Just As With The Part B Premium, IRMAA Is Going Down 3% In 2023 | Forbes

In October 2022, Forbes contributor Diane Omdahl published "Just As With The Part B Premium, IRMAA Is Going Down 3% In 2023", breaking down a genuinely rare event in Medicare history: both the standard Part B premium and the income-related surcharges stacked on top of it were set to decrease the following year.

The headline numbers: the standard Medicare Part B premium was dropping from $170.10 per month in 2022 to $164.90 in 2023 — a $5.20 reduction, roughly 3%. And because IRMAA surcharges are computed as multiples of that standard premium, the Income-Related Monthly Adjustment Amounts higher earners pay were falling by about the same percentage.

For beneficiaries who had absorbed 2022's painful 14.5% premium jump — the largest dollar increase in Part B history at the time — the reversal was welcome news. The article walked through the new surcharge amounts tier by tier and made the point that the relief applied to every IRMAA bracket, not just the standard premium.

When we shared this article with our readers in December 2022, our commentary was short but pointed:

At the time we wrote that, cost-of-living projections were running as high as 8.9%. The official 2023 COLA ultimately came in at 8.7% — still the largest Social Security increase since 1981. The core point stood either way: a 3% cut in the surcharge amounts tells you nothing about whether more people will end up paying those surcharges.

IRMAA is a system of interlocking parts — the base premium, the surcharge multipliers, the income thresholds, and the income retirees actually report. When one part moves down while another moves up sharply, the net effect on any individual household is anything but obvious. That is exactly why headlines about Medicare premiums, taken alone, can lull retirees into a false sense of security.

The 2023 decrease was, in large part, a correction of the 2022 spike. When CMS set the 2022 premium, it built in a contingency reserve for potential coverage of a new, extremely expensive Alzheimer's drug. CMS subsequently limited coverage of that drug to clinical trial participants, and the manufacturer cut its price roughly in half — meaning much of the money collected in 2022 was never spent.

Rather than hold those reserves, CMS passed the savings back to beneficiaries through a lower 2023 premium. The standard premium fell to $164.90, and the annual Part B deductible dropped from $233 to $226.

Because every IRMAA tier is defined as a percentage markup on the standard premium, the surcharges followed it down. The top-tier total Part B premium — paid by single filers with MAGI of $500,000 or more and joint filers at $750,000 or more — fell from $578.30 per month in 2022 to $560.50 in 2023. You can see the complete tier-by-tier history on our historical IRMAA brackets page.

Premium decreases like this are the exception, not the rule. Over the long arc of the program, Part B premiums and IRMAA surcharges have climbed steadily — which is why we treat 2023 as a data point worth remembering, not a trend.

Two things happened to IRMAA at once in 2023, and they moved in opposite directions for beneficiaries:

• Surcharge amounts went down about 3%, tracking the lower standard premium.
• Income thresholds went up with inflation. The first IRMAA tier began at $97,000 of MAGI for single filers and $194,000 for joint filers in 2023, up from $91,000 and $182,000 in 2022.

That combination — cheaper surcharges and higher entry thresholds — made 2023 unusually friendly to higher-income Medicare beneficiaries. A single filer just over the first threshold paid a total Part B premium of $230.80 per month in 2023, versus $238.10 for the equivalent tier in 2022. The full 2023 tier structure is laid out on our 2023 IRMAA brackets page, along with the 2023 IRMAA income limits.

But remember the moving parts. IRMAA is based on your income from two years prior — 2023 surcharges were determined by 2021 tax returns. The high-inflation years that produced the 8.7% COLA also produced higher interest income, larger required minimum distributions, and bigger capital gains distributions for many retirees. Income earned in 2022 and 2023 would come home to roost in 2024 and 2025 IRMAA determinations, regardless of what the 2023 surcharge schedule looked like. Our guide to how IRMAA is calculated walks through the two-year lookback in detail.

Looking back, the 2023 decrease is a useful case study for advisors and retirees alike. A few durable lessons:

• Surcharge rates and surcharge exposure are different problems. The 2023 schedule got cheaper, but rising retiree incomes meant more households were drifting toward the thresholds. Managing MAGI matters more than any single year's premium schedule.
• IRMAA is a cliff, not a slope. Crossing a threshold by a single dollar triggers the full surcharge for that tier, on both Part B and Part D — and for both spouses if both are enrolled.
• The two-year lookback rewards early planning. Decisions made at age 63 — Roth conversions, capital gains timing, account withdrawal sequencing — show up in Medicare premiums at 65.
• Relief is appealable when life changes. A retiree whose income dropped after the lookback year could file Form SSA-44 to request a new determination rather than pay surcharges based on stale income. See our full guide to appealing IRMAA.

This is the kind of multi-variable problem that benefits from modeling rather than headlines. RetirementAdvisorPro lets advisors project a client's MAGI year by year against future IRMAA thresholds, so a "premiums are going down" news cycle never obscures a client quietly drifting into a higher bracket.

Diane Omdahl's original piece remains a clear, well-sourced walkthrough of the 2023 changes and is worth reading in full: Just As With The Part B Premium, IRMAA Is Going Down 3% In 2023 (Forbes).

For the current-year picture, start with our up-to-date IRMAA brackets resource, then explore how the thresholds have moved since this 2023 snapshot.