IRMAA is now impacting more than 7 million retirees this year and for many they have questions. This report will answer all the questions relating to “How do you calculate IRMAA Surcharges?”
What is IRMAA?
IRMAA, short for Medicare’s Income Monthly Adjustment Amount, is a surcharge on top of a Medicare beneficiary’s Part B and Part D premiums if they are earning too much income during the year.
Simply put, IRMAA is a tax on income through Medicare and compounding the impact of this tax is that IRMAA also reduces your Social Security benefit.
You pay this tax of IRMAA automatically through your Social Security benefit too.
So, the more money you generate in retirement the higher your Medicare premiums will be and the less Social Security benefits you will receive.
Think of IRMAA as being a huge revenue generator for Congress that also helps alleviate the burden of what Social Security must pay out in benefits.
Social Security is not going broke…not even close.
How do you calculate IRMAA Surcharges?
There are 2 different sets of IRMAA surcharges as this tax will affect both your Medicare Part B AND Part D premiums.
To calculate IRMAA Surcharges – Part B
You must first realize that no one person ever pays full price or the “true cost” of Medicare Part B as the federal government provides a subsidy for all retirees.
The “true cost” of Medicare Part B is the current year’s monthly Part B premium multiplied by 4.
In 2024 the “true cost” of Medicare Part B is $698.80 a month (4 X $174.70).
According to Social Security.gov IRMAA is a Medicare subsidy reduction as those who reach it receive a lower subsidy for Part B premiums.
The subsidy per IRMAA Thresholds is as follows:
| IRMAA | Government Subsidy of Part B | Retiree Portion of Part B |
| No IRMAA | 75% | 25% |
| 1st Threshold | 65% | 35% |
| 2nd Threshold | 50% | 50% |
| 3rd Threshold | 35% | 65% |
| 4th Threshold | 20% | 80% |
| 5th Threshold | 15% | 85% |
Knowing the “true cost” of Medicare Part B and the amount of subsidy each person will receive when in IRMAA the monthly surcharge can easily be found.
In 2024 the IRMAA Part B surcharges per Threshold are as follows:
| IRMAA | Retiree Portion of Part B | True Cost of Medicare Part B | Part B and IRMAA Costs |
| No IRMAA | 25% | $698.80 | $174.70 |
| 1st Threshold | 35% | $698.80 | $244.60 |
| 2nd Threshold | 50% | $698.80 | $349.40 |
| 3rd Threshold | 65% | $698.80 | $454.20 |
| 4th Threshold | 80% | $698.80 | $559.00 |
| 5th Threshold | 85% | $698.80 | $594.00 |
Calculating IRMAA Part B in the future:
IRMAA Part B surcharges move with in conjunction with the Medicare Part B premium. If the Part B premium increases the IRMAA Part B surcharge will inflate at the same rate.
Over the next 8 years the Trustees of Medicare are projecting that the Part B premium will inflate by over 6.30%.
By 2032 this premium, according to the projections, may be $285.60 a month making the surcharges equate to:
| Possible 2032 Medicare Part B premium and IRMAA | |||
| IRMAA | Retiree Portion of Part B | True Cost of Medicare Part B | Part B and IRMAA Costs |
| No IRMAA | 25% | $1,142.40 | $285.60 |
| 1st Threshold | 35% | $1,142.40 | $400.00 |
| 2nd Threshold | 50% | $1,142.40 | $571.20 |
| 3rd Threshold | 65% | $1,142.40 | $742.60 |
| 4th Threshold | 80% | $1,142.40 | $914.00 |
| 5th Threshold | 85% | $1,142.40 | $971.00 |
To calculate IRMAA Surcharges – Part D
When it comes to calculating the Part D IRMAA surcharge that is entirely up to the Centers for Medicare Services (CMS) as there is no formula that is publicly available.
CMS each year will establish the Part D IRMAA surcharges. Historically, the surcharges will follow the projections made by the Trustees of Medicare in terms of how they increase.
The Affordable Care Act did establish a formula to determine the Part D IRMAA surcharges which, on page 354 of the Act, states:
“The product (Part D IRMAA surcharge) of— the quotient obtained by dividing the applicable percentage determined under paragraph (3)(C) of section 1839(i) (including application of paragraph (5) of such section) for the individual for the calendar year reduced by 25.5 percent; by ‘‘(II) 25.5 percent; and ‘‘(ii) the base beneficiary premium (as computed under paragraph (2))”.
Current Part D IRMAA Surcharges:
| Part D IRMAA | Monthly Tax |
| No IRMAA | Part D Premium |
| 1st Threshold | Premium + $12.90 |
| 2nd Threshold | Premium + $33.30 |
| 3rd Threshold | Premium + $53.80 |
| 4th Threshold | Premium + $74.20 |
| 5th Threshold | Premium + $81.00 |
Calculating IRMAA Part D in the future:
The Trustees of Medicare are projecting that the Part D IRMAA surcharges will increase through 2032 annually by:
| Part D IRMAA | Rate of Inflation |
| No IRMAA | N/A |
| 1st Threshold | 11.83% |
| 2nd Threshold | 8.80% |
| 3rd Threshold | 8.05% |
| 4th Threshold | 7.73% |
| 5th Threshold | 7.66% |
The monthly Part D IRMAA surcharges may be, according to the Trustees of Medicare, in 2032:
| Possible 2032 Medicare Part D IRMAA Surcharges | |
| Part D IRMAA | Monthly Tax |
| No IRMAA | Part D Premium |
| 1st Threshold | Premium + $28.90 |
| 2nd Threshold | Premium + $63.30 |
| 3rd Threshold | Premium + $97.70 |
| 4th Threshold | Premium + $132.10 |
| 5th Threshold | Premium + $143.60 |
Please note that average monthly total cost of Medicare Part D plans in 2024, on a national average is just over $91.00 a month. This total includes the monthly premium and the average Part D deductible.
Medicare Part D plans, thanks to Congress, can not inflate by more than 6.00% through at least 2028 regardless of market conditions.
In 2032, if inflation rates remain constant and there are no other legislative acts from Congress impacting Medicare, the monthly costs for Medicare, including IRMAA may be:
| Possible 2032 IRMAA Surcharges Part B premium and IRMAA | |||
| IRMAA | Part B | Part D | Total Monthly Cost |
| No IRMAA | $285.60 | $134.33 | $419.93 |
| 1st Threshold | $400.00 | $163.23 | $563.23 |
| 2nd Threshold | $571.20 | $197.63 | $768.83 |
| 3rd Threshold | $742.60 | $232.03 | $974.63 |
| 4th Threshold | $914.00 | $266.43 | $1,180.43 |
| 5th Threshold | $971.00 | $277.93 | $1,248.93 |
