Angry at IRMAA

Richard Quinn

I’M AMAZED BY the opinions expressed by some retirees about the Medicare premium surcharge known as IRMAA, short for income-related monthly adjustment amount. Is it really unfair for higher-income older Americans to pay larger premiums for Medicare Part B and Part D? Many people think so.

IRMAA was part of 2003’s Medicare Modernization Act and took effect in 2007. The threshold at which IRMAA kicks in for a couple is four times higher than the median household income for Americans age 65 and older. Yet here are just two—out of many—complaining comments I saw on Facebook. Both have been slightly edited:

  • “If I pay more for health care, I expect to get more. With IRMAA’s impact on Medicare premiums, this is not true.”
  • “IRMAA is designed to fault the wealthy for being successful because ‘they can afford to pay more.’ Raising the premium on higher earners to pay for the same services does not make sense. It should be the same for all people no matter what.”

The idea of taking more from some taxpayers—or giving more back to them—based on income is hardly unique to Medicare. The federal income-tax code is progressive, meaning those with higher incomes pay a higher percentage of their income in taxes. Similarly, the Affordable Care Act subsidizes health insurance based on income. (A digression: Those subsidies don’t always seem to go to the right people. Two bloggers I’ve come across report a seven-figure net worth—and yet they pay less than $40 a month for family health insurance coverage.)

Moreover, roughly 25% to 30% of large employers charge employees for health insurance premiums based on their salary level. At my old employer, we structured retiree premiums based on a combination of years of service and salary. Nobody seemed to complain about that. 

The federal government subsidizes Medicare premiums. IRMAA merely reduces the size of that subsidy for some Medicare recipients. According to Medicare’s trustees, about 4.8 million beneficiaries paid a Part B IRMAA premium, or about 8% of Medicare Part B recipients.

More than half of Americans feel the wealthy don’t pay their fair share in taxes. Yet it seems that many retirees, even though they have an income that’s four times or more the average, don’t think they should be considered wealthy. 

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