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.
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 2021 Medicare Part A premium is calculated as follows:
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 2021 Medicare Part B premium may be calculated using the income you reported on your 2019 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 2021 Medicare Part B premiums are calculated.
2019 Individual tax return | 2019 Joint tax return | 2019 Married and separate tax return | 2021 Part B monthly premium |
---|---|---|---|
$88,000 or less |
$176,000 or less |
$88,000 or less |
$148.50 |
More than $88,000 and up to $111,000 |
More than $176,000 and up to $222,000 |
N/A |
$207.90 |
More than $111,000 up to $138,000 |
More than $222,000 up to $276,000 |
N/A |
$297.00 |
More than $138,000 up to $165,000 |
More than $276,000 up to $330,000 |
N/A |
$386.10 |
More than $165,000 up to $500,000 |
More than $330,000 up to $750,000 |
More than $88,000 up to $412,000 |
$475.20 |
More than or equal to $500,000 |
More than or equal to $750,000 |
More than or equal to $412,000 |
$504.90 |
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.
Medicare Part C plans (Medicare Advantage) are sold by private insurance companies. Therefore, premiums will differ according to provider, plan and location.
Some Medicare Advantage plans offer $0 monthly premiums and $0 deductibles, and all Medicare Advantage plans must include an annual out-of-pocket cost limit. $0 premium plans may not be available in all locations.
Find $0 premium Medicare Advantage plans in your area
Compare PlansOr call TTY Users: 711 to speak with a licensed insurance agent. We accept calls 24/7!
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 2021.
2019 Individual tax return | 2019 Joint tax return | 2019 Married and separate tax return | 2021 Part D monthly premium |
---|---|---|---|
$88,000 or less |
$176,000 or less |
$88,000 or less |
Your plan premium |
More than $88,000 and up to $111,000 |
More than $176,000 and up to $222,000 |
N/A |
$12.30 + your plan premium |
More than $111,000 up to $138,000 |
More than $222,000 up to $276,000 |
N/A |
$31.80 + your plan premium |
More than $138,000 up to $165,000 |
More than $276,000 up to $330,000 |
N/A |
$51.20 + your plan premium |
More than $165,000 up to $500,000 |
More than $330,000 up to $750,000 |
More than $88,000 up to $412,000 |
$70.70 + your plan premium |
More than or equal to $500,000 |
More than or equal to $750,000 |
More than or equal to $412,000 |
$77.10 + your plan premium |
If you are subject to a Part D IRMAA, you may be able to save money by enrolling in a Medicare Advantage plan that includes prescription drug coverage.
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 D plans can also come with a late enrollment penalty. Learn more about how Part D late enrollment penalties are calculated.
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 on costs such as dental care, prescription drugs and other costs.
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
Compare PlansOr call TTY Users: 711 to speak with a licensed insurance agent. We accept calls 24/7!
Compare your Medigap plan options by visiting MedicareSupplement.com
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