How Does Medicare Determine Your Income
How Does Medicare Determine Your Income?
If you are closing in on 65 years old you’re probably thinking about enrolling in Medicare for your health care coverage. You might also be eligible if you’re under 65, have a qualifying disability, and/or have been receiving Social Security Disability Insurance (SSDI) for 24 months.
While there are no income limitations for receiving Medicare benefits, you might have to pay a higher monthly premium if your income is above a certain level. On the other hand, if your income is limited, you might qualify for assistance to help you pay your Medicare premiums.
Because the amount you pay for your monthly premiums for Original Medicare Part A (hospital insurance) and Part B (medical insurance) is determined by your income or your past employment status, it’s important to know how this is done.
How does Medicare determine your income?
You are eligible for premium-free Part A Medicare benefits if you or your spouse have worked and paid federal Medicare taxes for at least 40 quarters, or approximately 10 years in total. If you don’t qualify for premium-free coverage but you qualify for Medicare, you can enroll and pay your Part A premium of up to $471.00 per month.
Original Medicare Part B, which covers medical expenses like visits to health care providers and more, carries a monthly premium. To figure out how much you’ll have to pay for your monthly premium for Part B coverage, the Social Security Administration looks at your most recent federal tax information.
Most Medicare Part B beneficiaries pay the standard monthly premium of $148.50 as of 2021. This will be the case for you if the following points are true:
• You enroll in Medicare Part B for the first time during 2021.
• You aren’t getting Social Security benefits.
• Your bill for your Part B premium goes directly to you.
•You have both Medicare and Medicaid, and Medicaid pays your Part B premium. In this instance, your state of residence pays the standard Part B premium.
However, if your IRS tax return from two years ago has a modified adjusted gross income higher than the amount set by Medicare, your standard Part B premium has an additional income-related monthly adjustment amount (IRMAA) attached.
For example, if your annual income in 2019 was $88,000.00 or less as an individual tax filer or $176,000.00 as a joint filer, your Medicare Part B monthly premium is the standard premium.
For individual filers with an individual annual income of $88,000.00 to $111,000.00, and joint filers with over $176,000.00 to $222,000.00, your Part B monthly premium totals $207.90 as of 2021. The amount you pay for your Part B premium increases according to your annual income reported two years prior to your enrollment in Medicare.
How is the Part D monthly premium calculated?
If you enroll in a Medicare-affiliated, stand-alone prescription drug (Part D) plan, your monthly premium is also based on your federal income tax returns from two years prior to your enrollment.
If your income as an individual was $88,000.00 or less, or $176,000.00 or less as a joint filer, you pay the premium set by your Part D plan’s provider.
If your individual income level was $88,000.00 to $111,000.00, or $176,000.00 to $222,000.00 as a joint filer, you pay an additional $12.30 added to the standard Part D premium. The amount of the income-related monthly adjustment amount you pay on top of the plan’s premium increases with an increase in annual income.
If you need more information about how much you might pay monthly for your Part B or Part D Medicare benefits, you can find the monthly premium chart for 2021 at Medicare’s official website. You can also speak to a licensed agent who can help answer your questions and help you find the benefits package that will fit your needs.