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Managing Medicare Part B Premium Increases

If your modified adjusted gross income in 2015 was above a certain amount, you'll face a high-income surcharge on your premium.

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QI have my Medicare Part B premiums paid automatically from my Social Security benefits, and until now I have been protected by the provision that keeps premium increases at the same level as the previous year’s cost-of-living increase. As a result, my monthly premiums were just $104.90 in 2016, the same as in 2015. But I recently received a notice from Medicare that my monthly premiums will jump to $187.50 in 2017. Why do I have to pay that much more? Is there anything I can do to modify the premium increase?

A

As you say, most people who have their Medicare premiums deducted from their Social Security benefits are protected by the hold-harmless provision and paid just $104.90 per month in 2016 for Medicare Part B. Their premiums will rise in 2017 based on the 0.3% cost-of-living increase in Social Security benefits, resulting in monthly average premiums of $109. See Retirees to Pay More for Medicare in 2017.

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But even if your premiums are paid from your Social Security benefits, if your modified adjusted gross income in 2015 was more than $85,000 for single filers or $170,000 for married couples filing jointly, you won’t be protected by the hold-harmless provision – and you’ll have to pay a high-income surcharge. Monthly Part B premiums are $187.50 per person for single filers who earned $85,001 to $107,000 and married couples who earned $170,001 to $214,000. The high-income surcharge gradually rises based on income, topping out at $428.60 per month for single filers who earned more than $214,000 in 2015 and married couples who earned more than $428,000. See Part B Costs at Medicare.gov for the full list of “Income-Related Monthly Adjustment Amounts,” which is the official term for the high-income surcharge.

The modified adjusted gross income Medicare uses to determine your premiums is your AGI plus tax-exempt interest income. Even if you haven’t earned more from working, your modified AGI can increase under certain circumstances. Among them: You had taxable income from a pension or withdrawals from tax-deferred retirement savings, such as traditional IRAs and 401(k)s (but not Roths); you converted a traditional IRA to a Roth; you had taxable income from investments, including municipal bond interest.

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Medicare generally bases 2017 premiums on 2015 income because that is the last tax return on file. If your income has decreased since then because of certain life-changing events, such as marriage, divorce, death of a spouse or retirement, you can ask the government to base your premiums on more-recent income. You’ll need to file Form SSA-44 with the Social Security Administration to provide documentation of the life-changing event, such as a letter from your former employer stating that you’re now retired. For more information, see Medicare Premiums: Rules for Higher-Income Beneficiaries.

If you didn’t experience a life-changing event but your income was unusually high because of a one-time income boost -- such as a big taxable withdrawal from a traditional IRA -- then your premiums should go down for 2018 if your 2016 income falls below the limits for the surcharge.

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Got a question? Ask Kim at askkim@kiplinger.com.