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What does Original Medicare cost?
Q: What does Original Medicare cost the beneficiary? A: Medicare Part A (hospital insurance) is free for most seniors. If you or your spouse worked at least 10 years in a job where you paid Medicare taxes, you're eligible for free Medicare Part A when you turn 65. But Medicare Part B has a premium; most beneficiaries pay $170.10/month for Part B in 2022.
What does Medicare Advantage cost?
Those who enroll in Medicare Part C (Medicare Advantage) pay the $164.90/month that most enrollees will pay for Part B in 2023, in addition to the premium that’s charged for their Medicare Advantage plan.
zero-premium plan
A zero-premium plan is a Medicare Advantage plan that has no monthly premium. In other words, you don't pay anything to the insurance company each month for your coverage.
Yes, your income can affect your premiums for Medicare Part B and Part D. People with high incomes (in 2023, that’s defined as over $97,000 for a single individual) pay higher premiums for Medicare Part B and Medicare Part D. Most people do not pay any premium for Medicare Part A, but even for those who do, there is no income-related surcharge, so Part A premiums are not affected by income.
Medicare beneficiaries who earn over $97,000 a year – and who are enrolled in Medicare Part B and/or Medicare Part D – pay the income-related monthly adjusted amount (IRMAA) – a surcharge added to the Part B and Part D premiums. The threshold for IRMAA surcharges was quite a bit lower in 2022 (it started at $91,000), but it grew for 2023, due to inflation.
Since 2007, high-income Medicare enrollees have been required to pay the IRMAA surcharge for Part B coverage. An IRMAA surcharge for Part D premiums took effect in 2011.
For Medicare beneficiaries who receive Social Security retirement benefits, the premium for Part B is deducted from their Social Security check. This is true regardless of whether the person is subject to the IRMAA surcharge or not. But the “hold harmless” provision that prevents Social Security checks from decreasing from one year to the next does not apply to people who pay the IRMAA surcharge.
(The “hold harmless” provision has not been applicable in recent years, due to fairly large cost-of-living adjustments (COLA) for Social Security benefits. The 2023 COLA was historically large, and Part B premiums declined for 2023, including the Part B premiums that are paid by people subject to the IRMAA surcharge. So net Social Security checks are generally larger across the board for 2023 than they were in 2022.)
When people talk about “income limits”with regard to Medicare, they could be referring to the threshold where IRMAA surcharges start to apply for those on the higher end of the income spectrum. (Above a certain income limit, you’ll be subject to IRMAA, but below it, you won’t.)
But they could also be referring to the income thresholds that apply to Medicare Savings Programs and dual eligibility for Medicare and full Medicaid, for those on the lower end of the income spectrum. (Note that on the lower end, eligibility rules also include asset limits, in addition to the income limits.)
So you’d need to know the context in order to determine which program is being discussed: Is it an upper income limit, below which a person has access to certain financial assistance with their coverage? Or are they referring to the highest income a person can have and not be subject to paying additional premiums for their Medicare coverage?
IRMAA is determined by income from your income tax returns two years prior. This means that for your 2023 Medicare premiums, your 2021 income tax return was used. This amount is recalculated annually. The IRMAA surcharge is added to your 2023 premiums if your 2021 income was over $97,000 (or $194,000 if you’re married). You will receive notice from the Social Security Administration to inform you if you are being assessed IRMAA. But as discussed below, there’s an appeals process if your financial situation has changed.
The income used to determine IRMAA is a form of Modified Adjusted Gross Income (MAGI), but it’s specific to Medicare. The Modified Adjusted Gross Income is different from your Adjusted Gross Income, because some people have additional income sources that have to be added to their AGI in order to determine their IRMAA-specific MAGI.
It’s important to understand that MAGI for calculating IRMAA isn’t the same as the normal MAGI that you might be accustomed to for non-healthcare purposes, nor is it exactly the same as MAGI for calculating premium tax credits and Medicaid/CHIP eligibility under the Affordable Care Act. Table 1 in this Congressional Research Service brief is useful in seeing how MAGI is determined for IRMAA calculations.
There have been a few recent changes that affect high-income Medicare beneficiaries:
As noted above, the IRMAA brackets increased again for 2023, although Part B premiums decreased.
Here are the Part B IRMAA premiums for 2023. (For each income range, based on 2021 tax returns, the applicable premium is shown on the right. For incomes that are subject to IRMAA, the premium shown includes the IRMAA surcharge.):
| Part B IRMAA premiums (2023) | ||
|---|---|---|
| Individual | Joint | Monthly Premium |
| $97,000 or less | $194,000 or less | $164.90 (no IRMAA) |
| > $97,000 – $123,000 | > $194,000 – $246,000 | $230.80 |
| > $123,000 – $153,000 | > $246,000 -$306,000 | $329.70 |
| > $153,000 – $183,000 | > $306,000 – $366,000 | $428.60 |
| > $183,000 – $500,000 | > $366,000 – $750,000 | $527.50 |
| Greater than $500,000 | Greater than $750,000 | $560.50 |
Source: CMS
(Note that as of 2023, people who have had kidney transplants have lifetime access to Medicare Part B coverage of immunosuppressive drugs; prior to 2023, this only lasted for three years post-transplant. There’s a separate set of IRMAA premiums for high-income beneficiaries who are enrolled in immunosuppressive drug coverage only; the high-income premiums for these enrollees range from about $162/month to about $486/month.)
For Part D, the IRMAA amounts are added to the regular premium for the enrollee’s plan. Part D plans have varying prices, so the full amount, after the IRMAA surcharge, will depend on the plan.
Note that if you are a Medicare Advantage policy member and that plan includes prescription drug benefits (most Advantage plans do have built-in Part D drug benefits), then both Part B and Part D IRMAAs are added to the plan premium (Medicare Advantage enrollees pay the Part B premium in addition to any premium charged by their Advantage plan).
The following income levels (based on 2021 tax returns) trigger the associated IRMAA surcharges in 2023:
| Part D IRMAA surcharges (2023) | ||
|---|---|---|
| Individual | Joint | Monthly Premium |
| $97,000 or less | $194,000 or less | your premium (no IRMAA) |
| > $97,000 – $123,000 | > $194,000 – $246,000 | $12.20 + your premium |
| > $123,000 – $153,000 | > $246,000 -$306,000 | $31.50 + your premium |
| > $153,000 – $183,000 | > $306,000 – $366,000 | $50.70 + your premium |
| > $183,000 – $500,000 | > $366,000 – $750,000 | $70.00 + your premium |
| Greater than $500,000 | Greater than $750,000 | $76.40 + your premium |
Source: CMS
You can appeal the IRMAA determination – filing for a redetermination – if you believe that your calculation is erroneous. In addition, if you have had a life-changing event such as a loss of income or divorce, then you can refile or you can file for a redetermination using Form SSA-44.
If you do not agree with a redetermination, there is a formalized appeal process – the third level of appeal – technically called the Decision by Office of Medicare Hearings and Appeals (OMHA). (Note that this a different procedure from the appeal or grievance procedure when you receive denials of service from Medicare Parts A, B, or D.)
The higher premiums for Part B took effect in 2007, under the Medicare Modernization Act. And for Part D, they took effect in 2011, under the Affordable Care Act. Medicare premiums cover only a small fraction of the cost of providing coverage, and the IRMAA rules were created to ensure that beneficiaries with the means to do so are required to pay a larger share of the cost of their coverage.
Beneficiaries’ premiums only cover about 26% of the cost of Part B, and about 17% of the cost of Part D (and that’s with IRMAA surcharges in effect for beneficiaries with high incomes). Most of the cost of Part B and Part D is covered by general revenues, and the IRMAA surcharges help to spread that cost to beneficiaries who can afford to pay a larger share of the cost of their coverage.
Further complications have been introduced as a result of the SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019), which was enacted in late 2019. The SECURE Act has a number of different features – such as allowing IRA contributions after age 70½ if you’re still earning an income – and it extends the minimum age that one must receive RMDs (Required Minimum Distributions) from 70½ to 72.
The reason this may be important is that it is possible that delaying receiving RMDs may also reduce IRMAA if your Modified Adjusted Gross Income is close to the limits stated in the tables above.
When people withdraw from qualified funds such as a 401(k), IRA, or 403(b), these funds are taxable once they are transferred to their individual checking, savings, or brokerage account (assuming the retirement account wasn’t a Roth). The amount distributed is added to your taxable income, so exercise caution when you’re receiving distributions from qualified funds. This additional income will increase your Modified Adjusted Gross Income, and may subject you to higher Medicare Part B and Medicare Part D premiums.
Further, non-qualified funds must also be tracked because of the way that mutual funds’ capital gains and dividend distributions are made. At the end of every year, many mutual funds distribute capital gains or dividends to those with mutual fund holdings. As a result, people can unknowingly earn more income as a result of investments, and the result can be higher Medicare premiums.
The inverse is also true and now may be more applicable to you: realized capital losses can reduce your MAGI, and could potentially reduce your Medicare Part B and Part D premiums.
We recommend that you speak with a tax planner or financial advisor if you have questions about your specific circumstances, including investment income or your plans to withdraw money from your retirement accounts.
If your income exceeded $97,000 in 2021, your 2023 Medicare Part D and Part B premiums depend on your income. And as you can see in the tables above, the additional premiums can be substantial.
Understanding how this works – including what counts as income as far as Medicare is concerned – is a key part of your financial planning. And since the government will base your premiums on your income from two years ago, you’ll also want to have a good understanding of how to appeal an IRMAA determination, in case you experience a life change that reduces your income.
Jae W. Oh is a nationally recognized Medicare expert, frequently quoted in the national press, including on USA Today, Dow Jones, CNBC, and Nasdaq.com, as well as on radio talk shows nationwide. His book, Maximize Your Medicare, is available in print and ebook formats. Jae has appeared as a speaker in front of libraries, companies, as part of college-sponsored programs. The Managing Principal of GH2 Benefits, LLC, Jae is a Certified Financial Planner, Chartered Life Underwriter, a Chartered Financial Consultant, and a licensed insurance producer in multiple states.
Q: What does Original Medicare cost the beneficiary? A: Medicare Part A (hospital insurance) is free for most seniors. If you or your spouse worked at least 10 years in a job where you paid Medicare taxes, you're eligible for free Medicare Part A when you turn 65. But Medicare Part B has a premium; most beneficiaries pay $170.10/month for Part B in 2022.
Those who enroll in Medicare Part C (Medicare Advantage) pay the $164.90/month that most enrollees will pay for Part B in 2023, in addition to the premium that’s charged for their Medicare Advantage plan.
A zero-premium plan is a Medicare Advantage plan that has no monthly premium. In other words, you don't pay anything to the insurance company each month for your coverage.
Q: What does Original Medicare cost the beneficiary? A: Medicare Part A (hospital insurance) is free for most seniors. If you or your spouse worked at least 10 years in a job where you paid Medicare taxes, you're eligible for free Medicare Part A when you turn 65. But Medicare Part B has a premium; most beneficiaries pay $170.10/month for Part B in 2022.
Those who enroll in Medicare Part C (Medicare Advantage) pay the $164.90/month that most enrollees will pay for Part B in 2023, in addition to the premium that’s charged for their Medicare Advantage plan.
A zero-premium plan is a Medicare Advantage plan that has no monthly premium. In other words, you don't pay anything to the insurance company each month for your coverage.
