Medicare Part B premiums increased from $134 in 2018 to $135.50 in 2019 for most beneficiaries. That led many people to expect a modest increase from 2019 to 2020. However, 2020 Medicare Part B premiums are expected to take a much bigger jump to $144.30 for most people. While this is expected to be the standard premium amount, premiums are based on income levels.
The federal government looks at the modified adjusted gross income when determining premiums. Individuals who make $85,000-$107,000 are expected to pay $202.00 a month in 2020. The same is true for married couples who make $170,000-$214,000. In 2019, individuals and couples who met these income thresholds only paid $189.60 a month.
Individuals who make $107,000-$133,500 can expect their 2020 Medicare Part B premiums to go up to $288.50. Married couples who make $214,000-$267,000 are also expected to pay that amount. Medicare premiums continue to increase as incomes rise.
The highest projected premium will be $490.50 a month. This premium will be charged to individuals who make at least $500,000 a year and couples who bring in a minimum of $750,000 annually.
The Social Security Administration uses your tax returns to determine how much your premium will be. For 2020, the Social Security Administration will use the tax return you filed in 2019. This will be for the tax year 2018. The administration looks at your modified adjusted gross income, which is your tax-exempt interest income and your adjusted gross income. Then the Social Security Administration uses a sliding scale to determine how much you will pay for your Medicare 2020 Part B premium.
Medicare used to charge a standard premium amount for all Medicare Part B beneficiaries. Even people with high incomes paid the standard amount. That changed with the Medicare Modernization Act of 2003 (MMA). This act became the law in 2007 and changed how premiums were charged.
In the past, the federal government paid 75 percent of the monthly premium for all beneficiaries, and people were left with the remaining 25 percent. The MMA stated that individuals who make more than $80,000 and couples with incomes above $160,000 must pay more than the standard 25 percent. The law set the range at 35 percent to 80 percent. The percentage selected was based on income. This is referred to as the income-related monthly adjustment amount surcharge or IRMAA. The surcharge is added to the monthly premiums.
Additional changes occurred with the Medicare Access and Chip Reauthorization Act of 2015 (MACRA). This act allowed the federal government to charge people even higher premiums starting in 2018. Starting in 2018, individuals who made $133,500-$160,000 and couples with incomes from $267,000-$320,000 had to pay 65 percent of the Part B premium. That was an increase from 50 percent. Individuals who made $160,001-$214,000 and couples with incomes of $321,001-$428,000 were required to pay 80 percent of the Part B premium. That was a jump of 15 percent.
Finally, Congress passed the Bipartisan Budget Act of 2018 (BBA). Individuals who make more than $500,000 and couples that make more than $750,000 must pay 85 percent of the Medicare Part B premium. The new rate started in 2019 and is an increase of 5 percent.
Your Medicare premiums and surcharges are based on your tax returns, but it is possible that the income information is incorrect. If you make less than you did when you filed taxes, contact the Social Security Administration to get a new surcharge amount. Possible situations that could cause a change in income include:
You will have to provide documentation to prove the loss of income. If you can prove it, the administration will change the premium and surcharge you must pay.
If your Medicare 2020 Part B premium is set to increase, you likely wonder why. The income thresholds have not been changed since 2011. That means they have not been adjusted for inflation, so more people are reaching the thresholds and paying surcharges. That means you are more likely to end up paying more for your Medicare Part B premium in 2020.
Rising Medicare 2020 Part B premiums has lots of people worried. Fortunately, there are lots of health insurance options out there, including Medicare Advantage. Speak to a licensed insurance agent to find out how to find the most affordable insurance.