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Will My Income Affect My Medicare Premium?

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Medicare has an “income-related monthly adjustment.” What does that mean to you? If you are a higher income earner, you will pay more for Medicare Part B, which covers doctor and outpatient care, and a range of other services. Essentially, if you are a higher-income earner, you will be required to pay a larger percentage than others who are on Medicare. You could pay between 35% and 85% of the total cost of Part B, based on the income you reported to the IRS. For other Medicare beneficiaries, the government covers about 75% of the cost, with the beneficiary responsible for just 25%.

Medicare Prescription Drug Coverage for High-Income Beneficiaries

Your Medicare Prescription Drug Coverage will also be higher than average. As the prescription drug coverage is deducted from your Social Security benefits, you may need to pay another amount when the cost exceeds the Social Security benefits you receive. In these cases, you will receive a bill from Medicare or another federal agency every month.

How Does Medicare Determine Your Premiums?

Your premiums are based on your most recent federal tax return. The government calculates your payments on a sliding scale based on the IRS “modified adjusted gross income.” For those who are married and filing taxes jointly, with an income of $194,000 or more, your premiums for Medicare Part B and prescription drug coverage will be increased. If you file singly and the modified adjusted gross income is over $97,000, you will pay more.

What if My Income Goes Down?

If you have experienced a life change that led to reduced income, it is important to adjust your Medicare payments to reflect your current situation. The types of life changes that will be considered include:

  • You were married, divorced, or widowed.
  • You or your spouse (when filing jointly) are no longer working the number of hours you had in the past.
  • You lost property that was earning you income due to an event beyond your control.
  • You are the recipient of a settlement from a current or former employer when a company closed, went bankrupt, or is in the process of reorganization.

Medicare Appeals

If you believe that you are being wrongly charged more for your Medicare Part B and your prescription drug plan, you have the right to appeal the decision by the agency. The decision was based on the amount of the modified adjusted gross income submitted to Medicare by the IRS. When the IRS has the wrong information, that data is corrected first. If the data used by Medicare was incorrect or your income has reduced, you will need to submit documentation to the agency. In either case, it is helpful to have guidance from a local agent to guide you through the process. Just like any government agency, Medicare can make it confusing to resolve it on your own.

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