2021 Increase for Medicare Surcharges and Premiums, by Todd Carmack

As we enter 2021, it’s sometimes difficult to keep up with all the changes to Medicare. Don’t worry, we have everything you need to know in this guide. For example, it starts with a $4 increase to all Part B premiums in 2021. At the same time, the Centers for Medicare and Medicaid Services has revealed an increase in high-income surcharges.

 

Part B Premiums – Designed for outpatient services such as visits to the doctor, monthly premiums will rise for Part B from $144.60 to $148.50.

 

High-Income Surcharges – All based around MAGIs (modified adjusted gross income), married couples earning more than $176,000 could face surcharges of up to $356.40. Meanwhile, the same is true for individuals earning over $88,000. Unfortunately, a married couple both enrolled in Medicare should expect double payments.

 

This year, all IRMAA (income-related monthly adjustment amount) changes are based on federal tax returns for 2019. There’s a small increase to IRMAA surcharges for those in income brackets that trigger them with inflation adjustments.

 

What is the overall reaction to the $4 increase for Part B premiums? In many corners, it’s a relief. At one point in 2020, the COVID-19 pandemic was causing higher spending for Medicare, and many people thought this would pass down to participants. With concerns rising, the emergency spending legislation was introduced by Congress as a measure to prevent large premium increases.

 

With the drug plans available on Medicare plans, private insurers generally take control, and this means higher monthly surcharges for many high-income retirees in 2021. Depending on the circumstances, this extra fee could be $12 or reach $77.

 

Rather than finding and paying the IRMAA surcharges and Part B premiums, the system is designed to deduct all charges from Social Security benefits. Therefore, it takes place automatically. When Social Security isn’t an option, the individual receives a bill from Medicare.

 

What is the wider implication of these changes for Americans? Well, it comes at a difficult time with only a small COLA announced by the Social Security Administration. At just 1.3%, the average retiree will receive $1,543 this year (just $20 more than 2020); this same amount is $2,596 for couples (a $33 increase). With such a small increase in Social Security payments, it makes the Medicare Part B premium change more noticeable.

 

While not everybody will pay income-related surcharges, it’s believed that 7% of people will. Let’s look at a yearly comparison for Part B premiums for somebody earning between $88,000 and $111,000:

 

  • 2020 – $202.40 (surcharge of $57.80)
  • 2021 – $207.90 (surcharge of $59.40)

 

For married couples earning more than $750,000 and individuals above $500,000, premiums alone could reach nearly $12,120 per year. Why? Because there’s a surcharge of over $350 on top of individual monthly premiums of $505.

 

Can I Appeal an IRMAA Surcharge?

 

Yes, and there are a couple of scenarios where this is applicable. For example, it might be that your IRMAA premium was calculated using the wrong numbers. If you can prove that their information is incorrect, a recalculation is likely. On the other hand, it could be that your income has decreased as a result of a specific life event. Social Security will consider the following:

 

  • Marriage
  • Passing of a partner
  • Annulment/divorce
  • Reduced work hours (for either partner)
  • Retirement
  • Pension loss
  • Natural disaster (affecting a property used for income)

 

According to Social Security, not all events are considered ‘life-changing’, which includes portfolio distribution, sale of a vacation property, or Roth IRA conversion. In these events, Medicare premiums will increase. The changes come into effect for all reductions in income two years after the event for Medicare premiums.

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