What Is The Income Threshold before I am faced with the Medicare High-Income Surcharge?
Medicare beneficiaries whose income exceeds certain thresholds must pay more in monthly premiums for Part B doctor coverage and Part D drug coverage. These income adjusted premiums apply to single tax filers and those married filing separately with incomes of more than $85,000 and married couples filing jointly with incomes of more than $170,000. Less than 5% of those enrolled in Medicare have incomes above these thresholds and thus pay these higher rates, which are known as income related monthly adjustment amounts, or IRMAA.
All beneficiaries of Medicare part B pays a yearly premium amount of about $1,260 if their yearly income is $85,000 or less. And an annual premium of $2,520 for couples earning $170,000 or less. Medicare premiums for Part D prescription drugs depend on the plan you chose as a beneficiary. Beneficiaries with higher income pays anywhere from $147 to $852 more a year for prescription coverage in 2015, according to the CMS.
How does having higher income affect me?
If you have higher income, you will pay an additional premium amount for Medicare Part B and Medicare prescription drug coverage. This additional amount is known as the adjustment amount. Here is how it works:
Part B Medicare helps pay for your doctors’ services and outpatient care. It also covers other medical services, such as physical and occupational therapy, and some home health care. For most beneficiaries of Medicare, the government pays a substantial portion which is about 75 percent of the Part B premium. And the beneficiary pays the remaining 25 percent. For those beneficiaries that earn higher income, they will pay a larger percentage of the total cost of Part B based on the income they report to the Internal Revenue Service (IRS). You will pay monthly Part B premiums equal to 35, 50, 65, or 80 percent of the total cost, depending on what you report to the IRS.
Medicare prescription drug coverage helps pay for your prescription drugs. For most beneficiaries, the government pays a major portion of the total costs for this coverage, and the beneficiary pays the rest. The cost for prescription drugs which falls under Medicare part D varies depending on the plan and whether you get extra help with your portion of the Medicare prescription drug coverage costs. If you are a higher income beneficiary with Medicare prescription drug coverage (part D), you will pay monthly premiums plus an additional amount, which is based on what you report to the IRS. Due to the fact that individual plan premiums vary, the law specifies that the amount is determined using a base premium.
How does Social Security determine if I must pay higher premiums?
To know if you will pay higher premiums, Social Security uses the most recent federal tax return the internal revenue service provides for them. As a beneficiary, if you must pay higher premiums, a sliding scale is used to make the adjustments, based on your modified adjusted gross income (MAGI). The MAGI is your total adjusted gross income and tax-exempt interest income. If your taxes is filed as “married, filing jointly” and your MAGI is greater than $170,000, you will pay higher premiums for your Part B and Medicare prescription drug coverage. For those whole file taxes using different status, and your MAGI is greater than $85,000, you will have to pay higher premiums.
If you must pay higher premiums, the social security will send a letter with your premium amount(s) and the reason for determination of this amount. If you have both Medicare Part B and Medicare prescription drug coverage, you will pay higher premiums for each. If you have only one of Medicare Part B or Medicare prescription drug coverage you will pay an income related monthly adjustment amount only on the benefit you have. If you plan or decide to enroll in the other program later in the same year, and you already are paying an income related monthly adjustment amount, you will be automatically be enrolled in the adjustment program.
For individual beneficiary whose monthly salary is more than $85000, he/she pays an additional premium amount that is between the range of $109 and $134 monthly. For couples or joint beneficiaries, their monthly income has to be more than $170000 to pay this additional fee that is determined by the internal revenue service.