Since 2007, with the passing of the Medicare Modernization Act in 2003 and the Affordable Care Act in 2010 by Congress, Medicare has placed a surcharge, known as the Income Related Monthly Adjustment Amount (IRMAA), on top of the current Medicare Part B and Part D premiums for those retirees who earn too much income.
In 2016 the amount of income along with the brackets are as follows:
| Individual MAGI | Couples MAGI | Monthly Part B | Part D |
| <$85k | $170k | $121.80 | Premium (varies) |
| $85k – $107k | $170k – $214k | $170.50 (40% more of premium) | Premium + $12.10 |
| $107k – $160k | $214k – $320k | $243.60 (100% more of premium) | Premium + $32.80 |
| $160k – $214k | $320k – $428k | $316.70 (160% more of premium) | Premium + $52.80 |
| > $214k | > $428k | $389.80 (220% more of premium) | Premium + $72.90 |
The impact is twofold:
- Those who are impacted, by federal regulations, are not protected by the Hold Harmless Act.
- These surcharges are automatically deducted from any Social Security benefit received.
For those who remain in each bracket through retirement the costs will mount up as, according to the Medicare Board of Trustees, Medicare Part B premiums, historically, have inflated at roughly 7.85 percent while Part D premiums are expected to inflate by 8.4 percent.
A person who is 55 years old today, plans on retiring at age 66, enrolls into the national average Part D premium and lives until age 85 can expect to see the costs of health coverage be:
| Income Bracket | Part B | Part D* | Total | Added Surcharges |
| <$85k | $151,058.90 | $74,878.62 | $225,937.52 | |
| $85k – $107k | $211,457.65 | $92,549.19 | $304,006.85 | $78,069.33 |
| $107k – $160k | $302,097.13 | $120,606.02 | $422,703.15 | $196,765.63 |
| $160k – $214k | $392,736.60 | $148,488.58 | $541,225.18 | $315,287.66 |
| > $214k | $483,458.76 | $176,510.55 | $659,969.31 | $434,031.79 |
(*National average Part D premiums, $53.71 a month according to Jester Financial)
In retirement, not all income is created equal. In order to control your health costs in retirement while keeping more of your Social Security benefit an effective plan that generates the proper income has become a must.
To learn how your financial plans will impact your health coverage and Social Security in retirement it is highly recommended that you discuss Medicare’s IRMAA with your financial advisor.
