2 min read

Understanding Medicare Premiums: What You Need to Know for 2023 & 2024

Understanding Medicare Premiums: What You Need to Know for 2023 & 2024

Understanding the cost structure of Medicare can be a complex undertaking. Given the adjustments made to Medicare Part B and prescription drug coverage premiums based on income, it's important for beneficiaries to understand how these changes may impact them financially. This blog post aims to offer a detailed explanation of how Medicare premiums are calculated, the adjustments made for higher-income beneficiaries, and the available options if your income changes.

 

How Medicare Premiums are Adjusted: A Closer Look

Medicare premiums are designed to be affordable for the average American. For most beneficiaries, the government pays a substantial portion—approximately 75%—of the Part B premium, which covers services like doctors' visits, outpatient care, and some home health services1. The remaining 25% is the beneficiary's responsibility.

Higher Income and Its Impact on Premiums

If you fall into the "higher-income" category, you'll be responsible for a larger share of your Part B and Medicare prescription drug premiums1. This larger share is referred to as the "income-related monthly adjustment amount."

For instance, if you're a higher-income beneficiary, your monthly Part B premiums could range from 35% to 85% of the total cost, depending on your reported income to the IRS1. Let's say you're an individual with an annual income of $125,000, which falls into the 50% cost bracket. In this case, you would be responsible for half of the Part B costs, which would be higher than the standard 25% most beneficiaries pay.

 

Defining "Higher Income"

Your status as a higher-income beneficiary is assessed through your Modified Adjusted Gross Income (MAGI), using the most recent federal tax return the IRS provides1. Here's a brief breakdown:

  • Married and filing jointly with a MAGI above $194,000: You'll pay higher premiums.
  • Using a different filing status with a MAGI above $97,000: You'll also pay higher premiums.

 

What if Your Income Has Changed?

Life is unpredictable, and financial situations can change rapidly. Medicare recognizes this and allows for adjustments. If you've experienced a significant life event—like marriage, divorce, loss of income-producing property, or retirement—you may qualify for a reduction in your income-related monthly adjustment amount1.

For example, if you were recently divorced and your income dropped from $110,000 to $80,000, you could request an adjustment to your Medicare premiums to reflect your new financial reality.

 

Monthly Premiums for 2023: What to Expect

The standard Medicare Part B premium for 2023 is $164.901. However, if you are a higher-income individual or a couple, you could pay an additional amount on top of this. This added amount ranges from $65.90 to $395.60 based on your MAGI1.

Example Chart for Individuals

  • MAGI up to $97,000: Standard premium of $164.90
  • MAGI $97,000 - $123,000: Standard premium + $65.90
  • MAGI above $500,000: Standard premium + $395.60

 

Your Right to Appeal

If you disagree with the income-related monthly adjustment amounts, you have a right to appeal1. You can file this appeal online or through the Social Security office. For issues specific to prescription drug coverage, you must contact the Centers for Medicare & Medicaid Services (CMS)1.

 

Summary and Additional Resources

Understanding Medicare premiums is vital for making informed healthcare decisions and budget planning. By taking the time to comprehend these costs and how your income can affect them, you'll be in a better position to navigate your healthcare needs effectively.

Comprehensive Medicare Guide

 

Need more information?

For more comprehensive information, you can read our Comprehensive Guide to Medicare right here, visit the Social Security Administration's Medicare Premiums page, or call 1-800-MEDICARE.

Footnotes

  1. Social Security Administration, Medicare Premiums

Contact Us

Veritas Risk Management, Inc. offers proactive risk management services covering a wide variety of topics. Veritas Risk Management, Inc. does not engage in the practice of law, accounting, or tax consulting.  We encourage everyone to consult with his or her own professional advisor for details concerning his or her specific facts, situations, and circumstances.

Ready to meet? Just fill out the below.
Erie's Online Account | Maximize Your Insurance Experience

5 min read

Erie's Online Account | Maximize Your Insurance Experience

Maximize Your Insurance Experience with Erie's Online Account and Our Expertise As a licensed independent insurance agent in Tennessee, Virginia,...

Read More
Unraveling the Costs of a Chiropractor Without Insurance

5 min read

Unraveling the Costs of a Chiropractor Without Insurance

Your Guide to Affordable Chiropractic Care: Unraveling the Costs Without Insurance Are you in need of chiropractic care but worried about the cost?...

Read More