Although Original Medicare benefits are the same for every beneficiary, your premium costs can differ. The federal government provides Medicare Parts A and B. Private insurance companies offer the other plans, such as Medigap, Advantage, and Part D plans. Each part and plan have a premium. Some premiums are affected by income, but not all. Let’s talk about how much Medicare costs and how your income will affect your Medicare.
How Your Income Affects Original Medicare Parts A and B
Medicare Part A is your inpatient hospital coverage. Your premium is based on your work history in the U.S. If you worked at least 40 quarters in the U.S., you would qualify for premium-free Part A. However, if you worked between 30-39 quarters, you’ll pay $274 per month, and if you worked less than 30, you’d pay $499 per month. It’s also important to note that you can qualify for premium-free Part A through your spouse’s work history.
Part A’s premium has nothing to do with your income. Instead, it is based on your work history.
Medicare Part B and IRMAA
Part B is a different story. Medicare Part B is your outpatient medical coverage. Every beneficiary must pay the Part B premium while enrolled in Medicare Part B unless they qualify for Medicaid. The standard Part B premium in 2022 is $170.10, and generally, this comes out of your Social Security check each month when you receive Social Security benefits.
However, your Part B premium is based on your income. Social Security will look at your modified adjusted gross income (MAGI) from two years before determining what you will pay in the current year.
For example, in 2022, they will look at your MAGI on your tax return from 2020. If you made more than $91k and file individually or more than $182k and file jointly, you’ll pay more than the standard premium for Medicare Part B. In 2022, you could pay as much as $578.30 per month for Part B, depending on your prior income. It is called an Income Related Monthly Adjustment Amount (IRMAA) when you pay more. IRMAA is not permanent since Social Security reevaluates your income each year.
If your income has changed in the past two years, you can appeal IRMAA. You would submit the SSA-44 form to appeal as long as you qualify for one of the life-changing events. Social Security will evaluate your documents and determine if they will approve or deny your appeal. If they approve it, then your monthly premium will decrease.
Medicare Part D and IRMAA
Similar to Part B, Part D can be affected by income. The monthly premium is based on the plan you choose. But, if you are in a higher income bracket for Part B, you will also pay an additional IRMAA for Part D. The amount you pay will be in addition to your plan’s premium. For example, if you are in the highest income bracket for Part B, paying the $578.30, you will pay $77.90 in addition to your Part D plan’s premium.
Are Medicare Advantage Plans Affected by Income?
Most Medicare Advantage plans have $0 monthly premiums. You must continue paying your Part B premium and the IRMAA surcharge if you are subject to it. Additionally, if your Advantage plan includes prescription drug coverage, you would pay the Part D IRMAA surcharge.
Medigap Plan Premiums
Medigap plans are not affected by your income. Each carrier sets its premiums for the Medigap plans they offer. Medigap premiums are based on zip code, age, gender, and tobacco use. Therefore, they are different for every enrollee. Your income is not factored in when you look at premium rates for Medigap plans.
Some Medicare premiums are affected by income. If you are subject to IRMAA due to having a high income from two years prior, you will pay more for Parts B and D. However, don’t forget that you can appeal that amount if you qualify for a life-changing event such as retirement.