Medicare is divided into three parts: Part A (hospitalization), Part B (medical services) and Part D (prescription benefits). Individuals who have worked 40 quarters during their lifetime will not have to pay a premium for Medicare Part A. The Medicare Part D premium is based on which prescription plan is chosen and can be altered based on the plan selected and the benefits provided.
Enrollment in Medicare Part B is voluntary, but 93% of Medicare recipients who enrolled in Part A also enroll in Part B. However, payment of Medicare Part B premium is required if you want to enroll in coverage in addition to basic Medicare. Medicare Part B is not only required to receive benefits related to doctors, labs, x-rays, dialysis or durable medical equipment, it is also required if a Medicare Supplement policy or Medicare Part D is needed. The Part B premium paid by an individual is based on an individual’s income and unlike Medicare Part A, contributions are not made during an individual’s working career to reduce or eliminate the premium.
Medicare Part B premiums are based on the estimate that would be needed to finance the expenditures related to Part B benefits. Part B costs not covered by premiums are made up by transfers from the general Treasury fund. The vast majority of individuals will pay the standard $104.90 per month for Medicare Part B. However, if the adjusted gross income on your tax return from two years ago exceeds a certain income, level the Part B premium will be adjusted. This adjustment is referred to as means testing, which is a method for determining whether someone qualifies for a program’s benefits. The following table summarizes the amounts you will pay in 2021 under means testing.
2021 Part B Premiums by Income
|Tax Return Individual||Join Tax Return||You Pay 2021|
|<$136,000||<$272,000||$144.60 per person|
|$136,000.01 up to $163,000||$272,000.01 up to $326,000.00||$231.40 per person|
|$163,000.01 up to $499,999.99||$326,000.01 up to $749,999.99||$318.10 per person|
|>$499,999.99||>$749,999.99||$347.00 per person|
If a Medicare beneficiary has experienced an income decrease, the surcharge can be reduced. Examples of events that qualify for a review of your premium amount would include:
- You married, divorced or became widowed;
- You or your spouse stopped working or reduced your work hours;
- You or your spouse no longer own income-producing property due to a disaster or other event beyond your control;
- You or your spouse experienced a scheduled cessation, termination or reorganization of an employer’s pension plan; or
- You or your spouse received a settlement from an employer or former employer related to a closure, bankruptcy or reorganization.
Documentation supporting the loss of income claim would be required. If a federal income tax return was filed for the year in question, a signed copy of the return would also be needed.
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