Medicare Premiums for High Income Seniors: What to Expect

Turning 65 is an exciting time. In many cases, those who turn 65 have recently retired or are near retirement. However, planning for retirement and budgeting retirement costs can be tricky – especially as a high-income senior unsure of what to expect of Medicare premium payments. This blog will discuss what Medicare Part A and Part B eligible seniors can expect from coverage, as well as how Medicare Part A and B premium payments are calculated based on income.

Medicare Part A: What does it cover?

Medicare Part A, also known as hospital insurance, covers the following:¹
 

• Inpatient care at a hospital
• Skilled nursing home facility care
• Hospice care
• Home health care

You can find out more about Medicare Part A and what it covers at Medicare.gov.

Medicare Part B: What does it cover?

Medicare Part B, also known as medical insurance, covers the following:²
 

• Outpatient services
• Certain clinical research studies
• Ambulance services
• Durable medical equipment (DME)
• Mental health
• Limited outpatient prescription drugs

You can find out more about Medicare Part B and what it covers at Medicare.gov.

 

What you need to know about Medicare Part A premiums.

The good news about Medicare Part A is that most people shouldn’t pay a premium, even if you have what is considered higher income as a senior. If you paid Medicare taxes while employed, you should get premium-free Medicare Part A coverage. However, if you paid Medicare taxes for less than 30 quarters while employed, you may pay up to $471 each month in Medicare Part A premiums (as of 2021).³ If you paid Medicare taxes while employed for 30-39 quarters, the cost of Medicare Part A is $259 (as of 2021).³

What you need to know about Medicare Part A hospital inpatient coinsurance and deductibles.

Even if you aren’t paying premiums for Medicare Part A due to paying Medicare taxes for more than 40 quarters of your employment, that doesn’t mean there are no costs associated with Medicare Part A. As of 2021, Medicare Part A high-income seniors can expect the following deductible and coinsurance costs associated with hospital stays:³
 

• $1,484 deductible per benefit period
• $0 coinsurance for each benefit period on days 1-60
• $371 coinsurance per day of each benefit period on days 61-90
• $742 coinsurance per each “lifetime reserve day” on days 91 and beyond (with up to 60 days over your lifetime)
• All costs for each day beyond lifetime reserve days

For skilled nursing facility stays, expect the following costs under Medicare Part A:⁴

• $0 for the first 20 days of each benefit period
• $185.50 per day for day 21-100 of each benefit period
• All costs for each day beyond day 100 of the benefit period  

For more information on Medicare Part A hospital inpatient and skilled nursing facility deductibles and coinsurance, head to Medicare.gov.

What you need to know about Medicare Part B premiums.

Unlike Medicare Part A, most people who enroll in Medicare Part B have some degree of premium payment that is expected of them. The standard premium for Medicare Part B is $148.50 (as of 2021).⁴ However, depending on your income, you may have to pay more in premium than what is standard.
 
You can learn more about Medicare Part B premiums by heading to Medicare.gov or SSA.gov. 

How to determine your Medicare Part B premium payment.

According to law, adjustments to monthly Medicare Part B premiums must be made if you have what Medicare calls “higher income.” Determining whether you have higher-income as a senior and require a premium adjustment to Medicare Part B is based on your federal tax return of two years prior. In other words, if on your federal tax return your modified adjusted gross income is over a certain threshold, you will pay a higher premium for Medicare Part B.⁵
 
Those who would be required to pay a higher premium for Medicare Part B as of 2021 must meet one of the following criteria:⁵

1. Seniors filing their tax returns “married, filing jointly” with a modified adjusted gross income of more than $176,000 per federal tax year.
2. Seniors submitting their federal tax return with a different filing status and a modified adjusted gross income of more than $88,000 per federal tax year.  

While the adjusted premium payment for Medicare Part B generally affects less than five percent of those with Medicare and premium adjustments are done on a sliding scale, you certainly don’t want to be surprised when discovering your monthly premiums for Medicare Part B are over the standard amount.⁵
 
For more information on Medicare Part B premiums, “high-income,” and sliding-scale Medicare Part B premium payments, please visit Medicare.gov or SSA.gov.

Sources

1. Medicare.gov, What Part A covers, 2021
2. Medicare.gov, What Part B covers, 2021
3. Medicare.gov, Medicare costs at a glance, 2021
4. Medicare.gov, 2021 Medicare Costs, 2020
5. SSA.gov, Premiums: Rules For Higher-Income Beneficiaries, 2021