Little-used adjustment may bring big savings


Clients could qualify for lower parts B and D.

InvestmentNews, Mar 15, 2015
By Katy Votava

There are many ways people are overpaying and leaving money on Medicare’s table.

An often-overlooked chance to save money is to make sure clients aren’t paying too much for their Medicare Part B and D income-related monthly adjustment amount (IRMAA). When income drops because of certain life-changing events, the beneficiary may be eligible for an IRMAA reduction, which can add up to significant dollars.

IRMAA is based on a modified adjusted gross income (MAGI) sliding scale using this formula: MAGI = adjusted gross income (line 37) plus tax-exempt interest income (line 8b) from the IRS 1040.

If the MAGI is more than $85,000 per individual or $170,000 per couple, clients will pay more for Medicare Parts B and D based on a five-tier MAGI cliff bracket hierarchy. Having even $1 dollar less MAGI puts clients in the next-lower IRMAA bracket, which can result in substantial savings.

It’s not uncommon for people to qualify for a reduction because their income drops by more than one bracket (as a result of a major life event), which puts even more money at stake.

The problem is that the Social Security Administration doesn’t know someone is eligible for an IRMAA reduction unless the person notifies the agency.

Clients have two opportunities to request the Medicare IRMAA reduction from the SSA: When they enroll in Medicare Part B for the first time; and when they receive their annual Medicare Part B premium and IRMAA notice in the late fall for the following Jan. 1.
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