There are five types of Medicare coverage: Parts A (hospital coverage) and B (non-admitted emergency room visits, medical appointments, medical supplies, and tests), Part C (Medicare Advantage Plan), Part D (drug coverage), and Medicare Supplement Insurance often referred to as a Medigap coverage. The Social Security Administration provides parts A and B coverage. Insurance companies offer parts C, D, and Supplemental Insurance. Understanding Medicare and the costs are important.
Does a person have to sign up for Medicare Part A, and what are the costs?
Part A is generally $0 because a person paid Medicare taxes long enough while working, approximately ten years. If Part A is not free, then depending on how long the applicant or spouse worked, they can buy it. 2023 premiums range from $278 to $506 per month.
When people apply for Part B coverage, they must apply for Part A, too. If an applicant does not buy Part A when they are first eligible for Medicare, the person might pay a penalty.
Does income affect Medicare costs, and what is IRMAA?
Income does affect premiums. The Medicare IRMAA, Income-Related Monthly Adjustment Amount is an additional amount a person pays for Medicare Parts B or D. The Social Security Administration (SSA) sets six income brackets that determine IRMAA. In essence, SSA looks at the adjusted gross income reported to IRS tax returns for the past two years to determine which bracket a person or couple is in.
Rates vary per year. For 2023, the lowest bracket is for individuals who make $97,000 or less or couples who make $194,000 or less. In the lowest bracket, the monthly premiums for Part B is $164.90, Part B immunosuppressive drug coverage is only $97.10, and Part D is the plan premium. Depending on income, additional monthly premiums for Part B range from $230.80 to $560.50. Moreover, Part B immunosuppressive drug coverage ranges from $161.80 to $485.50. Finally, Part D takes the plan premium and adds a monthly premium ranging from $12.20 to $76.40.
Does IRMAA affect Medicare Advantage Plans?
Some people mistakenly think they can avoid paying IRMAA charges if they have a Medicare Advantage plan. That is not true. IRMAA applies to all Medicare beneficiaries whose earnings are high enough to make them eligible. Remember, Medicare Advantage plans include Part B and Part D coverage, which is why Medicare IRMAA costs apply.
What happens if a person has a change in income?
Suppose a person has a “life-changing event” that significantly reduces their income or causes a financial disruption, for example, marital status change, job loss, reduction in pension, or income-producing property. In that case, they can ask the SSA to adjust their IRMAA premium. Contact SSA directly in writing or by calling 1-800-772-1213.
How are Medicare and IRMAA premiums paid?
Initially, when a person applies for Medicare, the standard Part B and D costs apply. Once the SSA receives an applicant’s income data from the IRS, they will send a predetermination notice explaining IRMAA, the determination, and how to appeal if the decision is incorrect. Social Security deducts premiums from a person’s retirement benefits, but the SSA will send a bill if that does not happen.
Medicare Part C (Medicare Advantage plans), D (drug coverage), and Supplemental insurance (Medigap coverage) are provided by an insurance company, so premiums are based on the carrier plan and need to be paid directly to the provider.