How Does Medicare Determine My Premium?

March 29, 2023

Medicare Part A

Most people don’t have to pay a premium for Medicare Part A. If you’ve paid Medicare taxes, generally, at least 10 years, or you enrolled in Medicare before 65, you won’t pay a premium for Medicare Part A. Buying Medicare Part A is an option if you don’t qualify for premium-free Medicare Part A. Your Medicare Part A premium will be determined by how long you or your spouse worked and paid Medicare taxes, you will pay either $278 or $506 as your monthly premium.

Medicare Part B

Your Medicare Part B premium is determined by your modified adjusted gross income (MAGI). Your MAGI is calculated using your adjusted gross income and several other income sources. The majority of people won’t have to add additional sources of income, so their modified adjusted gross income is the same as their adjustable gross income. This is what is used to determine your monthly premium. Unless you are a high-income earner, you will pay the 2023 standard Medicare Part B premium – $164.50.

The chart below shows how the Medicare Part B monthly premium increases with your income.

If you fall into one of these higher income tiers, the Social Security Administration will send a letter explaining their justification for this higher premium.

If you have a special life event changes your income and puts you in a lower payment tier when it comes to your Medicare Part B premium. Contact the Social Security Administration to explain how this change affects your income.

Medicare Part D Prescription Drug Plans

Medicare Part D premiums are similar to Medicare Part B premiums in that the monthly premium can increase for those with higher incomes. The extra amount you pay is called an Income Related Monthly Adjustment Amount (IRMAA). Like Part B, you can let the Social Security Administration know if you’ve had a life-changing event that will change the income level used to determine your Medicare Part D.

Below, you can see the IRMAA you will pay in addition to your plan premium depending on your income:

If your filing status and yearly income in 2021 was
File individual tax returnFile joint tax returnFile married & separate tax returnYou pay each month (in 2023)
$97,000 or less$194,000 or less$97,000 or lessyour plan premium
above $97,000 up to $123,000above $194,000 up to $246,000not applicable$12.20 + your plan premium
above $123,000 up to $153,000above $246,000 up to $306,000not applicable$31.50 + your plan premium
above $153,000 up to $183,000above $306,000 up to $366,000not applicable$50.70 + your plan premium
above $183,000 and less than $500,000above $366,000 and less than $750,000above $97,000 and less than $403,000$70.00 + your plan premium
$500,000 or above$750,000 or above$403,000 or above$76.40 + your plan premium

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