Medicare Part B Premiums: New Rules For Beneficiaries With Higher Incomes 2008

The Medicare Modernization Act of 2003 changed how Medicare Part B premiums are calculated for some higher income beneficiaries. The majority of Medicare beneficiaries are not affected. Part B (medical insurance) helps pay for doctors’ services and outpatient care. It also covers other medical services, such as physical and occupational therapy, and some home health care. For most beneficiaries, the government pays a substantial portion—75 percent—of the Part B standard premium and the beneficiary pays the remaining 25 percent.

Beginning in 2007, the government portion was reduced for higher income beneficiaries who began paying a larger percentage of the premium based on income they reported to the Internal Revenue Service (IRS). In 2008, higher income beneficiaries will be responsible for 67 percent of their income-related adjustment. By 2009, the end of the transition period, these higher income beneficiaries will pay a monthly premium equal to 35, 50, 65, or 80 percent of the total Part B cost, depending on their income level.

However, the law is expected to affect only about 4 to 5 percent of Medicare beneficiaries, so most people will continue to pay the standard premium, without an income-related adjustment.

How will I know if I must pay more?

To determine if you will pay a higher Part B premium, the IRS will send Social Security information from your most recent tax return. We will use a sliding scale to make adjustments to premiums. The sliding scale will be based on your modified adjusted gross income (MAGI). Your MAGI is a combination of your adjusted gross (taxable) income and tax exempt interest income.

In 2008, if you file your taxes as “married, filing jointly” and your MAGI is more than $164,000, you will pay a higher Part B premium. For all other taxpayer filing statuses, if your MAGI is more than $82,000, you will pay a higher Part B premium. (See chart on other side.)

After getting the IRS data, if we determine you will need to pay a larger percent of the premium, we will send you a letter explaining how we made this determination and what your new premium will be. However, it is important to remember that if your income does not exceed the limits described above, this law does not apply to you.

Which tax return will you use?

To determine your 2008 Part B premium, we will use the most recent tax return information provided by IRS. Generally, this information is from a tax return filed in 2007 (for tax year 2006). Sometimes, IRS can only provide information from a return filed in 2006 (for tax year 2005). If we use tax year 2005 data and you filed a return for tax year 2006 or did not need to file a tax return for tax year 2006, call us or visit any office. We will update our records.

If you amended your tax return and it changes the income we count, let us know. Send Social Security a copy of the amended tax return that you filed and your acknowledgment receipt from IRS. We will update our records with the information you provide, and correct your Part B premiums back to the earliest time in the year you had Part B.

What if my income has gone down?

If your income has gone down due to any of the following circumstances and the change will make a difference in the income level we consider, contact us to explain that you have new information and may need a new decision about your Medicare Part B premium:

• You married;

• You divorced or your marriage was annulled;

• You became a widow/widower;

• You or your spouse stopped working or reduced work hours;

• You or your spouse lost income from income-producing property due to a disaster or other event beyond your control; or
  
• Your or your spouse’s benefits from an insured pension plan stopped or were reduced.

If any of these events happen, you will need to show us evidence of the event and tell us how it has reduced your income. Evidence could be a death certificate, a letter from your employer about your retirement, or something similar. If you filed a federal income tax return for the year in question, you will need to show us your signed copy of the return.

What if I disagree?

If you disagree with the decision regarding your Medicare Part B premium amount, you have the right to appeal. You may request an appeal in writing by completing a "Request for Reconsideration" (Form SSA-561-U2) or you may contact your local Social Security office to file your appeal, or request a copy through our toll-free number listed below.

You do not need to file an appeal if you are requesting a new decision because of an event listed previously that made your income go down or if you have shown us the information we used is wrong.

Contacting Social Security

For more information, visit our website at www.socialsecurity.gov/mediinfo.htm or call toll-free, 1-800-772-1213 (TTY 1-800-325-0778).

To learn more about Medicare Part B coverage, visit www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227; TTY 1-877-486-2048).