Medicare premiums, IRMAA surcharges to rise in 2022

The 15% hike in the Medicare Part B premium is one of the largest annual increases in Medicare’s history, as COVID-related expenses and a new Alzheimer drug drive costs higher.

Medicare beneficiaries will pay higher Part B premiums and income-related surcharges next year, partially as a result of Covid-related health care expenses during the pandemic and the recent approval of a new Alzheimer drug.

The standard Medicare Part B premium, which covers doctors visits and other outpatient services, will increase to $170.10 per month in 2022, up $21.60 from this year’s monthly premium of $148.50, the Centers for Medicare and Medicaid Services announced late Friday.

The 15% increase in the Part B standard monthly premium is one of the largest annual hikes in the history of the Medicare program. When the Medicare program started in 1966, the initial Part B premium was $3 per month.

The increase in the 2022 Medicare Part B premium and annual deductibles reflect rising prices and utilization across the health care system during the pandemic and anticipated increases in the intensity of care provided, according to CMS. In addition, Medicare needs to build in contingency reserves “due to the uncertainty regarding the potential use of the Alzheimer’s drug Aduhelm by people with Medicare,” the CMS announcement explained.

By law, the Medicare Part B monthly premium must equal 25% of the estimated total Part B costs for enrollees 65 and older and must maintain adequate reserves in case actual costs are higher than anticipated.

“CMS is committed to ensuring high quality care and affordable coverage for those who rely on Medicare today, while protecting Medicare’s sustainability for future generations,” CMS administrator Chiquita Brooks-LaSure said in a statement. “The increase in the Part B premium for 2022 is continued evidence that rising drug costs threaten the affordability and sustainability of the Medicare program.”

Higher-income Medicare beneficiaries will pay even more next year. In 2022, individuals with modified adjusted gross income of $91,000 or more and married couples with MAGIs of $182,000 or more will pay additional surcharges ranging from an extra $68 per month to an extra $408.20 per month on top of the standard Part B premium. Married couples where both spouses are enrolled in Medicare pay twice as much.

High-income surcharges for 2022, officially known as income-related monthly adjustment amounts or IRMAA, are based on income reported on 2020 federal tax returns. The income brackets that trigger IRMAA surcharges increased from $86,000 for single taxpayers and $176,000 for married couples in effect in 2021. About 7% of Medicare beneficiaries pay IRMAA surcharges.

High-income retirees are also subject to monthly surcharges on their Medicare prescription drug plans, ranging from an extra $12.40 per month to an extra $77.90 per month per person on top of the monthly premium. Medicare drug plans are run by private insurers, and premiums vary widely.

Medicare Part B premiums and IRMAA surcharges are usually deducted directly from monthly Social Security benefits. People who aren’t yet claiming Social Security are billed directly by Medicare.

The 2022 Medicare premium and surcharge announcement from CMS follows last month’s announcement by the Social Security Administration of a 5.9% cost-of-living adjustment for 2022, the largest COLA in 40 years. SSA said the average Social Security benefit for a retired worker will rise by about $90 a month to $1,657 in 2022, while the average benefit for a retired couple will grow $144 a month to $2,753, more than offsetting the Part B premium increase for most beneficiaries.

But Mary Johnson, a Social Security and Medicare policy analysts for The Senior Citizens League, noted that the Part B Medicare premiums increase, which is the highest annual hike since 2016, will nearly wipe out the cost-of-living adjustment for Social Security recipients with the lowest benefits.

 And while Social Security recipients with higher benefits should be able to cover the $21.60 per month increase, Johnson said they may not wind up with as much left over as they were counting on. Rising Part B premiums have ranked as one of the fastest-growing costs that older Americans face in retirement, increasing 274% since 2000, she said.

Tax Filing Status 2020 Tax Filing Status 2020 Tax Filing Status 2020 You Pay in 2022
Individual Married, Joint Married, Separate Premium + IRMAA
$91,000 or less $182,000 or less $91,000 or less $170.10
$91,001 – $114,000 $182,001 – $228,000 Not Applicable $238.10
$114,001-$142,000 $228,001-$284,000 Not Applicable $340.20
$142,001-$170,000 $284,001-$340,000 Not Applicable $442.30
$170,001-$500,000 $340,001-$750,000 $91,001-$409,000 $544.30
>$500,000 >$750,000 >$409,000 $578.30

(Questions about Social Security rules? Find the answers in Mary Beth Franklin’s 2021 ebook at MaximizingSocialSecurityBenefits.com.)

Pluses and minuses of Social Security’s cost-of-living adjustment

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