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Politicians and pundits are advocating the concept of taxing the Rich to fund healthcare. They believe that a tax hike over “the marginal rate of 70-92% on wealthy Americans” is a “necessary tool” to finance Medicare for All while also using some of the proceeds to fund other interests like cancelling student loan debt.

The frightening part, specifically when it comes to healthcare and Medicare, is that the country is already taxing the rich to fund healthcare and has been for years.

This tax on the rich is to fund healthcare is through Medicare’s IRMAA, and to make matters worse it appears that most tax-paying Americans, financial professionals and what seems to every member of Congress know nothing about it.

What is IRMAA?

IRMAA is short for Medicare’s Income Related Monthly Adjustment Amount.

According to the Code of Federal Regulations IRMAA is:

“An amount that you will pay for your Medicare Part B and D coverage when your modified adjusted gross income is above certain thresholds”.

Simply put, IRMAA is a tax through Medicare on your income if you generate too much of it in any given year.

Who does IRMAA impact?

According to the Social Security Administration (SSA) IRMAA impacts anyone who is on Medicare and who has a modified adjusted gross income (MAGI) over $103,000 for individuals and $206,000 for couples.

When did taxing the rich to fund healthcare start?

IRMAA was created by Congress in 2023, with the passing of the Medicare Modernization Act though the concept of taxing the rich to fund healthcare through Medicare’s IRMAA did not start until 2007.

At the time the intent of Congress was to develop a system within in Medicare that provided retirees a competitive option to just Medicare Parts A and Part B while also making them slightly more responsible for paying for their own medications.

The ending result was the creation of both Medicare Advantage Plans as well as Medicare’s Part D Plans (drug coverage) and to help fund this IRMAA was formed to provide extra revenue to the program.

How much does taxing the rich really generate?

In 2007, when IRMAA began, only 5.70% of eligible Medicare beneficiaries were in IRMAA. According to the Trustees of Medicare these beneficiaries were responsible for close to $1.7 billion extra in taxes for Medicare.

Today, in 2023, roughly 15.30% (6.8 million people) of eligible Medicare beneficiaries are in IRMAA and they will pay over $20 billion in IRMAA taxes for Medicare.

The issue going forward is that the Trustees are projecting that the number of people in IRMAA needs to grow for the program to remain solvent.

Through 2024 to at least 2030 the Trustees, in recent reports, are stating that IRMAA will cost a total of $270 billion as roughly 10 to 12 million people in Medicare will be subject to IRMAA.

When it comes to taxing the rich for healthcare it is already happening in a big way, the question now comes down to if you are going to pay this tax too?

To learn more about IRMAA and how to avoid this tax please contact one of the many IRMAA Certified Professionals throughout the country, a directory can be found here.