How the IRMAA Surcharge is Calculated
The Income Related Monthly Adjustment Amount (IRMAA) is, simply, a surcharge on top of the current year’s Medicare Part B and Part D premium for those who earn too much income while in retirement.
The brackets that determine how much of a surcharge is to be added are as follows:
| Individual | Married Couple | Part B | Part D |
| < $88k | < $176k | $148.50 | Premium (varies) |
| $88k – $111k | $176k – $222k | $207.90 | Premium + $12.30 |
| $111k – $138k | $222k – $276k | $297.00 | Premium + $31.80 |
| $138k – $165k | $276k – $330k | $386.10 | Premium + $51.20 |
| $165k – $500k | $330k – $750k | $475.20 | Premium + $70.70 |
| >$500k | >$750k | $504.90 | Premium + $77.10 |
How does Medicare determine the IRMAA surcharges?
Believe or not, every retiree in Medicare receives a form of subsidy to offset the Medicare Part B premium. According to the Medicare Board of Trustees the Part B premium “is set at the level of about 25% of average expenditures for beneficiaries aged 65 and over”.
In 2021 the cost of the average expenditure for Part B is set at $594.00 a month.
Again, Part B enrollees pay, 25% of that $594.00 premium or $148.50 a month ($594 x 25% = $148.50).
For those who enter Medicare’s IRMAA the subsidy is lessened.
The subsidies per bracket are:
| IRMAA Brackets | Subsidy |
| No IRMAA | 25% |
| 1st Bracket | 35% |
| 2nd Bracket | 50% |
| 3rd Bracket | 65% |
| 4th Bracket | 80% |
| 5th Bracket | 85% |
From here all that needs to be done in determining the Part B IRMAA surcharge is multiplying the known subsidy to the current year’s expenditure and presto, calculating the IRMAA surcharge becomes easy.
For the Part D IRMAA surcharge, unfortunately, it is not that simple.
Social Security.gov reports that “Once the IRMAA calculations are done, CMS notifies the Social Security Administration (SSA) so we can make IRMAA”. There is no further information provided on how the surcharges are calculated for Part D.
Conclusion:
To determine the Part B IRMAA surcharge simply multiply the current year’s Part B premium by 4 and then multiply that number by the subsidy (($148.50 x 4 = $594.00) ($594.00 x subsidy = surcharge)).
And again, for the Part D IRMAA charge it is, for right now, a waiting game on when they will release the information annually.
