About Medicare’s dreaded ‘IRMAA’ provision

Dear Rusty: My wife is on Medicare and receiving Social Security benefits each month. We built a house and used money from our investments to pay for it. We knew we would pay taxes on that withdrawal, but my wife got a letter from Social Security saying that because the money we withdrew was listed as income, her 2024 Medicare premium went up over $500. And since Medicare is taken out of her Social Security, that results in a $6,000 loss to our budget.

Is there anything that can be done about this situation? We sent a letter to Social Security, but they responded that unless her situation was one of only a few categories (loss of house, divorce, etc.) nothing could be done for the year.

The money was used strictly on another investment – our new house. It wasn’t like we took it out and spent it wildly. Can you please advise? Signed: Frustrated Homeowner

Dear Frustrated: Unfortunately, it sounds like your wife is a victim of the Medicare provision known as “IRMAA” – the “Income Related Monthly Adjustment Amount.” Each person’s Medicare Part B premium (coverage for outpatient healthcare) is determined yearly from their income from all sources as reported to the IRS two years prior. IRMAA sets income thresholds, depending on your IRS filing status, and if those thresholds are exceeded you must pay a higher Medicare Part B premium (and also a higher Part D premium if you have prescription drug coverage).

Assuming you file your taxes as “married/jointly,” if your combined 2022 income as a couple was between $206,000 and $258,000 your wife’s 2024 Part B premium is $244.60 (instead of the standard $174.70); if your combined 2022 income was between $258,000 and $322,000 then your wife’s Part B premium for 2024 is $349.40; if your combined in 2022 was between $322,000 and $386,000, her Part B premium is $454.20; if your combined 2022 income as a married couple was between $386,000 to $750,000 then your wife’s 2024 Part B premium is $559; and if your 2022 income as a married couple was over $750,000 your wife’s Part B premium is $594. If your wife also has private Part D prescription drug coverage, IRMAA also increases those premiums. Note that the IRMAA thresholds are different for other income tax filing statuses.

As the Social Security office has already explained, you could appeal your wife’s IRMAA premium increase if she had a “life changing event,” but the list of acceptable life changing events is quite small (see form SSA-44). The only good news is that your wife’s Medicare premium will be calculated anew for next year, so her Medicare premium for 2025 will – if your 2023 joint income is less than the first IRMAA threshold – revert to the standard 2025 premium.

FYI, it doesn’t matter what you used the money for. Your withdrawal was reported to the IRS as taxable income, which is what caused IRMAA to apply to your wife’s Medicare premium for 2024. Many people don’t realize that Medicare premiums are higher for those with a higher income, but since your withdrawal was a one-time event, your wife’s Medicare Part B premium next year should be much less and her Social Security benefit correspondingly higher.