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September 17, 2019 at 09:58 AM
Here’s some good news for advisors with clients on Medicare earning more than $85,000 as individuals and $170,000 as couples filing jointly: Starting next year, the income brackets linked to surcharges for Medicare Parts B (medical services and supplies) and D (prescription drugs) will be indexed to inflation for the first time since 2010.
There are five income brackets linked to different surcharge percentages, ranging from 33% to 201%, which are applied as an additional cost to the base premium. The top income bracket, above $500,000 for individuals and above $750,000 for couples, won’t be indexed to inflation until 2028. The surcharges are officially known as the Income-Related Monthly Adjustment Amounts (Irmaa).
The inflation indexing of the surcharge, which uses the Consumer Price Index for All Urban Consumers (CPI-U), was previously in effect from 2007 through 2010, then temporarily ended by the Affordable Care Act until 2020.
With the renewed indexing of incomes, “Americans will need to have higher income levels to be subject to the added cost of surcharges — a positive development for current and future Medicare recipients,” according to a new report from HealthView Services.
But, says the firm’s CEO, Ron Mastrogiovanni, “given the pressure on the Medicare Trust Fund, retirees should expect additional changes and cost shifting to make up for lost revenues.”
The Trust Fund will collect less money from Medicare beneficiaries as a result of the inflation indexing while health care costs continue to rise, putting even more pressure on the program.
“To maintain the solvency of the Medicare Trust Fund, revenue no longer generated from surcharges must be recovered from other sources,” the report notes.
