Senior Insurance Blog

Are Medicare Costs Based On Your Income?

Are Medicare Costs Based On Your Income?

If you have a high income, there’s a good chance you’ll be in Medicare’s “higher-income” threshold, which means your Medicare costs will be more than everyone else's.

The current law requires your Medicare Part B premium to be adjusted as well as your Medicare prescription drug coverage premium (Part D).

This affects less than 5% of all Medicare enrollees, but if you’re part of the 5%, you may want to know just how much more you’ll be forking over for your post-65 insurance.


Paying More for the Medicare Part B Premium

Most people enrolled in Medicare pay $135.50 in 2019 for their Part B premium. That amount is actually only about 25% of the total cost. The government comes in and pays a substantial portion – about 75% – of the total Part B premium.

Social Security uses your most recent federal tax return to determine what’s called your modified adjusted gross income (MAGI). If you’re filing jointly with your spouse and your MAGI is greater than $170,000, you’re going to pay more than $135.50 per month for your Medicare Part B. This is also true if your MAGI is greater than $85,000 and you file your taxes using a different status.

In other words, if you have a high income, the government is going to pay less, and you’re going to pay more.

There are several tiers depending on how much you make and how you file your taxes. Each tier adds more to your Part B premium, and the amount is based on a percentage.

Those percentages are 35%, 50%, 65%, 80%, and 85% of the total Medicare Part B premium. For example, if you’re in the highest tier, the government pays 15% of the Part B premium and you pay 85%.

  • Individuals who make between $85,000-$107,000 or married couples who make between $170,000-$214,000 pay an additional $54.10 per month
  • Individuals who make between $107,000-$133,500 or married couples who make between $214,000-$267,000 pay an additional $135.40 per month
  • Individuals who make between $133,500-$160,000 or married couples who make between $267,000-$320,000 pay an additional $216.70 per month
  • Individuals who make between $160,000-$500,000 or married couples who make between $320,000-$750,000 pay an additional $297.90 per month
  • Individuals who make more than $500,000 or married couples who make more than $750,000 pay an additional $325 per month

If you’re married and live with your spouse but file your taxes separately, the tiers are a little bit different:

  • Individuals who make between $85,000-$415,000 pay an additional $297.90 per month
  • Individuals who make more than $415,000 pay an additional $325 per month

Paying More for the Medicare Part D Prescription Drug Plan Premium

Medicare Part D is your prescription drug coverage, and the government helps pay a lot of those costs, too. Just like with the Medicare Part B premium, your drug premium will go up depending on your income.

The exact amount you’ll pay is tied to something called the “base premium.” This is announced each year by the Centers for Medicaid and Medicare Services (CMS), and for 2019, it's $33.19. That is going to be totally separate from your individual drug plan’s premium.

If you end up having to pay more because of your income, the amount will be deducted from your monthly Social Security check.

Here are what the tiers look like in 2019 for Part D premiums:

  • Individuals who make between $85,000-$107,000 or married couples who make between $170,000-$214,000 pay an additional $12.40 per month
  • Individuals who make between $107,000-$133,500 or married couples who make between $214,000-$267,000 pay an additional $31.90 per month
  • Individuals who make between $133,500-$160,000 or married couples who make between $267,000-$320,000 pay an additional $51.40 per month
  • Individuals who make between $160,000-$500,000 or married couples who make between $320,000-$750,000 pay an additional $70.90 per month
  • Individuals who make more than $500,000 or married couples who make more than $750,000 pay an additional $77.40 per month

And here are the tiers for those who are married and live with their spouse but file their taxes separately:

  • Individuals who make between $85,000-$415,000 pay an additional $70.90 per month
  • Individuals who make more than $415,000 pay an additional $77.40 per month

RELATED: How Much Will Medicare Cost Me Per Month In 2019?

Determining Your Income

The extra amount you pay is based on your income from the most recent federal tax return. In 2019, that means you’d be looking at your 2017 tax return, which was filed in 2018. The IRS will provide this return to Social Security, so if something is incorrect or they have the wrong year, you can call or visit your local Social Security office.

If your income has gone down and moves you from one tier to another, you’ll also need to contact Social Security to explain the change. Some common reasons for an income change include:

  • You married, got divorced, or became widowed
  • You our your spouse stopped working
  • You or your spouse lost an income-producing property because of a disaster
  • You or your spouse’s pension plan got terminated or canceled

If this is the case, you’ll want to be prepared with documentation proving the income change. For example, if you just became widowed, you’d want to be prepared with a death certificate.

There’s a form for this called Form SSA-44 Medicare Income-Related Monthly Adjustment Amount – Life-Changing Event.

In short, the Medicare Part B premium and Medicare Part D premium are the only two Medicare costs that are based on your income.

Everything else, from deductibles to copayments are going to be standard for everyone.

If you need any help signing up for or understanding Medicare, give us a call! Luke or Sarah will be glad to take the headache out of Medicare for you.

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