One of the biggest misconceptions about Medicare is that it’s free. Unfortunately, Medicare is not free; you have to pay for it. The only part of Medicare that you have already been paying into for all your working years is Part A.
That is why most people qualify for premium-free Part A when they turn 65. You could say they’ve pre-paid for Part A already. However, you haven’t been paying into Medicare Part B. Therefore, you have to pay a monthly premium for Part B once you enroll.
If you start taking out Social Security benefits before you turn 65, you will be automatically enrolled in Medicare Parts A and B. In this case, your Part B premium will be automatically deducted each month from your Social Security check. If you aren’t taking Social Security benefits by the time you enroll in Part B, your premium will be billed to you.
Most people will pay $135.50 a month for Medicare Part B in 2019. Others will pay a higher premium. So, how does the Social Security office determine what Medicare Part B will cost you?
Calculating your Premium Amount
The magic number that determines your Medicare Part B premium is your Modified Adjusted Gross Income (MAGI). Your MAGI is an amount made up of your adjusted gross income and tax-exempt interest income. You can figure your MAGI by adding up the amounts listed in lines 37 and 8b on your IRS 1040 form.
Once you know your filed MAGI, you can now figure out how much your Medicare Part B premium will be for the coming year. See Figure A.
You may have noticed in Figure A that it’s based on your income from 2017. This is because the Social Security Administration uses the most recent tax forms they have on file for you. These forms are usually dated two years back. Based on those forms, you may have to pay an Income-Related Adjustment Amount (IRMAA) in 2019 (on top of the base premium of $135.50) based on your 2017 MAGI that is reflected on your tax return.
If you end up owing a higher premium, the Social Security office will send you a letter stating your calculated amount with an explanation. However, if you have a legitimate reason as to why you shouldn’t have to pay a higher premium, you can file an IRMAA appeal, also known as a Request for Reconsideration.
Reasons you may want to file an IRMAA appeal
The main qualification for appealing your IRMAA is you must have had some form of life-changing event. The most popular reason someone might file an IRMAA appeal is that they have recently retired and are no longer making as high of an income.
However, there are other circumstances that could cause a beneficiary to begin to earn a lower income that, in turn, could lead to them filing an appeal. Some are listed below.
- Loss of income-producing property
- Termination or changes of a pension
How to file an IRMAA appeal
To file an IRMAA appeal, first, you’ll need to go to the Social Security Administration website. Then, scroll to the bottom and click the blue square that reads, “Forms.” The Request for Reconsideration form should be the second from the top.
Once you have clicked on that form, you will be brought to a screen that has two options, “Appeal Medicare Decision” and “Appeal Other Decision.” You’ll want to choose the second option. From there, you will simply follow the prompt and enter the information asked for. Filling out this form should only take about fifteen minutes.
Some information you might need while filing your appeal is your notice from Social Security stating their Part B premium decision for you and supporting documents such as a notice of retirement from your employer.
Appeal decisions are made by Social Security employees. If the person reviewing your case approves your appeal, your changes to your premium will be automatically updated. However, if they deny your appeal you will have to pay the increased premium.
Fortunately, the SSA reviews your taxes at the end of every year, whether you appeal or not. If you have dropped into a lower income bracket naturally, then your Part B premium will be automatically adjusted for the following year. It’s free to file an appeal, though, so it’s worth a shot to see if you can get it lowered earlier.