The IRMAAs that are used as a means test on Medicare participants for Medicare services are scheduled to alter in the upcoming year.
Diane Omdahl, president and founder of consultant Sixty-Five Incorporated in Mequon, Wis., and author of the forthcoming Medicare for You: A Smart Person’s Guide, has stated, “Others call this a means test, but I don’t.” A person’s Medicare eligibility is not determined by this. I wouldn’t call it a flat tax either, but it’s closer to that than anything else.
The sole purpose of the IRMAA is to shift the financial burden of Medicare onto those with higher incomes.
How are IRMAAs calculated? And even though they dipped slightly from 2022, what can a client do to mitigate their effects?
Medicare expenditures increase in proportion to one’s income, said EisnerAmper consultant Onofrio Sirianni. The Medicare part B premium is calculated by looking at your income over the past two years. The IRMAA formula is as follows: AGI plus interest on municipal bonds less untaxed Social Security… and maybe additional income categories.
Sirianni remarked, “The overwhelming majority of our clients are not aware of IRMAA,” adding that his company includes a meeting on Medicare planning, including IRMAA, as part of their routine annual meetings with clients.
It’s true that many people who are eligible for Medicare because they are over 65 or are retired are aware of the program, but Omdahl notes that a large portion of the population is not. Those above the age of 65 who are forced into it due to minimum distribution requirements and other factors are often taken aback. If a person hasn’t had one of the “eight recognized life-changing events,” then there is usually nothing they can do.
Death of a spouse, marriage, divorce or annulment, involuntary loss of income-producing property due to disaster, disease, fraud, or loss of pension are all life events that can be used to appeal and amend an IRMAA estimate, according to Sirianni.
Omdahl emphasized the importance of acting quickly “if income reduces because of a life-changing event.”
Lawrence Pon, CPA/PFS, CFP from Redwood City, California, remarked, “Almost no one will win an appeal.” Just let them know that this is a one-year occurrence and that next year, their IRMAA will go down.