You Can Appeal a Medicare Premium Surcharge
If you meet one of the seven qualifying life events, you have a good chance of getting a higher premium for Medicare Part B and Part D reduced.
If you get hit with a higher premium for Medicare Part B and Part D that you think is unjustified, you can ask Social Security to revisit that decision and perhaps reduce the cost. "You should go through the appeals process if you believe you qualify," says Jim Blankenship, founder of Blankenship Financial Planning and author of the independently published A Medicare Owner's Manual: Your Guide to Medicare Benefits ($12.88). Don't just accept the higher premium if your circumstances require a second look, he says.
Premiums for Medicare Part B and Part D -- coverage for doctor's visits and prescription drugs, respectively -- are based on your modified adjusted gross income from two years earlier. To determine your 2021 Medicare premium, Social Security uses your 2019 tax return. In those two years, however, your life can change in ways your 2019 tax return and current Medicare premium don't reflect. Sometimes, those changes are enough to convince Social Security that your Medicare premium should be reduced.
Part B's standard monthly premium in 2021 is $148.50 for individuals earning $88,000 or less; it's $176,000 or less for joint filers. Anyone whose income exceeds those thresholds pays a higher premium, also known as an "income-related monthly adjustment amount," or IRMAA. The higher monthly premiums rise steadily from $207.90 to $504.90 through five income tiers. The same tiers apply to IRMAAs for Medicare Part D, with enrollees paying an extra $12.30 to $77.10 per month depending on their income.
IRMAAs are commonly referred to as a surcharge, though that's a bit of a misnomer, says Casey Schwarz, senior counsel for education and federal policy at the nonprofit Medicare Rights Center. "I think that's important because sometimes when people hear 'surcharge,' they envision they are paying their premium and someone else's too," she says. "But that's not it. It reduces the amount the government pays for you."
Reasons to Appeal
In some circumstances, Social Security will recalculate your premiums -- known as a redetermination -- for Part B and Part D, particularly if the agency based the cost on a tax return that was later amended. Otherwise, there are seven "life-changing events" that qualify for a redetermination if they hurt your income: marriage, death of a spouse, divorce or annulment, reduced work hours or retirement, loss of income-producing property, the loss or reduction of some types of pension income, and an employer settlement payment because the company went bankrupt or reorganized.
The loss of income-producing property only counts as a qualifying event if it was "not at your direction." That means selling a piece of property doesn't count, but property, livestock or crops damaged because of arson, disease or a natural disaster does. A loss due to fraud or theft is also a reason to appeal.
What doesn't count is a one-time windfall. For instance, a Medicare beneficiary whose income jumps significantly one year from selling a home does not qualify for an appeal and will have to pay the higher premium. That's also true for people who take their first two required minimum distributions in the same year. If that temporary spike in income from those RMDs triggers a higher premium two years later, you're stuck paying it.
Filing a Claim
To ask for a redetermination, complete Form SSA-44 and include supporting documents, such as the death certificate for a spouse or a letter from a former employer stating that you are now retired. If you filed your federal income tax return for the year that your income was reduced, you will also need to provide a signed copy.
A decision usually takes a few weeks, but if you had one of the events that Social Security considers lifechanging, you should win the appeal. In that case, Social Security will reimburse you for the additional premiums by adding it to your benefit one month. If you are on Medicare but haven't started collecting Social Security, you should see a credit on a future invoice.
If your request for a redetermination is denied, there are three additional levels of appeals you could try: to the Office of Medicare Hearings and Appeals, to the Medicare Appeals Council and finally to the federal district court where you live. You may need to hire an attorney for some of these levels, which are primarily used by beneficiaries appealing decisions about coverage. For an IRMAA appeal, be prepared to lose if your claim is based on something other than one of the life-changing events. "If it's not listed, it's considerably harder to get approved," says Danielle Roberts, cofounder of Boomer Benefits, an insurance agency that helps baby boomers with Medicare. "Then you are fighting an uphill battle."
Barbara Hughes, a retired attorney, twice successfully appealed a Medicare IRMAA after she reduced her work hours in 2015 and then again after retiring in June 2020. Hughes had to provide a letter from her employer, a completed Form SSA-44 and income tax information both times.
For her appeal in 2015, she also was required to have a short in-person visit at her local Social Security office to give more information about her current income and explain why it fell. Before the pandemic, Medicare beneficiaries could visit a Social Security office to file an appeal or supply supporting documents. With the agency's offices largely closed to the public for the past year, beneficiaries contesting IRMAAs have had to mail or fax documents to make their case.
For her second appeal, Hughes had to call her local office several times before the agency refunded the higher premiums she paid both this year and for the second half of 2020. Even with that inconvenience, the process was fairly easy to complete "as long as I carefully followed the instructions buried in the letter SSA routinely sends to recipients toward the end of the year," Hughes says. Her premiums are now more than $70 less per month, and she received an $800 refund for the higher premiums she paid in the second half of 2020.
"I think my 2020 reduction in income was so much that they needed more explanation," Hughes adds. "But you don't have to be an attorney to do this on your own when you have what SSA lists as a qualifying event."