Your Medicare Part B Premium is Specific to You
Did you know that your Medicare Part B premium is unique to you? Most people do not realize that the Part B premium is simply a base amount. Many will pay less and some people will pay more. Each year the Part B premium is released in the last quarter, sometime between October through December. The premium released is the base Part B premium for the upcoming year.
The actual Medicare Part B you pay is determined based on the federal income tax returns you submitted to the Internal Revenue Service. Furthermore, the actual Medicare Part B premium you pay is determined based on your tax returns filed two years prior. The word “premium” is insurance-speak and simply refers to the cost each month for the insurance. For example, your 2018 Medicare Part B premium is based on your 2016 income tax return.
Specifically, Social Security is looking at your family’s adjusted gross income (AGI). This is line 37 on tax form 1040 for example. (See here for more information on which line your family’s adjusted gross income can be found.) This is re-evaluated each year.
The line number varies depending on which tax form your household filed. If you are paying more than the base Medicare Part B premium, you are paying the Income Related Monthly Adjustment Amount (IRMAA). If you do not have to file an income tax return, do not worry. None of this applies to you.
The percentage of costs in the chart below shows the share of Part B costs for each tax bracket. For example, those that pay the base Part B premium only bear 25 percent of the total program costs. You can find out how Medicare is funded here.
Medicare IRMAA Brackets Changing in 2018
Starting in 2018, based on legislation passed in 2015, individuals with incomes above $133,500 and couples with incomes over $267,000 will pay higher Part B and Part D premiums. Up to this point, those with an AGI of $133,500 had been treated the same as someone who’s AGI was $160,000. The increase in Medicare Part B premiums for some higher-income beneficiaries, designed to help offset the cost of the new law, is expected to increase Medicare’s premium revenues by $34.3 billion between 2018 and 2025, according to the Congressional Budget Office.
As always, the IRMAA brackets are based on tax returns filed two years prior. Thus, 2018 Medicare premiums will be based on 2016 tax returns.
If you this causes a hardship for you and you have experienced a life-changing event causing a drop in income, we can help you file an appeal. Examples of life-changing circumstances are death of a spouse, retiring or losing a job.
For more info visit: https://www.kff.org/medicare/issue-brief/medicares-income-related-premiums-a-data-note/.