So, you’ve gotten to the point that you know you need to enroll (or want to enroll) into the Medicare health insurance system. Let’s pivot to “how much” that will cost you each month.
It’s amazing how many people arrive on Medicare’s doorstep not realizing that there is either a cost or they felt that it was going to be much more subsidized than it truly is.
Part A (hospital) coverage is generally “premium-free Part A”. Most people will pay no further premium for their Part A coverage as they enroll into Medicare.
This is tied to work credits over the years and a person with 40 or more quarters of credit will pay no premium for Part A.This is due to the fact that most people have “pre-paid” for this coverage. If you recall, there was a little box on your pay stub over the years that was designated as “MCARE”. That was you pre-funding some of this coverage.
Note that if you did not work over the years but were/are married to someone that qualifies for “premium-free Part A”, you will not pay premium as well as you will qualify based on their record.
Part B comes with a price tag. Remember that Part B is the “medical” portion of your coverage. Think doctors, x-rays, CT scans, etc. The majority of you are familiar with paying BCBS, for example, for this type of health insurance coverage. Well, Part B with Medicare is similar to that. Thus, you will pay Medicare your monthly premium vs paying BCBS.
How much does it cost? The base rate for Part B in 2020 is $144.60. The majority of people will pay this rate. How much a person will pay for Medicare, however, is tied to income. Those with higher income levels will pay more as we’ll discuss next.
When someone enrolls into Medicare, they’ll receive a letter from the Social Security Administration with essentially the message of “welcome to Medicare, your rate will be $144.60”. First, please note that this is a per person, per month charge. There are no family rates with Medicare.
Also note that higher income people will then receive a second letter from the Social Security Administration with the message of “we looked at your tax returns and have deemed that you will pay $289.20 per month”. That person is dealing with “IRMAA”. They will pay the surcharged (i.e. taxed) amount in addition to having to pay an IRMAA surcharge on their Part D (drug) plan as well. In this case, that Part D surcharge would be $31.50. *This is an example, there are six income categories for IRMAA in 2020.
If someone enrolls into the Medicare program in 2020, the government will locate their tax returns for 2018 (always a 2 year look back). They will look to the modified adjusted gross income figure and your Medicare premium will be based on this figure. We have a concise video created on our YouTube Channel walking you through the costs of Medicare. It goes into more detail than we are here.
If you are married and have not worked but your spouse was a high-income earner? You will pay the higher Medicare amount as well. IRMAA is based on joint tax returns.
A common question here becomes “well, I was working and making X amount of money but now I’m retiring so that’s not fair, can I do anything about it?” Yes, you can if the situation is warranted. You may file a request for redetermination of IRMAA using this form. We help people routinely will this issue. Worst case? You didn’t know that you could do that and eventually your lower income would catch up with your premiums. Remember, the government will look back every new year to determine your Medicare premium, so your lower/retirement income would eventually catch up. But, why wait if you don’t have to!
If you are hit with IRMAA, Keep in mind that there are ways to appeal it. This video explains exactly what IRMAA is and also explains how to appeal it. If you have any questions, please give us a call or chat with us in the box at the bottom of your screen.
Yes, Medicare has a cost.
Yes, Medicare is per person, per month. No more family rates.
Yes, if you are hit with IRMAA, you can request a redetermination of the figure.
Yes, you will pay the monthly Part B premium regardless of whether you purchase a Medigap contract or a Medicare Advantage Plan (some people believe that they can avoid Part B premiums by purchasing the bundled Medicare Advantage Plan).