Is Medicare IRMAA a big deal?

[Philliefan33]

I understand what IRMMA is. I don't understand the reasoning behind it. Just because a person or couple makes a bit more than the guy next door doesn't make sense that he should pay more because of it. What other item, besides federal medical insurance plans, has the purchase price based on what your income is? Imagine if the federal government decided to tax cars annually but only for those with a certain income. And more if you made more. If state government agencies did the same thing. Real estate taxes would be higher just because. Or the cost of gasoline at the pump could be taxed higher. The sales tax could be higher. Would any that all seem "fair"? I say not. Why then Medicare?

I have done Roth conversions over the last few years on money I earned years ago. At that time, I agreed to be taxed later. I wasn't told that I would also be paying more than the guy next door for health care. Possibly he may have his SS cut because of it too, if some have their way. Again, not "fair" by any definition I have known.

Not to hijack the thread, but the cost of college tuition varies based on income. Those with higher incomes do not get the “need-based” aid, so end up paying more for the same product. Then as an added kick in the pants, if your income is too high you do not qualify for the American Opportunity Credit.

 

[athena53]

Perhaps everyone should pay the full cost of Medicare B, which would lead to a premium of over $600 per month per person, and another $150 or so per month for Plan D. Once everyone is being charged the same, some type of assistance could be arranged for recipients that can’t afford the full price.

That's a good thought; I believe in transparency and people SHOULD see the true cost of coverage. My concern would be that the group of people who decide to "save money" by not signing up for B and D because they're healthy might increase when you add the complexity of signing up and then providing the additional info necessary to see if you qualify for subsidies. It is never happy news when they're diagnosed with something expensive and they find that they're going to pay a lifelong surcharge for signing up late. (And yes, I understand the reason for the surcharge- I spent my career in insurance.)

 

[marko]

Perhaps everyone should pay the full cost of Medicare B, which would lead to a premium of over $600 per month per person, and another $150 or so per month for Plan D. Once everyone is being charged the same, some type of assistance could be arranged for recipients that can’t afford the full price.

Wouldn't this send the same millionaires who 'qualify' for ACA running back to their accountants, figuring out how to game this as well?

The clever, wealthy and motivated can accomplish amazing feats of legerdemain.

 

[Gumby]

I think his point was that it is exactly the same thing and that maybe people should stop whining so much.

 

[Romer]

The good thing out of this thread is it made me dig into this more to understand the Difference between MAGI and AGI better. The one thing I learned is that MAGI includes non taxable Social Security. Meaning (correct if I am wrong) that I will pay Fed Taxes on 85% of the SS check based on my Pension raising income.

MAGI would add back in that 15%

I am 61 now so making sure I limit income to IRMAA level in 2024. The MAGI item would hit when I start social security.

As I understand it, taking money out of my IRA or converting to a Roth does not increase MAGI from AGI

 

[Gumby]

The good thing out of this thread is it made me dig into this more to understand the Difference between MAGI and AGI better. The one thing I learned is that MAGI includes non taxable Social Security. Meaning (correct if I am wrong) that I will pay Fed Taxes on 85% of the SS check based on my Pension raising income.

MAGI would add back in that 15%

I am 61 now so making sure I limit income to IRMAA level in 2024. The MAGI item would hit when I start social security.

As I understand it, taking money out of my IRA or converting to a Roth does not increase MAGI from AGI

As far as I can tell, MAGI for IRMAA purposes does not include the non-taxable portion of social security.

See: https://sgp.fas.org/crs/misc/R43861.pdf at page 5, and
https://secure.ssa.gov/poms.nsf/lnx/0601101010


also, for help with the second above https://www.irs.gov/pub/irs-pdf/f1040.pdf

 

[youbet]

I think his point was that it is exactly the same thing and that maybe people should stop whining so much.

Please note that some of the whining is not about paying the tax due to one's MAGI being over a threshold, but rather that the structure of the tax includes cliffs and is regressive.

 

[Chuckanut]

I am glad that the IRMAA break points are at least indexed for inflation, unlike the earning limits for taxing SS which has been the same for decades.

 

[Gumby]

Please note that some of the whining is not about paying the tax due to one's MAGI being over a threshold, but rather that the structure of the tax includes cliffs and is regressive.

Increasing taxes as income increases is not generally considered regressive taxation, although I will acknowledge that the marginal rate temporarily increases immediately above the cliff. It's easier and cheaper for the government to administer the program with cliffs. You can adjust your affairs to avoid the cliff, or not, as you see fit. But the system won't change just because we whine about it.

 

[Hermit]

When I retired I was offered somewhere around $400k or $40k/year pension which I took. That was 10 years ago. I am now moving to the positive side of that equation if you do not include gains. With that decision so long ago I now and forever will be in the IRMAA income realm. When I made this decision 10 years ago, I am not sure I had even heard of IRMAA. The moral of this story is to make as sure as you can that you have all the necessary available information for decision making when planning for retirement and then do the math. I agree that the "trigger" income post is a great place to start for that information.

 

[Car-Guy]

^^^^
Yep, if you are filing a single tax return and getting 40k from a pension and "let say" 35 to 40k from SS, that's going to get you pretty close to the first IRMAA tier.. Another 20k income from just about source will push you over...

 

[aja8888]

If people think the IRMMA costs are high, you should ask my BIL what his heart transplant at age 74 would have cost him without Medicare help. Then add in 2 years of monthly testing and a huge pile of very expensive drugs to get the heart to stay in place and keep beating. He is 83 now and doing great.

Medicare is a good deal folks, even of if it costs a bit. Maybe just starting out on it you don't think so, but as you age (hopefully) and things go wrong, and some can go very wrong, you will be glad you have the coverage.

My two hip replacements didn't cost me a cent out of pocket (Medicare and full Pan F).

 

[pacergal]

Perhaps everyone should pay the full cost of Medicare B, which would lead to a premium of over $600 per month per person, and another $150 or so per month for Plan D. Once everyone is being charged the same, some type of assistance could be arranged for recipients that can’t afford the full price.

Good idea. Perhaps the subsidies could be tiered at certain income levels. As your reported income drops below certain thresholds, you would get a larger subsidy. Sort of like the ACA subsidy.

I was thinking along these lines--Thank you.

Maybe I just don't get the hand wringing here. Most of the folks on the forum have had excellent income and are very good at budgeting/saving--thus ER.
And utilize the regulations to manipulate their income to receive lower ACA costs.
Insurance in the US is expensive! Health care here is expensive. But you don't want to go without.

DH and I chose to remain in public service jobs at lower pay because of the pension. Said pension will have us in IRMAA territory permanently sometime in the near future.
However, I am thankful and blessed every day that I do have the income we have! So many do not.
Taxes are a part of life, you make more money, you pay more taxes (unless you have enough of the deductions to reduce you taxes yearly!)
Life is too short to worry about a few more dollars.
Surely folks here know how to adjust your budgets if needed.
Why, some of the expenditures in the BTD thread would feed families for months!

Enjoy your day. Life is too short.

 

[Romer]

As far as I can tell, MAGI for IRMAA purposes does not include the non-taxable portion of social security.

See: https://sgp.fas.org/crs/misc/R43861.pdf at page 5, and
https://secure.ssa.gov/poms.nsf/lnx/0601101010


also, for help with the second above https://www.irs.gov/pub/irs-pdf/f1040.pdf

Thanks Gumby, I was reading the generic description of MAGI which does add the non taxable benefit. Table 1 does clarify it.

 

[oldtimer]

Wow! All this whining - where is the cheese?

According to the Medicare Trustees Report, 8% of Medicare beneficiaries paid IRMAA. Would you rather just be living off of SS and not paying IRMAA?

 

[oldtimer]

Thanks Gumby, I was reading the generic description of MAGI which does add the non taxable benefit. Table 1 does clarify it.

For ACA premiums, not Medicare premiums.

 

[marko]

Medicare is a good deal folks, even of if it costs a bit. Maybe just starting out on it you don't think so, but as you age (hopefully) and things go wrong, and some can go very wrong, you will be glad you have the coverage.

My two hip replacements didn't cost me a cent out of pocket (Medicare and full Pan F).

+1 DW turns 65 in July, exchanging a $15,000 HC bill each year for Medicare. I'll (only somewhat reluctantly) pay the IRMMA in years that I have to.

 

[Midpack]

Wow! All this whining - where is the cheese?

According to the Medicare Trustees Report, 8% of Medicare beneficiaries paid IRMAA. Would you rather just be living off of SS and not paying IRMAA?

Yep, this is largely a well to do crowd...

 

[athena53]

The moral of this story is to make as sure as you can that you have all the necessary available information for decision making when planning for retirement and then do the math. I agree that the "trigger" income post is a great place to start for that information.

Ah, but things change. Much of my IRA was accumulated when the conventional wisdom was "defer taxes because you'll be in a lower bracket in retirement". I'm not sure if that's true anymore, especially with the additional IRMAA surcharges which can be taxes triggered by IRA withdrawals and taxation of SS and the institution of RMDs, which started only in 2007. Roth IRAs were enabled by legislation in 1997 but didn't become a common part of workplace plans till later.

And another thought on full disclosure of the cost of Medicare without any additional paperwork required by the beneficiaries: have the annual statement announcing premium for the upcoming year worded as follows:

"The total cost of your Medicare B coverage is $590.50 per month. Based on your 2021 Modified Adjusted Gross Income, $395.60 will be paid by the taxpayers and you will pay the remaining $164.90 per month."

 

[ivinsfan]

Well I guess attitudes here won't be any better here in 23. Whining and hand wringing. ReallyIt's perfectly OK for a poster to say I don't think it's fair that I paid the same or more then others into Medicare and then when I get Medicare I still have to pay more then others.



That's a valid statement about a valid issue...but you wouldn't know it by some of the snarky, holier then thou comments here.. to my profound distress I find myself reading here less and less every day. Some of our board civility left during Covid and I don't think it's coming back. We have lost valued posters due to this issue IMO.

 

[audreyh1]

When I retired I was offered somewhere around $400k or $40k/year pension which I took. That was 10 years ago. I am now moving to the positive side of that equation if you do not include gains. With that decision so long ago I now and forever will be in the IRMAA income realm. When I made this decision 10 years ago, I am not sure I had even heard of IRMAA. The moral of this story is to make as sure as you can that you have all the necessary available information for decision making when planning for retirement and then do the math. I agree that the "trigger" income post is a great place to start for that information.

IRMAA for part B started in 2007, so it was pretty new. In addition things can always change even after you make the best decision you could at the time.

 

[Sunset]

My Big Whine about IRMMA is the cliff: $1 over the line, and it costs ~$1,000 each extra.

Should be 10 steps to be less draconian, $1 over step 1 and cost $100, go over step 2 and another $100.

 

[ivinsfan]

IRMAA for part B started in 2007, so it was pretty new. In addition things can always change even after you make the best decision you could at the time.

Kind of price rise by stealth, lawmakers hoping no one would notice the rise in cost since apparently it was only for "rich people". It's no wonder people feel aggravated by stuff like this.

 

[MarieIG]

They are a big deal for some, for various reasons, . . .

 

[Irishgirlyc58]

Whining- when others complain about something that doesn’t affect me.

Valid complaints- when I complain about something that I think everyone else should consider valid.

I’ve seen a lot of “whining” about things that don’t affect me. I typically don’t post in those threads unless I have something I think is worthwhile to the conversation.
But that’s my decision.

The original question was is IRMAA that big of a deal. People responded with their own opinions on it based on their circumstances.
If you aren’t affected by it then I guess your response would be not to me it isn’t!

Just because it doesn’t affect you doesn’t mean it doesn’t affect others.
We never know what other people are living with or responsible for in their lives.