If you received a notice that you'll be paying higher Medicare premiums based on your income, you may be able to get the surcharge reduced or eliminated by filing an appeal. This comprehensive guide will walk you through everything you need to know about Medicare premium surcharges, reasons your income may have changed, the appeal process, and tips to avoid higher costs in the future.
- Medicare premium surcharges apply to higher earners, with MAGI over $91K individually or $182K married.
- Surcharges are based on income from 2 years prior.
- Appeal with Form SSA-44 if you had a major life change leading to lower income.
- Provide documentation like tax returns, employment changes, death certificates, etc.
- Social Security has up to 120 days to review your appeal.
- If denied initially, you can proceed through up to 3 more levels of appeals.
- Avoid unnecessary surcharges by keeping income fluctuations in mind.
What is the Medicare Premium Surcharge?
Medicare Part B covers outpatient and doctor services, while Part D provides prescription drug coverage. Most people pay a standard premium amount for these, but higher earners pay an extra charge called the income-related monthly adjustment amount (IRMAA) or Medicare premium surcharge.
In 2022, the standard Part B premium is $170.10 per month. If your income is above certain thresholds, you'll pay additional surcharges ranging from $68-$408 per month for Part B. There is also a surcharge for Part D coverage that ranges from $12.40-$77.90 per month.
The Medicare surcharges affect individuals with a modified adjusted gross income (MAGI) above $91,000 or married couples above $182,000. Your MAGI includes your adjusted gross income, tax-exempt interest, and certain foreign earned income.
Importantly, the surcharge thresholds are based on income from 2 years prior. So your 2022 premiums are based on your MAGI from 2020.
The surcharges increase on a sliding scale at income brackets of:
- $91,000 to $114,000 (individuals)
- $182,000 to $228,000 (couples)
- $114,000 to $142,000
- $228,000 to $284,000
- $142,000 to $170,000
- $284,000 to $340,000
- Above $170,000
- Above $340,000
So if your income exceeds these brackets, even by a dollar, you'll jump up to the next surcharge level.
Why File an Appeal?
Given it's based on your income from 2 years ago, you may have experienced a reduction in income that makes you eligible for a lower premium.
Some common reasons retirees can successfully appeal IRMAA surcharges include:
- You retired or cut back your work hours. This is one of the most straightforward appeals, as you can show documentation of leaving your job and the resulting drop in earnings.
- Your spouse passed away. The loss of a spouse's income can mean you fall below the threshold. Provide a copy of the death certificate when filing the appeal.
- You finalized a divorce. Losing a spouse's income may qualify you for a reduction if your income falls below the brackets.
- You had a one-time income event. Some causes of temporary spikes include selling your home or business, converting a retirement account to a Roth IRA, or large withdrawals from IRAs or taxable accounts. These alone don't warrant an appeal, but if combined with retirement or another life change, you may now qualify for lower premiums.
Essentially, you need to prove your income has permanently decreased due to a life-changing event. This also resets the income baseline going forward.
How To File an Appeal
Follow these steps to submit an IRMAA appeal:
- Review the Initial Determination Notice. You should have received an initial notice from Social Security stating you need to pay higher premiums based on your MAGI from 2 years ago. Review this carefully, as it will have instructions for filing an appeal.
- Complete Form SSA-44. Form SSA-44 is the Medicare Income-Related Monthly Adjustment Amount Life-Changing Event form. This is where you provide information about the life event and documentation of your reduced income.
- Include Supporting Documentation. This is key to getting your appeal approved. Some examples of documentation that can support your case:
- Tax returns from the year your income decreased
- Job termination letter
- Death certificate
- Divorce decree
- Pay stubs or statements showing reduced work hours
- Social security statements
- Investment account statements
- The more proof you can provide to justify the life change and income reduction, the better.
- Submit the Appeal. Mail or fax the completed Form SSA-44 and supporting documents to your local Social Security office. Be sure to keep copies for your records. You can also visit a local Social Security office in person to submit the paperwork, but call ahead as many have reduced hours due to COVID-19.
- Allow up to 120 Days. Social Security has up to 120 days to review your appeal and provide a written decision. If approved, they will re-determine your premiums based on your new income data. If denied, you will receive a letter explaining the reason along with instructions for further appeal levels if you choose to continue.
Additional Appeal Levels
If your initial IRMAA appeal is denied by Social Security, you can proceed through up to 3 more levels of appeals:
- Reconsideration - You can request reconsideration from Social Security within 60 days. Provide additional documentation and explanation of your life event and income reduction.
- Administrative Law Judge - If reconsideration fails, you can request a hearing with an administrative law judge within 60 days. Here you may want to enlist legal help.
- Medicare Appeals Council - The next level is a review by the Medicare Appeals Council, an independent group. You have 60 days from the judge's decision to request this.
- Federal District Court - This is the final level, in which you file a lawsuit in federal court appealing the decision. You'll definitely want legal representation for this process.
Very few cases make it through all levels of appeal, as the first two are typically enough to have a denied IRMAA case reviewed thoroughly. But the option remains if you feel you have a compelling case that warrants being heard by the appeals council or federal court.
7 Pro Tips to Avoid Higher Premiums
While you can appeal your surcharges later, it's best to avoid unnecessarily high premiums in the first place. Here are some smart strategies:
- Contribute to retirement accounts - Putting pre-tax dollars into 401(k)s, IRAs, etc can reduce your MAGI and help you stay below the brackets.
- Harvest capital losses - Selling losing stocks/funds at a loss offsets capital gains, potentially lowering your income.
- Watch out for Roth conversions - Converting too much in one year could spike your income if you're near the cut-offs. Spread out over multiple years instead.
- Avoid large IRA withdrawals - Taking big lump sums can lift your income, triggering surcharges. Consider retirement account loans instead.
- Donate IRA funds to charity - If over 70.5, you can donate up to $100,000 annually from IRAs to charities through a Qualified Charitable Distribution without counting it as income.
- Shift investments to lower-dividend funds - Reinvesting mutual fund payouts versus taking them as income prevents increasing your MAGI unnecessarily.
- Keep taxes in mind when selling a home or business - Exceeding the capital gains exclusion on a home sale or having a windfall business sale income year could lead to surcharges.
Frequently Asked Questions
Can I appeal my IRMAA surcharges every year?
You can request a new determination any year you have had a major life change resulting in reduced income. Social Security will review your new documentation annually.
What if my appeal is successful - will I get premiums refunded?
Yes, if Social Security lowers or eliminates your surcharge, you'll be refunded any excess premiums collected back to the date of your life-changing event.
Is there a limit to how much IRMA can be reduced by appealing?
If approved, your new premium will be set based on your reduced income, so there is no fixed limit to the amount it can be lowered if you fall into a lower bracket. You could potentially have the surcharge eliminated entirely.
If denied, can I provide more documentation and try appealing again?
You can file a new appeal each year, but should have additional documentation to support your case. Simply appealing repeatedly without new information is unlikely to lead to reconsideration. But major changes in subsequent years could warrant another try.
If you received Medicare premium surcharges due to your past income being over the brackets, take time to appeal if you've had any major life changes since then leading to a permanent drop in earnings. With the right documentation and diligence, many retirees can successfully have their IRMAA premiums reduced or eliminated. Avoid headaches down the road by keeping income fluctuations in mind as you transition into retirement as well.
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