Medicare Costs and Premiums
The Medicare costs for Part B and Part D, as well as supplemental coverage, are something that many people don’t anticipate. It can surprise them when they turn 65 and realize that Medicare is not free.
Medicare Cost for Part A
Medicare Part A for most people is usually free. There is no premium if you have worked. 10+years (40 quarters) in the US. Payroll taxes collected from you during those years qualify you to have Part A at no charge.
If you have to buy Part A, you will pay up to $458/month for it in 2020. A pro-rated premium is available if you worked less than 40 quarters work experience but more than 30 quarters.
Medicare Cost for Part B & D is Based on Income
Part B and Part D premiums are based upon your modified adjusted gross income. Medicare will check your latest IRS tax return and use that to determine what you’ll pay for Parts B & D. The items that contribute to your modified adjusted gross income (MAGI) include any money earned through wages, interest, required minimum dividends from investments, capital gains, Social Security benefits, and tax-deferred pensions. Distributions from Roth IRAs and Roth 401(k)s, life insurance, reverse mortgages and health savings accounts do not count in the MAGI calculation.
Social Security will send you a letter once a year around December or early January to tell you what your costs are for the upcoming year.
Most Americans fall into the standard income bracket – see the chart below. Only about 5% of all Medicare beneficiaries currently pay higher Medicare premiums. However, in 2018, the top three income brackets will be revised downwards. Therefore, retirees will be placed into higher brackets than they are today if they qualify as having a high income. This means that starting in 2018, a larger percentage of Americans will be paying higher Medicare premiums.
Medicare Part B Premium for 2020
Most people new to Medicare on or after January 2017 will pay $144.60 for Part B, or an adjusted amount as listed below if you have a higher income than most people. The Part B premium is paid in the form of a deduction from your social security check. You will be billed quarterly from Medicare if you are not yet receiving Social Security income benefits.
To determine your Medicare costs, review the table below. It shows the amount that you will pay in 2020 for Part B, per this chart copied from the official Medicare website. The standard Part B premium in 2020 will be $144.60 (or more depending on your household income).
You’ll pay the standard premium amount if:
- You enroll in Part B for the first time in 2017 or later
- You don’t get Social Security benefits
- Part B premiums are directly billed to you.
- You have Medicare and Medicaid, and Medicare pays your premiums. (Your state will pay the standard $134 premium.)
- Your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount. If so, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.
If you’re in one of these 5 groups, here’s what you’ll pay:
|If your yearly income in 2018 (for what you pay in 2020) was||You pay each month (in 2019)|
|File individual tax return||File joint tax return||File married & separate tax return|
|$87,000 or less||$174,000 or less||$87,000 or less||$144.60|
|above $87,000 up to $109,000||above $174,000 up to $218,000||Not applicable||$202.40|
|above $109,000 up to $136,000||above $218,000 up to $272,000||Not applicable||$289.20|
|above $136,000 up to $163,000||above $272,000 up to $326,000||Not applicable||$376.00|
|above $163,000 and less than $500,000||above $326,000 and less than $750,000||above $87,000 and less than $413,000||$462.70|
|$500,000 or above||$750,000 and above||$413,000 and above||$491.60|
Part D Premium Chart
To determine your Medicare cost for Part D drug plans, review the table below. It shows the amount that you will pay for Part D in 2020.
|If your filing status and yearly income in 2018 was|
|File individual tax return||File joint tax return||File married & separate tax return||You pay each month (in 2020)|
|$87,000 or less||$174,000 or less||$87,000 or less||your plan premium|
|above $87,000 up to $109,000||above $174,000 up to $218,000||not applicable||$12.20 + your plan premium|
|above $109,000 up to $136,000||above $218,000 up to $272,000||not applicable||$31.50 + your plan premium|
|above $136,000 up to $163,000||above $272,000 up to $326,000||not applicable||$50.70 + your plan premium|
|above $163,000 and less than $500,000||above $326,000 and less than $750,000||above $87,000 and less than $413,000||$70.00 + your plan premium|
|$500,000 or above||$750,000 and above||$413,000 and above||$76.40 + your plan premium|
Your income usually decreases after you retire. If you find yourself in a higher income bracket because your earlier tax returns showed higher income than you now have after retirement, be sure to read our blog post on how to appeal a higher premium.
If this is all a little confusing, don’t fret! At Integrity Senior Solutions, we can help you figure out exactly what your premium will be. Many people find that Medicare and a supplement costs much less than the private insurance they had prior to Medicare. Either way, you’ll want to get some estimates of your Medicare costs you before you retire. This way you can plan ahead to have enough savings for the future.
We can help you determine your potential Medicare costs right over the phone. Call 1-888-228-6119 to speak to a licensed professional agent who can answer your questions. You can also send your inquiry using the form to the right.
Be sure to enroll in our FREE 5-day email Medicare Made Easy mini-course. We have put together this quick course spread over 5 days to help those who are new to Medicare. There is also a worksheet to help you keep track of the items you need to address when turning 65. To register that email mini-course, click on this link.