Medicare is an important safety net for tens of millions of American seniors, but not everyone will pay the same amount next year for their Medicare benefits. Medicare Part B and Part D premiums are adjusted higher for people with substantial income. Will you be subject to the Medicare Income Related Monthly Adjustment Amount in 2017?
Digging into the details
Medicare Part A, which helps pay hospitalization expenses, is free for most American seniors, but Medicare Part B, which helps pay other medical expenses, costs seniors a monthly premium that changes every year.
In 2017, the standard Medicare Part B premium will increase to $134 from $121.80 in 2016. However, not everyone will pay the standard amount. Some people will pay less and others will pay substantially more.
If you're already enrolled in Medicare Part B and your payments are automatically deducted from your Social Security income, then you may only end up paying $109 per month. That's because Part B premium changes can't grow more quickly than Social Security income and Social Security income is only climbing 0.3% next year. Because of this quirk, Medicare Part B premiums for millions of Americans will only tick up slightly next year.
Alternatively, high-income Americans will pay significantly more for their Part B coverage. If your income is high enough, Medicare's Income Related Monthly Adjustment could result in a monthly premium as high as $428.60 in 2017, up from $389.80 last year.
The amount of extra money Part B members must pay next year is based on five income tiers that begin at $85,000 for individuals and $170,000 for couples who file jointly. As you can see in the following table, if you're in the lowest adjustment bracket, you'll pay 40% more than the standard Part B premium, and if you're in the highest bracket, you'll pay a whopping 220% more than the standard premium in 2017.
The amount you pay in monthly Part D premiums next year could be a lot higher than other Americans because of income adjustments, too.
Medicare Part D drug coverage is provided by private insurers, so monthly premiums vary from plan to plan. In 2017, the Centers for Medicare and Medicaid Services, or CMS, estimates that the average Part D premium will be $34.
High-income Americans will pay between $13.30 and $76.20 more for their monthly drug coverage than their standard monthly premium. In most cases, this premium adjustment is taken directly out of Social Security income. However, if you're not receiving Social Security, you may be billed. If you are billed, remember that this adjustment is payable to Medicare, not the private insurer that's providing your Part D coverage.
If your income has dropped, make sure you contact Medicare and let them know. If you've had a major life-changing event that's decreased your income, you can file a form that could result in Medicare reducing your payment. There are a number of life-changing events that may result in Medicare changing how much they charge you, including marriage, death of a spouse, work stoppage or reduction, and the loss of pension income, so make sure you consider all your options before writing that check.