Until the Medicare Modernization Act of 2003, virtually everyone paid the same rate for Medicare coverage. However, in an effort to increase the long term solvency of the Medicare program, Congress authorized increased premiums for retirees with higher incomes beginning in 2007.
Seniors with Higher Incomes Pay Higher Premiums
The monthly Medicare Part B premium most seniors pay during 2009 is $96.40. This represents approximately 25% of the total cost. The government picks up the remaining 75%. However, if your income is greater than $85,000 ($170,000 if married, filing jointly), than you pay more. The additional amount increases as your income goes up, hitting its 2009 maximum of $308.30 per month for incomes greater than $213,000 ($426,000 if married, filing jointly). Such high income individuals pay 80% of the cost of the insurance, with the government footing the tab for the remaining 20%.
Prior Year Income is Used
When determining how much to charge you in monthly premiums, Social Security will use the tax return you filed with the IRS for last year. You don’t have to do anything to ensure that Social Security gets the necessary information. However, if your income will be substantially different this year than last due to a divorce, death, retirement, or some other major event, you may contact the Social Security Administration and let them know. After receiving proof of the change, they may alter the premium amount you pay.
