1 TZ Insurance Solutions analysis of data provided by the Centers for Medicare & Medicaid Services (CMS), including the 2024 MA Landscape Source Files as well as carrier-provided plan data provided by Sun Fire Inc.
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How Are Your Medicare Costs Calculated?
- January 12, 2024
- Reviewed by John Krahnert
Some Medicare premiums are calculated based on your income, such as Medicare Part B and Medicare prescription drug coverage premiums. Learn about other Medicare costs and how they are calculated.
If you are a high-income earner, you could potentially pay higher premiums for Medicare Part B (medical insurance) and Medicare prescription drug coverage.
But how are these Medicare costs calculated?
Below is a detailed breakdown of how the costs of Medicare are calculated, including premiums and late enrollment penalties.
What is the Medicare Part A premium for 2024?
Most people do not have to pay a premium for Medicare Part A (hospital insurance) because they worked and paid Medicare taxes for at least 40 quarters (10 years).
If you or your spouse paid the required amount of Medicare taxes, you should qualify for premium-free Part A coverage.
If you paid Medicare taxes for fewer than 40 quarters, your 2024 Medicare Part A premium is calculated as follows:
- If you paid Medicare taxes for between 30 and 39 quarters, you will pay $278 per month for Part A in 2024.
- If you paid Medicare taxes for fewer than 30 quarters, you will pay $505 per month for Part A in 2024.
What does Medicare Part B cost in 2024?
Medicare Part B premiums are calculated based on your income. More specifically, they’re based on the modified adjusted gross income (MAGI) reported on your taxes from two years prior.
This means your 2024 Medicare Part B premium may be calculated using the income you reported on your 2022 taxes. If your reported income was higher than a certain amount, you’ll pay a higher premium.
This is known as the Medicare IRMAA, or the income-related monthly adjustment amount.
The table below illustrates how 2024 Medicare Part B premiums are calculated.
| 2022 Individual tax return | 2022 Joint tax return | 2022 Married and separate tax return | 2024 Part B monthly premium |
|---|---|---|---|
|
$103,000 or less |
$206,000 or less |
$103,000 or less |
$174.70 |
|
More than $103,000 and up to $129,000 |
More than $206,000 and up to $258,000 |
N/A |
$244.60 |
|
More than $129,000 up to $161,000 |
More than $258,000 up to $322,000 |
N/A |
$349.40 |
|
More than $161,000 up to $193,000 |
More than $322,000 up to $386,000 |
N/A |
$454.20 |
|
More than $193,000 up to $500,000 |
More than $386,000 up to $750,000 |
More than $103,000 up to $397,000 |
$559.00 |
|
More than or equal to $500,000 |
More than or equal to $750,000 |
More than or equal to $397,000 |
$594.00 |
Because IRMAA is based on your reported income from two years prior, the amount you have to pay for a Medicare IRMAA will be calculated again each year.
How much does Medicare Part C cost?
Medicare Part C plans (Medicare Advantage) are sold by private insurance companies. Therefore, premiums will differ according to provider, plan and location.
All Medicare Advantage plans must include an annual out-of-pocket cost limit. In 2024, the average Medicare Advantage premium is $13.24 per month.1
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How are Medicare Part D premiums calculated?
Medicare Part D prescription drug plans are also sold by private insurance companies, so premiums will vary from one plan to the next.
As with Medicare Part B premiums, Part D plans also calculate premiums based on your income from two years prior and may charge an IRMAA.
The table below illustrates how much you can expect to pay for a Part D plan in 2024.
| 2022 Individual tax return | 2022 Joint tax return | 2022 Married and separate tax return | 2024 Part D monthly premium |
|---|---|---|---|
|
$103,000 or less |
$206,000 or less |
$103,000 or less |
Your plan premium |
|
More than $103,000 and up to $129,000 |
More than $206,000 and up to $258,000 |
N/A |
$12.90 + your plan premium |
|
More than $129,000 up to $161,000 |
More than $258,000 up to $322,000 |
N/A |
$33.30 + your plan premium |
|
More than $161,000 up to $193,000 |
More than $322,000 up to $386,000 |
N/A |
$53.80 + your plan premium |
|
More than $193,000 up to $500,000 |
More than $386,000 up to $750,000 |
More than $103,000 up to $397,000 |
$74.20 + your plan premium |
|
More than or equal to $500,000 |
More than or equal to $750,000 |
More than or equal to $397,000 |
$81.00 + your plan premium |
If you are subject to a Part D IRMAA, you may be able to save money by enrolling in an MA-PD plan, which is a Medicare Advantage plan that includes a Part D plan.
How are Medicare late enrollment penalties calculated?
If you do not sign up for certain parts of Medicare when you first become eligible but choose to add one of these coverage options at a later date, you may have to pay a late enrollment penalty that will be added to your monthly premium.
- Medicare Part A
Most people are eligible for premium-free Part A coverage. If you aren’t eligible for premium-free Part A don’t enroll in Part A when you’re first eligible but decide to enroll later, your Part A late enrollment penalty will be calculated based on how long you went without Part A coverage.
The Part A late enrollment penalty is 10 percent of the Part A premium, which you must pay for twice the number of years for which you were eligible for Part A but didn’t sign up. - Medicare Part B
Medicare Part B is optional coverage, but if you don’t sign up when you’re first eligible, your late enrollment penalty will be calculated based on how long you went without this Medicare coverage.
The Part B late enrollment penalty is as high as 10 percent of the Part B premium multiplied by each 12-month period that you weren’t enrolled but were eligible.
For example, if you were eligible for Part B for three years but were not enrolled, your late enrollment penalty could be 30 percent of the Part B premium once you finally do enroll in Part B. You must pay the Part B late enrollment penalty for as long as you have Part B coverage.
Medicare Part D plans can also come with a late enrollment penalty. Learn more about how Part D late enrollment penalties are calculated.
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Medicare Advantage plan could help you save on out-of-pocket costs
Do you have more questions about how your Medicare costs are calculated? Are you looking for ways to lower some of your out-of-pocket health care costs?
A Medicare Advantage plan could potentially help you save money.
A licensed insurance agent can help you compare the Medicare Advantage plans that are available where you live. You can compare benefits, coverage and the costs of each plan and then choose the right fit for your needs.
Compare Medicare plan costs in your area
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About the author
Christian Worstell is a senior Medicare and health insurance writer with MedicareAdvantage.com. He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.
Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.
Christian has written hundreds of articles for MedicareAvantage.com that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.
Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.
A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism.
If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at Mike@tzhealthmedia.com.
