Why Am I Paying More for My Medicare?

Medicare Premium

Amazed.  Dazed.  Incredulous.  Angry.  Frustrated.  These are words describing people on Medicare who get a nice, neat letter from the Social Security Administration People announcing their Medicare premiums are going to be more than they were anticipating.  A lot more.  Folks earning above $85,000 and married couples earning more than $170,000 in retirement are required to pay higher premiums for Medicare Part B and Part D, most often significantly higher.

As a reminder, Medicare Part B covers doctor visits, outpatient services and other care, Medicare part D covers prescription drugs. Your monthly Medicare Part B premium will be higher if your income is above a certain amount. You’ll pay more for Part B if the income you reported on your IRS tax return two years ago was above $85,000 per year ($170,000 for couples). The income that counts is the adjusted gross income you reported plus other forms of tax-exempt income.

Will I be Affected?

The qualifying income amounts are shockingly low.  If an individual makes $7,084 per month in retirement, their Medicare Part B premiums are a whopping 40% higher every month plus an additional $12.70 every month in Part D premium.  Add those up, and folks in this category actually pay 50% more for their Medicare coverage every single month.

“But I’ve been paying into Medicare my entire working career.  I went to college/graduate school/took a risk and started my own company and succeeded.  I’m proud to have made a good amount of money, but have also lived below my means, saved a high percentage of my pre and post-tax income to be able to retire on an amount I can live comfortably on for the rest of my life.  I’ve paid my Medicare taxes, I’ve been responsible and now I have to pay more?!?!

Yep.  I’ve heard hundreds of versions of the paragraph above.  It’s a shock to most people in this situation, and usually the reaction once the Social Security Administration letter announcing they’re now going to charge you more for being successful and responsible.   That’s essentially what this is… you can pay more than your neighbor or fellow retiree, therefore you will.  You’re subsidizing those who cannot afford to pay higher Medicare premiums.

As you may already be painfully aware, we’re not just talking about multi-millionaires here.  The Social Security Administration reports less than 5 percent of Medicare beneficiaries pay higher premiums, but small percentages can be deceiving.  That means almost 3 million people across the country have higher premiums than their neighbors, and the differences are significant.

Don’t worry, they’ll just take the extra premiums out of your Social Security check.  It’s really convenient.  (Apply dripping sarcasm)

The federal government looks at the modified adjusted gross income in the latest returns filed with the Internal Revenue Service (typically two years back) to determine if you must pay an income-related premium.

Adjusted Gross Income2016 Part B Monthly Premium Amount2016 Part D Monthly Premium Amount
Individuals with adjusted gross income of $85,000 or less
OR married couples with a $170,000 or less
Standard
premium:
$121.80
Your plan
premium
Individuals with adjusted income
above $214,000
OR married couples with adjusted income above $428,000
Standard
premium
+ $268.00
Your plan
premium
+ $72.90
Individuals with adjusted income above $160,000 up to $214,000
OR married couples with adjusted income
above $320,000 up to $428,000
Standard
premium
+ $194.90
Your plan
premium
+ $52.80
Individuals with adjusted income above $107,000 up to $160,000
OR Married couples with adjusted income
above $214,000 up to $320,000
Standard
premium
+ $121.80
Your plan
premium
+ $32.80
Individuals with adjusted income above $85,000 up to $107,000
OR married couples above $170,000 up to $214,000
Standard
premium
+ $48.70
Your plan
premium
+ $12.70

There’s even more good news (more sarcasm).  If you don’t fall into a higher-income Medicare bracket, you might sometime soon because the Affordable Care Act froze the income thresholds through 2019, rather than allowing the thresholds to rise with inflation.  This means as inflation marches on, the number of people considered “high income” will increase.

The Takeaway

If you make more, you’re going to be paying more. Much more.  If you disagree with the way the Social Security Administration has processed your tax information, file an appeal.  As you can imagine, in true bureaucratic fashion, there’s a form to fill out.  You may request an appeal in writing by completing a Request for Reconsideration (Form SSA-561-U2), or you may contact your local Social Security office to
file your appeal. You can find the appeal form online
at www.socialsecurity.gov/online or request a copy
through their toll-free number at 1-800-772-1213 (TTY
1-800-325-0778)

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