Medicare Part B costs: key takeaways
- Standard Part B premiums are increasing to $144.60/month in 2020.
- The Social Security COLA is large enough to cover the full cost of the Part B increase for most enrollees.
- The high-income threshold (where premiums start to be higher based on income) will increase to $87,000 for a single person.
- The Part B deductible will increase to $198 in 2020.
Q: How much does Medicare Part B cost the insured?
A: In 2019, most people earning no more than $85,000 ($170,000 for a married couple) pay $135.50/month for Part B. And in most cases, Part B premiums are just deducted from beneficiaries’ Social Security checks.
The standard premium for Part B is increasing to $144.60/month in 2020. And the high-income threshold — which determines who has to pay an increased premium based on income — is being indexed for inflation starting in 2020. In previous years, it’s consistently been $85,000, but it will be $87,000 in 2020 (details for the indexing are discussed below).
Part B premium can be limited by Social Security COLA, but that’s not expected to happen in 2020
In 2019, most enrollees are paying the full $135.50 premium. That’s in contrast with 2017 and 2018, when most enrollees paid a premium that was lower than the standard premium. The standard premium in 2018 was actually $134/month, but the cost of living adjustment for Social Security wasn’t quite large enough to cover all of the increase from 2017’s premium for most enrollees. That’s why most people paid about $130/month.
The standard Part B premium is increasing by about $9/month in 2020. But the 1.6 percent Social Security COLA for 2020 will increase the average beneficiary’s Social Security benefit by $24/month. Since the COLA for most beneficiaries will exceed the premium increase for Part B, most Part B enrollees will be paying the standard premium in 2020. [If the COLA wasn’t sufficient to cover the Part B increase, the average enrollee would be charged a lower-than-standard premium for Part B in order to avoid a year-over-year decrease in their net Social Security check after the Part B premium is subtracted each month.]
Higher premiums for enrollees with high-income (and the threshold for that is higher in 2020)
Since 2007, people who earn more than $85,000 ($170,000 for a couple) have paid higher Part B premiums (and higher Part D premiums) based on their income. These beneficiaries pay Part B premiums that range from $189.60/month to $460.50/month in 2019.
For the first time, the threshold for what counts as “high income” is being adjusted for inflation as of 2020, increasing it to $87,000 for a single individual and $174,000 for a couple. Harry Sit, of The Finance Buff, explains how the inflation indexing works here.
Indexing the high-income threshold: The math
The indexing is based on the percentage by which the average of the Consumer Price Index for Urban consumers (CPI-U) for the 12-month period ending in the most recent August exceeds the average of the 12-month period that preceded that. So for 2020, we’ll look at how the average CPI-U from September 2018-August 2019 exceeded the average CPI-I from September 2017-August 2018.
On this page, you can pull up the data for CPI-U (select the first box under “Price Indexes”) and manually calculate how the average CPI-U has changed. You’ll add up all the numbers from September 2017 through August 2018 (don’t include the “Half1” and “Half2” numbers), and divide by 12 to get the average (in this case, 294.28). Then you’ll do the same thing for September 2018 through August 2019 (you’ll get an average of 254.016). The difference between those two numbers is 4.736, which is 1.9 percent higher than 294.28. So as Harry explains here, we increase 85,000 by 1.9 percent — which results in 86,615 — and then round to the nearest $1,000. That gives us an income threshold of $87,000, which will be the lower bound of “high-income” as of 2020.
For people with income above $87,000 ($174,000 for a couple) in 2020, Part B premiums for 2020 range from $202.40/month to $491.60/month.
2020 premium surcharge is based on 2018 tax return; you can appeal it if your income has changed
The government determines whether you have to pay an income-related premium surcharge based on your income tax return from two years ago, since that will be the most recent tax return they have on file at the start of the plan year. [2018 tax returns were filed in 2019, so those will be the most current returns available when income-related premium adjustments are made for 2020.]
But if a life-change event has subsequently reduced your income, there’s an appeals process you can use. In the appeal, you can request that the income-related premium adjustment be changed or eliminated without having to wait for it to reflect on a future tax return.
Part B deductible will be higher in 2020
Medicare B also has a deductible, which will be $198 in 2020, up from $185 in 2019. After the deductible is met, the enrollee is generally responsible for 20 percent of the Medicare-approved cost for Part B services. But supplemental coverage (from an employer-sponsored plan, Medigap, or Medicaid) often covers these coinsurance charges.
For people who become eligible for Medicare before the start of 2020, there are Medigap plans available (Plans C and F) that cover the Part B deductible, in addition to coinsurance charges. But those plans will not be available for newly-eligible Medicare beneficiaries after the end of 2019.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.