You would expect to pay a monthly premium for a Medicare drug plan right? And an annual name brand drug deductible (It can be no higher than $505 in 2023) that needs to be met is typical if you have a “stand-alone” Medicare drug plan. (Those who are enrolled in a Medicare Advantage plan that includes drug coverage don’t have to suffer through a name brand drug deductible).
But there is also an “Income Related Monthly Adjustment Amount” (IRMAA) assessment that you’ll pay to Medicare if you make above $97,000 as an individual and $194,000 for a married couple.
Medicare uses the modified adjusted gross income reported on your IRS tax return from 2 years ago. The IRS provides this to Social Security. If you got a notice of IRMAA from Social Security they’re basing it on your 2021 income. (FYI, these notices were just mailed out late November/early December.
There are 5 income brackets that cause a person to pay more for their Medicare Part D (prescription drug) coverage.
If you make above $97,000 up to $123,000 (individual) or above $194,000 up to $246,000 (joint) you’ll pay $12.20 plus your plan premium.
If you make above $123,000 up to $1153,000 (individual) or above $2246,000 up to $306,000 (joint) you’ll pay $31.50 plus your plan premium.
If you make above $153,000 up to $183,000 (individual) or above $306,000 up to $366,000 (joint) you’ll pay $50.70 plus your plan premium.
If you make above $183,000 and less than $500,000 (individual) or above $366,000 and less than $750,000 you’ll pay $70.00 plus your plan premium.
If you make $500,000 as an individual or $750,000 as a married couple; you can make any amount higher than that but still pay the same Part D “IRMAA”. You’ll pay $76.40 plus your plan premium.
Surprisingly, a few of these “IRMAA” amounts are actually slightly lower than they were in 2022.
Don’t try to “work the system” by just paying cash or using “GoodRX” to buy your medications. If you don’t have “credible drug coverage” (which means it covers both generic and name brand drugs at a certain copay or co-insurance level) you will start accruing a late enrollment penalty (LEP). Even if you add coverage the next chance you have (during the Annual Enrollment period) that penalty will be with you for the rest of your life.
The penalty is 1% of the national average premium for the current year of a Medicare drug plan multiplied by the amount of months that you were without Part D or credible drug coverage.
Has the question come to mind about what to do if your income drops because you retire or lose a source of income? If the government bases your “IRMAA” on income reported 2 years earlier, do you need to suffer a higher premium until they catch up with your current income? The answer is “No”. If your curious, look up online Form SSA-44; Medicare Income-Related Monthly Adjustment Amount-Life Changing Event. I’ll write about that next month.