too.

Cameron (12:33):

Yeah. Don't just do a crazy low estimate in hopes of appealing your IRMAA and then all of a sudden, it's not even close to what it actually is.

Joanne (12:40):

It's not going to slip through. No. So why don't you go to step three cam, and tell them the last part?

Cameron (12:45):

Yeah, so once you fill out what your income is estimated to be for the current year in steps two, and step three I would say it's pretty much optional, but a lot of people get confused by this. Step three is just saying if your income for next year is going to be even lower than the current year, you can basically put your estimated income for next year in step three. However, we don't really recommend doing this most of the time because even after you complete these forms, you're going to have to request a new initial determination essentially every year that your income comes back higher. Even if you do step three, you're still probably going to have to do another determination next year. And then once you have completed the form, basically it comes down to submitting your form. So you're going to submit your request and send it to social security in some way that we'll talk about.

Cameron (13:31):

But the first thing before you do that is you'll want to look at what you have for evidence and documents that show you are basically having a lower income due to a life-changing event. In our example, we use work stoppage. So, you could use a signed letter from your employer showing that your employment has ended, or pay stubs, showing work stoppage. If you cannot provide any direct evidence, a lot of people get concerned by this, but social security will accept your signed statement on the form under the penalty of perjury. If you did stop working and you don't have a proof for it, just know that you can also say you can attest to it on the form and it's legally binding and you're telling them that you have stopped working. And then Joanne can talk to you about, once you've got everything filled out, you have the evidence gathered, what can you do to get the SSA form 44 over to social security?

Joanne (14:20):

Right? And then note two, we're going to put that SSA form 44 down in the show notes. Okay? So that form is there for you in a pdf. You, you can print that if you need that when you get it all completed. What's the best way to get it there? It's truly getting it to the hands of the Social Security Administration in person. Unfortunately, it's best, you know, to take a half day off work, we can't guarantee the schedule's getting in there, but it really is the best way to do it when you're walking into the offices and as of April 7th, 2022, those offices have been reopening to the public. So, check your local office. It should be opened by now. If you don't want to do that or you can't do that, you can do certified mail. If you do certified mail, be very, very careful that you keep a copy of your SSA 44 for your records.

Joanne (14:59):

Certified has not shown up. So make sure you keep that copy. Another way you can do this, you can fax the SSA 44 over to your local Social Security office. If you do that, just make sure that you follow up with that office to make sure that they received it. Your request is being seen ultimately by an actual human being, not just a computer algorithm. It can be helpful to include as much information and evidence as you have available. However, don't overload them. We had a client with a recent sale of a marina, which showed retirement. It was the same thing as a work stoppage. That was the reason. But they had a 48-page sale of the business document. Do not send all 48 pages in, please. So, send page two or one that just shows the date, the transfer of the property, and things like that. In the end, the person actually went from the top tier all the way to the bottom tier. So just don't overwhelm them, but definitely do have evidence in your favor.

Cameron (15:59):

Joanne mentioned it briefly, but the biggest thing is if you are going to go the route of not being in person and you want to send it via certified mail or fax, just make sure you follow up with a phone call to your local office after you have sent over those documents to confirm that they have received them and somebody is going to review them shortly. So, we also already talked about what happens if you have a life-changing event that will make you eligible for a new initial determination. However, there are some non-life-changing events that may also allow you to do the same thing. Those are going to include if you had an amended tax return filed with the IRS if you must do corrections of IRS information if you use two-year-old tax returns instead of the three-year-old that they may be used for certain people. Or if you report a change in a living arrangement when the tax filing status and married, but filing separately. So again, those are just some other unique situations. They certainly don't happen as often, but those are non-life-changing events that could still qualify you for a new initial determination. And I will have Joanne start to talk about what happens if you don't have any of those. And you may not necessarily qualify for a new initial determination, but you still want to give it a shot.

Joanne (17:11):

Yeah, so this is not automatic by any means, but it doesn't hurt to try, that's for sure.

Cameron (17:16):

It's free to try!

Joanne (17:17):

It is free to try, and you never know. The Social Security Administration, state that you must file a request for an appeal and that they cannot discourage individuals from making an appeal. So, this, as we said, never hurts to try. Whether or not you're going to be successful is another story. Make sure you're providing as much documentation as possible in the scenario, but understand that a successful redetermination is not a guarantee. And again, provide good documentation, and be efficient in how you deliver that to them. If it's, if it's a bundle of papers, they're not going to go through that. So, below is a list of some non-qualified events, maybe loss of alimony, a voluntary sale of an income-producing property, or conversion of an IRA. That is always a big one. We see lots of this even with Roth conversions, but typically conversion of an IRA is not going to get that reduced for you. If you're cashing out bonds, same thing. So, a lot of these we're not super familiar with. We are very familiar with, the work stoppage, things like that, the divorce, uh, death, and the ones, that do routinely work.

Cameron (18:23):

Yeah, and again, that's the non-qualified events Joanne was talking about. So those are not events where you're going to be guaranteed by any means a successful redetermination, but those are events where you can certainly give it a shot and we can always try to help you with that. But if you are told that you don't qualify for a new initial determination based on what we just talked about or based on the evidence that you provide, what happens is that when you request a reconsideration with Social security and you have 60 days to request this appeal after your denial of your first initial determination. If you do go this route and request a reconsideration, just know that again, this is seen by an actual person at Social Security and it's going to be a different person than the one that denied your first new initial determination.

Cameron (19:11):

Then if that is not successful, you can even go higher and you can request a hearing with the Office of Medicare Hearing and Appeals. And finally, if you really want to go crazy, get a lawyer and go to court, whether we recommend it is a different story. But at the highest level, you can go and request a review by the Department of Health and Human Services Medicare Appeals counsel, along with federal court action. So again, we don't really recommend you go much above a redetermination, but if you really want to go that far, you certainly can. Just remember that every single year social security re-evaluates your IRMAA. So even if you are unsuccessful for one year, you may only have to wait one year or two until your income is catching up to what it is. So again, in 2023, they'll look at 2021 and it's going to keep going that way.

Joanne (20:01):

And I can't recall anyone really going crazy and escalating up the chain at all, which is good. So again, just like you said, you know, maybe your appeal didn't come through and you did this in August of 2022 this year, but guess what, January's right around the corner unfortunately for 2023. So, they're going to look again. Just always remember you have that two-year rolling look back, okay? So just gather your evidence and things accordingly. 

Cameron (20:26):

Yeah, absolutely. And one thing that we really want to mention and hammer in here is the fact that if you are successful, you will be refunded back the premiums that you were essentially owed or that you shouldn't have paid because of a higher IRMAA. So, if you do an appeal and you must wait a couple of months, you will be refunded those excess premiums that you have to pay above whatever amount it is reduced to. And that is also important to keep in mind that while you're going through any part of the appeals process, please make sure you're paying your IRMAA surcharges for both Part B and for your drug coverage Part D or with the Medicare Advantage plan because while you're waiting for the appeal, those added premiums from IRMAA, they are part of your plan premiums. So, you can't just pay the base rate and not pay for the whole thing. Make sure you pay the surcharges or else you do risk some of your coverage is canceled. That way you won't have to worry about the cancellation and like we said, you would be refunded in the event of a successful appeal.

Joanne (21:23):

They will cancel your part B coverage if you're not paying that. If you just think you're going to pay $170.10 since you're presuming, you're going to get moved down there, don't just pay 170.10. If this is tied to your social security, you can't even do that. But if you're paying online or if you're writing them a check or if you've got Easy Pay already set up for your Medicare Part B, just let it go through or just go on and pay with a credit card but pay the entire amount. But again, as Cam said, they will refund and give you back what you shouldn't have paid initially if that's the case.

Cameron (21:54):

And that brings us to the next part of this, which Joanne will talk about. And it's basically, if you go through everything we talked about, you go through the redetermination and the appeals process and you still owe some level of IRMAA, what do you have to do to pay those premiums going forward? So again, I'll let Joanne talk about that.

Joanne (22:12):

Yeah, basically you're going to pay up. If you owe $238/month for your Medicare, that's partially IRMAA and partially that base premium of $170.10. The way you're going to pay that is, like I just mentioned, you're going to pay with a credit card going online to your medicare.gov portal. You're going to set up an easy pay potential that'll come out of your checkbook. And those are ways that you can do that. If you're not collecting Social Security. If you're collecting Social Security, then these numbers are just going to come right out of your benefits. They're going to reduce your social security amount each month by the level of IRMAA and part B premiums that you might owe. And same thing to Part D premiums that are paid to Medicare. 

Cameron (22:56):

If you get the bill for IRMAA, you're going to see part D added on there along with Part B. So, it's not even going to come from your drug plan company. So, I know that's confusing.

Joanne (23:06):

There is a breakdown, and again, the letters are not super clear in how it's written by the Social Security Administration, but the numbers always do check out. I think Cameron caught one the other day with one of our agents that was the first time ever we have seen an error in social security billing ever. So they're pretty spot on for getting this right. Okay, so just make sure you're paying even though you might not want to, you might not trust that the government's going to refund that, but it does happen. So always, always please make sure you're paying your premiums for all these things. Now again, to really hit this one home too, remember that if you have a Medicare Advantage plan, prescription drug coverage might be built into that plan. And you have IRMAA, if you must pay higher income levels and figures, you will be seeing that charge still being paid to the government.

Joanne (23:50):

You’re going to pay a higher IRMAA. So, for some reason, and I'm not sure if it's just because people think of zero-premium plans with Medicare Advantage that they think that crosses over to the government side of things, it does not. If you can, you can be in the top IRMAA, you know, 500 plus dollars and enrolled into a Medicare Advantage plan for zero, that's fine. You're still going to pay 500 plus IRMAA to the government. Nothing is going to get you out of that just by going to Medicare Advantage.

Cameron (24:19):

And your Medicare advantage, the prescription coverage will create the Part D IRMAA that we talked about. So that could be additional up to, $77 per month. And again, that is not going to your advantage plan. However, it's still part of the premium for the plan, although you're paying it to the government, if you don't pay it, it can cancel your actual advantage plan itself. So, IRMAA is going to apply to anybody in any plan. If you're above the income thresholds, there's no other way to avoid it, aside from again, being below the income thresholds we talked about in the beginning. Then other than you know how to pay your premiums, we just must talk briefly about what to know for the future. So this is important because people tend to forget it often, but IRMAA does a new initial determination every year with the data they're getting from the IRS. 

Cameron (25:07):

So again, this year they're looking at 2020, and next year they will look at 2021 and it just keeps going like that. Eventually, you will get to the point where your current income does match the income from two years ago. So, we're not saying you always must do a new initial determination or go through this whole process, but at least probably for a year or two after the work stoppage, just expect to not only do one IRMAA new initial determination, but perhaps a second and even a third one. Also, another thing to know is that the IRMAA thresholds, can, and will change from one year to the next. Joanne said, for an individual, it's $91,000 is the income bottom threshold for this year. Now for next year, it could be higher or lower. We don't know exactly what it's going to be. Generally, it does rise a little bit, but just know that those thresholds can and will change from year to year. So if you're on the edge of a threshold, especially, just make sure you're constantly checking to see what you may owe for Medicare in the upcoming year.

Joanne (26:04):

And we will post the charts, we can put the IRMAA charts for 2022 posted in the show notes as well. And I would suggest printing those and having them available to you when you're meeting with your financial planner. Because you must remember too that when people come to see us, we're getting them ready for Medicare. So, we don't have time to help them for two years prior to look and talk about IRMAA and all that kind of stuff. So sometimes this is a big, big surprise for people, which is exactly why we have this episode. But a lot of people are surprised that IRMAA even exists. If you are selling a business, for example, maybe you're structuring a sale in a different way, or maybe you are doing Roth conversions far earlier than you thought you would be. You may be able to avoid some of this. We've had all sorts of situations that people can’t rectify when they're just hitting Medicare, but if you plan this out with your financial planner a couple of years prior, it may be easier on you. We can only do so much. The forms are only going to do so much. Social security is only willing to do so much. So, you really must take this into account as a planning opportunity.

Cameron (27:07):

Yeah, and Joanne said it perfectly. But realize that IRMAA is one of the many topics concerning your transition to Medicare. Just like anything else, it’s super important to understand how IRMAA works and what your options may be to lower it to avoid overpaying for your Medicare coverage. So that's it for this episode. Make sure to tune in to other episodes of our podcast, also subscribe to our podcast and please leave us a review. Also, check out our YouTube channel by going to youtube.com and searching Giardini Medicare. If you want to reach out to one of our licensed brokers, you can go to our website gemedicareteam.com, and schedule a free phone consultation or send us an email at info@gmedicareteam.com. As Joanne said, all our sources, forms, and everything we talked about in this episode will be in the show notes. So, thank you for tuning in, and have a good day.