Part B costs, deductibles and IRMAA surcharges will increase about 6% next year.
By David Enna, Tipswatch.com
Less than a month ago, U.S. retirees collecting Social Security learned their benefits will be increasing 3.2% beginning in January. That was the good news. The bad news is that costs for Medicare copayments and deductibles will be rising at a higher rate, about 6%.
Those costs were revealed in a little-noticed press release on Oct. 12 from the Centers for Medicare & Medicaid Services. It revealed the 2024 premiums, deductibles, and coinsurance amounts for Medicare Part A and Part B programs, and the 2024 income-related monthly adjustment amounts (IRMAA) for Parts B and D.
Any day now, if you are on Medicare, you will get a letter from CMS informing you of these new premium and deductible costs for 2024. If you planned poorly, you may be meeting up with IRMAA, and you really don’t want to meet IRMAA. These surcharges can be lofty, so it’s smart to plan ahead to limit these costs.
Let’s dive into the key Medicare changes for 2024.
Part A: Hospital insurance
Most people who reach age 65 go on Medicare Part A, even if they are still working. Medicare Part A covers inpatient hospital, skilled nursing facility and some home health care services. About 99% of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment.
Although coverage is generally free, Part A has some sizable deductibles and coinsurance costs, and those will be rising 2% in 2024:
Keep in mind that most people on Medicare have a Medigap or Medicare Advantage plan that will cover all or most of the Part A deductible and coinsurance amounts. For example, all standardized Medicare Supplement (Medigap) plans, A through N, provide coverage for Part A coinsurance, and most also cover all or most of the Part A deductible costs.
Part B: Medical insurance
Medicare Part B can be described as covering “outpatient services,” things like doctor visits, some lab tests, an annual wellness exam, diabetes screenings, etc. Medicare Part B generally pays 80% of approved costs of covered services, and you pay the other 20%. Some services, like flu shots, Covid vaccines and a wellness visit, may cost you nothing.
Part B costs are going up about 6% for 2024, much higher than the Social Security COLA increase of 3.2% or the current annual rate of U.S. inflation, at 3.7%.
Part B deductible. Before Medicare pays anything, you have to meet your Part B deductible each year. The annual deductible for all Medicare Part B beneficiaries will be $240 in 2024, an increase of $14 from the annual deductible of $226 in 2023. As of January 2020, Medigap plans sold to new enrollees were not allowed to cover the Part B deductible. But once the deductible is met, Medicare and Medigap plans will cover some or all of your Part B costs.
Part B premium. The standard monthly premium for Medicare Part B enrollees will be $174.70 for 2024, an increase of $9.80 from $164.90 in 2023. This Part B premium is paid by all people on original Medicare and is incorporated into Medicare Advantage pricing, which may or may not result in a baseline monthly cost.
So, for most people on original Medicare, Medicare Part B is going to cost $174.70 a month for the premium, plus the cost of the $240 deductible. That’s a total cost of $2,336.40 a year, up about 6% from this year’s costs.
CMS offered this rather cryptic explanation of the increased costs:
The increase in the 2024 Part B standard premium and deductible is mainly due to projected increases in health care spending and, to a lesser degree, the remedy for the 340B-acquired drug payment policy for the 2018-2022 period under the Hospital Outpatient Prospective Payment System.
Curious about the 340B-acquired drug payment policy? Read this.
The IRMAA ‘surprise’
Since 2007, a beneficiary’s Part B monthly premium is based on reported income, known as MAGI, or modified adjusted gross income. According to the Social Security Administration handbook, for Medicare’s purposes MAGI is adjusted gross income (line 11 of your 2022 federal income tax form) plus tax-exempt interest.
Note that I mentioned your 2022 income tax return. That’s the one you filed earlier this year and now, just a month ago, CMS announced the IRMAA surcharge brackets applied to that 2022 return. In other words, you could not know the surcharge levels until after the fact. And this is a rather brutal surcharge, because going just $1 over any limit can trigger thousands of dollars of one-year costs.
Here are the 2024 Part B total premiums and surcharges for high-income beneficiaries, which apply to income reported on your 2022 tax return:
I took a quick look at the brackets and surcharges for 2023 versus 2024, and found that the income brackets were adjusted higher by varying percentages, about 4.9% to 6.2% for each bracket. The IRMAA surcharges were also adjusted higher by 6.0%.
These income-related monthly adjustment amounts affect about 7% of people with Medicare Part B. And it’s important to note that people on Medicare Advantage plans continue to pay the Part B premium, and are also subject to the IRMAA surcharges.
Annual income of $206,000+ for a couple may sound like a lot, but the lower IRMAA levels can easily be reached through Roth conversions, stock sales to fund a major purchase, a new pension starting up, etc. Be aware of the potential to trigger the IRMAA surcharges and plan around that possibility.
Part D: Drug coverage
IRMAA surcharges also apply to Medicare’s Part D premiums for drug coverage. There is no “standard” Part D premium — the cost you pay depends on the Part D insurer and plan you choose. The IRMAA cost, if any, is added on top of your base premium. People in Medicare Advantage plans don’t pay a separate Part D premium, since those plans include Medicare Advantage Prescription Drug (MAPD) coverage. But Part D is built into Medicare Advantage, and the IRMAA surcharge still applies.
Here are the Part D IRMAA levels for 2024, based on reported income for 2022:
Wrapping things up
Here is the end result of these IRMAA surcharges for a married couple filing jointly:
Obviously, these surcharges add up to substantially higher costs for both single and married couples. A couple hitting the 3rd tier of the IRMAA surcharges would be paying more than $7,500 a year of extra costs for Medicare coverage. Hitting tier 5 sends the annual costs up more than $12,000.
And I repeat: When you filed your federal tax return in early 2023 you could not know what these IRMAA brackets or surcharges would be. They were just announced on Oct. 12. They are called the “2024 IRMAA levels” but apply to your 2022 tax return.
When you file your 2023 return next year, realize that you won’t know the relevant IRMAA levels until October or November 2024, many months after you have filed. Your only option is to use the 2024 numbers as a guideline. It’s a crazy system.
You can appeal an IRMAA ruling
The Social Security Administration has very specific rules that will allow you to get a waiver of the IRMAA surcharge, if you meet certain criteria for a “life-changing event,” which include:
- Work stoppage
- Work reduction
- Employer settlement payment
- Death of spouse
- Divorce
- Loss of pension income
You’ll need to fill out IRS Form SSA-44 to request the waiver.
A final thought …
One point to remember, in fairness: For people collecting Social Security, payments will increase 3.2% next year, or about $708 for an average recipient. Medicare costs for a single person will increase about $131 without IRMAA surcharges. So although Medicare costs are rising faster than the Social Security COLA, recipients will still come out ahead, if that’s any consolation.
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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
Treasury Inflation-Protected Securities 
When I turn 65 and start to collect Medicare benefits, do my wife who is younger than 65 eligible to be on the plans too? Or is this on an individual basis?
No. You need to be 65 to qualify for traditional Medicare. And the plans and costs are on an individual basis, although some Medigap providers have a discount for the second person.
Harry Sit has a great site for IRMAA planning https://thefinancebuff.com/medicare-irmaa-income-brackets.html#htoc-2025-irmaa-brackets
Presently, we are doing Roth conversions on our tax deferred accounts; knowing the likely future IRMAA brackets is extremely helpful.
I very much appreciate your blog, David, and the comments and strategies from readers. I will share my thoughts in case it helps others.
We have been investing in I-bonds for quite awhile and were able to take advantage of the 3+% fixed rate in the early years. It was also a time when the limit on purchases was higher. As a result, when these bonds mature, we will have a lot of interest to pay taxes on and at a time when we will be taking RMDs on our tax deferred accounts. To prepare for this big tax bulge in 2031 (and minimize how much we might have to redeem in an earlier year), we are whittling down our tax deferred accounts (via Roth conversions) so we can control what IRMAA bracket we would hit.
If you have tax deferred assets, it is advantageous to estimate your future RMDs and other sources of income so you can plan ahead for IRMAAs and other tax situations. For those with substantial assets, you can get caught in a situation where tax deferred assets are so large that the growth will outstrip the removal of your RMDs – a double edged sword in that you have a lot of growth, but your RMDs will increase every year and can trip you up (like push you into higher IRMAA levels). If you plan, you can do Roth conversions in early years, reduce future RMDs and beef up tax-free assets. Similarly, if you are still working, it might be advantageous to skew retirement savings to Roth accounts. The Tax Man has to get paid sometime – early planning can give you more choice down the road.
If you are married, you should also consider that when the first of you dies, the surviving spouse will be put into less favorable single tax brackets the following year. If the surviving spouse’s income does not dramatically change, they will be pushed into higher tax brackets than when married. If tax deferred accounts from the deceased spouse are inherited by the surviving spouse those RMDs will then be taxed at higher rates. In tax planning, I have never heard about this marriage benefit which I find odd.
Excellent points and I agree with everything you wrote. We also are doing RMDs that push us to the first tier of IRMAA, and we are fine with that. We also have I Bonds maturing in 2031 with 3.0% and 3.4% fixed rates. If we hold to maturity there will be a big tax bill, but the IRMAA hit will be limited to one year (2033). Probably can live with that.
At the beginning of each year we set a target income level for everything incoming, including any traditional IRA withdrawals or Roth conversions. We use the newest IRMAA levels as our target and we get as close as we can (safely) to the top of tier 1.
The death of a spouse is very much an issue, and that is the key reason for doing Roth conversions, simply to limit future tax liabilities for a single-filer spouse in the future.
At some point, you just have to say, “We are going to pay a lot in taxes.” This is a sign of a very fortunate saver/investor.
David – I didn’t realize that Roth conversions were primarily a benefit to a surviving spouse. Couldn’t Roth conversions up to the limit of a lower tax bracket benefit a single filer as well by reducing future RMDs? I will probably be in the 12% bracket next year and I was thinking of doing conversions up to the limit of the 12% bracket.
Yes, certainly any Roth conversion done while in a 12% tax bracket is a great thing. The reason I mentioned the spousal benefit: If two working people both have large tax-deferred 401ks and IRAs (as if often the case) when one spouse dies the other inherits and must take RMDs from both accounts, but gets moved into the single-taxpayer brackets.
This timely article just popped up! https://www.cnbc.com/2023/11/11/how-to-prepare-for-the-survivors-penalty-before-a-spouse-passes.html
Here’s an important consideration for older folks. Not as timely as your post @minnesotaswede, but still very relevant.
Am I Too Old for an IRA Conversion?
Brian, great video (FYI the link does not work, so just search the title on Youtube).
While watching it, this other video came up;
it is a much more comprehensive take on taxes with Roth conversions and considerations (in case this link does not work, search on: I’m 65 Years Old With $1.4 Million In IRA’s – Should I Do A Roth Conversion?)
My biggest frustration, as a retiree who enjoys the casino, is that all winning sessions are added to gross income. Losses, which are far more frequent, can only be deducted if you itemize, thus losing the standard deduction, and making you look wealthy because of the artificially high gross income.
Hi……my situation. Went on disability at age 35. Immediately put on Medicare. Decided to drop me off husbands insurance, that saved a couple hundred a month. 6 months later, I get a letter stating because I went 6 months with no prescription coverage, I would be penalized for life. No amount in dollars or percentage was ever given to me. So, every month for the last 22 years I have paid a “price”. I have had a supplemental since then.
What is the difference between medigap and supplemental? How do I know what is best for me?
The Medigap plans are the supplemental add-ons to original Medicare. So they are the same thing. The best place for non-biased advice is to use a SHIP adviser for your state. The service is free. https://www.medicareplans.com/medicare-benefits-counselors-and-advisors/
IRMAA premium year tables are published each year in order to measure MAGI against thresholds for their respective tax year to determine if IRMAA surcharges apply. These tables state the MAGI tax years the table is designed for, e.g. “If MAGI in 2018 (or 2017 if 2018 is not available) was”. Here, those Married, filing jointly owe IRMAA surcharges in 2020 if their MAGI in 2018 (or 2017) was over $174K, the first tier of the threshold.
In the case of a SSA approved Life-Changing Event (Form SSA-44), when the tax year for MAGI to be determined is changed to a later tax year, which IRMAA premium year table would the SSA use to determine if IRMAA surcharges are owed in that year? For example, the SSA accepted John and Mary’s 2019 Life-Changing Event and agreed to use their (now) lower 2020 MAGI to determine their 2020 IRMAA. Which IRMAA premium year table would the SSA use to determine if they owe IRMAA surcharges in 2020: the one that measures 2018 (or 2017) MAGI, or the one that measures 2020 MAGI?
It is all highly confusing. For example:
Let’s say you are working in 2023 and get laid off, get a severance and then retire. You file your 2023 tax return in early 2024. Then in August of 2024 you turn 65 and go on Medicare. CMS is going to look at your 2022 tax return (before you retired) to measure your IRMAA status. That will be the Medicare premium you start paying in 2024 through the end of the year. You may be able to appeal any IRMAA penalty because you have now retired.
Then. … in November 2024 the CMS issues the new IRMAA brackets for 2025, and looks at your 2023 return, when you received the severance. If that severance put you over the IRMAA limits, then you again face IRMAA surcharges for 2025, which you can again appeal because of the severance you received in 2023 qualifies as a life-changing event as your retired.
So far, so good? But then for the rest of 2024 your income (and your spouse’s) had better come in under the IRMAA limits or CMS will come after you for back-payments of the IRMAA surcharges. This happens.
I really dislike means testing for Social Security and Medicare, since most of us have been forced to contribute to them our whole working lives, and those of us who were perhaps more prudent with our expenditures over time and saved more (with more interest income), end up getting screwed by the government.
As of now, Social Security (unlike Medicare) does not use means testing, although some have argued for it. Nonetheless, there exists a pernicious aspect of taxing on Social Security income. “Since 1984, Social Security beneficiaries with total income exceeding certain thresholds have been required to pay federal income tax on some of their benefit income. Because those income thresholds have remained unchanged while wages have increased, the proportion of beneficiaries who must pay income tax on their benefits has risen over time.” So the threshold in terms of REAL income is very low now. Up to 85% of your benefits are taxable if half of your Social Security benefits plus all other income is more than $34,000 for individuals. That $34,000 has not changed since 1984. It should rise every year based on the CPI, retroactive back to 1985.
Since both Social Security and Medicare are in deep financial distress, I am in favor of the IRMAA surcharges and taxes on Social Security payments for higher earners. Those payments go back to the so-called “trust fund.” The IRMAA levels seem reasonable to me, but the tax up to 85% of Social Security payments triggers at a very low income levels … $25,000 for singles and $32,000 for couples. (Only 1/2 of Social Security benefits apply to the income calculation, but the levels were set long ago — as you note — and have not been updated for inflation, which is mind-boggling).
Not updating the tax structure on Social Security benefits is stealth means testing. I disagree with you about IRMAA surcharges. People who have scrimped and saved for a long time to earn higher interest, should not be penalized by Medicare. All of us were forced to pay into it, so we should all be treated equally.
As is obvious, Medicare isn’t free. The Part B cost for a couple without any IRMAA surcharges is $4,192.80. And the first level of IRMAA brings the Part B cost to $5,870.40, or about $70 more a month per person. This is very good health insurance for that price. I can’t complain. …. On the Social Security tax, the trigger levels absolutely should be indexed and then I suspect that eventually higher earners will have 100% of the benefits subject to income tax. Some unpleasant things are going to have to happen to fix Social Security.
“In 2023, the maximum amount of earnings on which you must pay Social Security tax is $160,200.” Now I don’t mind doing away with that maximum, as that is also a kind of means testing, but which in this case benefits the high income earners. There should be no maximum on this. Getting rid of that maximum would help with the projected Social Security deficit.
Agree. And this will need to be part of the solution.
With Federal tax brackets of 35% and 37% for high income earners. Plus the states with 8-10% state income tax. Add in the 3.8 percent Net Investment Income Tax. Taking 50% of workers pay because they are successful. Now we eliminate the Social Security tax limit with no benefit for the contributor?
How much more is necessary?
I’m not familiar with what states have 8-10% income taxes, but I assume those are the top marginal rates on a graduated scale. Federal rates are also marginal top rates. NIIT is only on income above $200,000 (so also basically a top marginal rate). Even at those rates, a tax payer wouldn’t be paying half of their income to taxes since the rates on their lower income tiers were lower. True, though, on a marginal basis, perhaps 50 cents of every additional dollar earned for very high earners could be paid to taxes. I think of that as the cost of a society that allows someone to be that prosperous.
I do think that SS benefits should grow if the wage base is uncapped. The current formula has diminishing benefit returns for higher earners and I think that model should be extended to account for a higher wage base (perhaps add another bend point with a top percentage around 5% for income above the current wage base).
I’m a few years away from going on Medicare (how did THAT happen?). Do you have any advice about how to manage investments and retirement accounts in advance of turning 65 to limit the impact of the income adjustments for Part B coverage? Is it correct to say that since tax exempt income is added back into the calculation, municipal bonds wouldn’t help but tax deferred instruments like I Bonds and TIPS and retirement accounts do help. Any other advice?
You want to start planning for Medicare when you are age 63. In that year, be aware of the current IRMAA limits and try to stay under them. If you want to do a big Roth conversion, do that when you are 62. So for example, if you are going on Medicare in 2025, you want your 2023 tax return to fit within the limits you set. I think going up one level of IRMAA is tolerable, by the way.
I Bonds and TIPS held in a traditional retirement account won’t affect IRMAA, until you redeem the I Bond or withdraw money from the IRA. TIPS held in a taxable account will generate phantom income that will count toward IRMAA. So will any capital gains distributions you get from stock funds in a taxable account.
More important than not knowing the applicable IRMAA levels when you file your tax return, it seems to me, is the fact that you don’t know those levels before the end of the covered tax year, when you could still possibly do something about your MAGI. I actually could have known the new IRMAA levels when I filed my return (with extension) on October 15th, but there was really nothing I could do about my 2022 MAGI at that point.
Good point!!!!…I guess, historical trends may help?
True. It is a frustrating policy.
As always, a great job….wow!!! timing of this post could not be more perfect for me because I am signing up, for the first time, for Medicare part B, D and Medigap today. Previous exchanges on this topic convinced me to go with these choices and not fall for Medicare Advatage plans. When I told my wife about this post, her response: it has also to something with “the law of attraction”. We get what we seek….thanks, David…..best chander
I did some thorough research before going on Medicare in 2018, and I heard from excellent, non-biased advisers. They were consistent in steering me away from Medicare Advantage, which is too much like “corporate insurance” in my opinion. I have zero complaints about Medicare so far (with a plan G Medigap plan).
I have Plan F Medigap, which is the most expensive. But I get no bills, no-copays, no deductibles, no questions. I see whoever I want where I want, doctors and specialists. It is good in all 50 states, plus DC, Guam, American Samoa, Virgin Islands, and Puerto Rico. Almost all doctors take it.
Excellent job David, and a word of caution. Anyone thinking a Medicare Advantage plan is preferable should investigate very thoroughly. The few perks they tout are easily swamped by unexpected expenses. You could be better off with original Medicare plus a Medigap policy.
I own Nursing Homes and Home Healths, and Len is absolutely correct. It really comes down to who you want making the calls on your health care as you age. If you want it to be about you and your medical people (doctors, hospitals, nursing home, etc) you should definitely choose traditional Medicare with a gap filler.