Are Medicare Premiums Based on Income

Are Medicare Premiums Based on Income?

Medicare premium costs are a factor for many beneficiaries planning for healthcare expenses in retirement at age 65. While some Medicare parts come with no monthly premium, others like Medicare Part B do charge a standard premium amount. However, higher income beneficiaries may find themselves paying more for Medicare coverage.

Medicare Part B and Part D premiums are partially income-based. If your income is above certain thresholds, you’ll pay an extra amount on top of the base premium. Understanding how income impacts Medicare costs can help you properly budget for premium expenses.

Medicare Part B Premiums

Medicare Part B covers outpatient medical insurance care like doctor visits, tests, durable medical equipment and more. All beneficiaries pay a monthly premium for Part B coverage.

In 2023, the standard Part B premium is $ 164.90 per month. However, if your income is above $97,000 as an individual or $194,000 for a married couple, you’ll pay an income-related monthly adjustment amount (IRMAA) in addition to the base premium.

IRMAA surcharges are broken into 5 income tiers:

  • Individuals making $97,000 to $123,000 pay an extra $65.90 per month.
  • Those making $123,000 to $153,000 pay an extra $164.90 per month.
  • Income between $153,000 and $183,000 leads to an extra $281.70 monthly.
  • Those making $183,000 to $499,999 pay an extra $389.80 per month.
  • Income above $500,000 means an additional $408.20 per month.

Premiums are based on your most recent federal tax return. What you pay in 2023 will be determined by your 2021 income tax return. If your income has gone down since you filed, you can appeal to have your income tier lowered.

Spouses each pay IRMAA rates based on their individual income level. Part B premiums are deducted from Social Security payments for most retirees. Higher earners not yet receiving Social Security will be billed quarterly.

Medicare Part D Premium Surcharges

Medicare Part D is optional prescription drug coverage. All enrollees pay a monthly premium that varies by plan. Higher earners pay an extra amount called the Part D income-related monthly adjustment amount (Part D-IRMAA).

The income brackets are the same as for Part B. In 2023, Part D-IRMAA amounts are:

  • Individuals making $97,000 to $123,000 pay an extra $12.20 per month.
  • Income between $123,000 to $153,000 leads to an extra $31.50 monthly.
  • Those making $153,000 to $183,000 pay an extra $50.70 per month.
  • Income from $183,000 to $499,999 means an additional $70.00 per month.
  • Those earning above $500,000 pay an extra $76.00 per month.

Part D-IRMAA gets added to your Medicare Part D Plan’s normal premium. You’ll pay this higher amount if you enroll in a Medicare drug plan or Medicare Advantage Plan with prescription drug coverage.

If you have both Parts B and D, you could owe income-related monthly adjustments for both coverage parts. This can significantly increase total Medicare costs for higher earners.

Why Do Medicare Premiums Vary by Income?

The idea behind income-relating Medicare premiums is that higher income beneficiaries can afford to pay a larger share of Medicare costs. This helps subsidize premiums for lower income Medicare enrollees.

When Part B first began in 1965, all enrollees paid the same premium regardless of income. But legislation was later passed to tie premiums to income levels as a way of financing Medicare and keeping costs lower for those who could least afford coverage.

Income-based premiums help fund Medicare, while also making costs more progressive based on ability to pay. Wealthier beneficiaries shoulder more of the burden compared to lower income beneficiaries with the same coverage.

How is Income Calculated for Medicare Premiums?

Medicare looks at your modified adjusted gross income (MAGI) from your federal income tax return to determine your income tier for premium purposes.

Your MAGI includes wages, interest, dividends, retirement distributions, and other taxable income. It also accounts for certain deductions like student loan interest, self-employment tax, and IRA contributions.

Social Security benefits are not considered income for determining Medicare premium costs (or for most other purposes). So even high earners with substantial non-taxable Social Security income may fall into lower Medicare premium brackets.

Life changes like retirement, death of a spouse, or change in marital status can lower your MAGI significantly. In that case, you should report reduced income to Medicare so your premiums reflect your current situation rather than past higher earnings.

Are There Programs to Help with Medicare Premiums?

If you have limited income and resources, you may qualify for Medicaid or a Medicare Savings Program to help cover Medicare premiums along with other out-of-pocket costs.

States have different income and asset limits to qualify for this extra assistance. Even if you don’t qualify for full Medicaid, Medicare Savings Programs may provide premium relief if you meet requirements.

Additionally, some states have State Pharmaceutical Assistance Programs that can help pay Medicare drug plan premiums and drug costs for residents based on financial need.

What If I Can’t Afford Higher Income Medicare Premiums?

If paying high Part B and D premiums would mean you can’t afford basic needs, you can request a waiver of the income-related monthly adjustment amount.

Waivers are granted in cases of financial hardship where premiums would be more than contributions you made via Medicare payroll taxes during your working career. Additional documentation of hardship is required to receive a waiver.


While Medicare offers broad health coverage to all seniors regardless of income, premium costs are partially based on income levels. Higher earners pay a larger share of Medicare expenses through income-related monthly adjustments on Parts B and D. Understanding these income brackets and surcharges can help you accurately budget for Medicare costs in retirement.

We’re Here to Help

You do not have to spend hours reading articles on the internet to get answers to your Medicare questions. Give the licensed insurance agents at Manatee Insurance Solutions a Call at (352) 221-3779. You will get the answers you seek in a matter of minutes, with no pressure and no sales pitch. We are truly here to help.


Are Medicare premiums based on income?

 Yes, Medicare premiums can be based on income.

How does income affect Medicare premiums?

A: Your income can affect the amount you’ll pay for Medicare premiums. If you have a higher income, you may be required to pay higher premiums.

What is modified adjusted gross income?

 Modified adjusted gross income (MAGI) is a measure used to determine your Medicare premiums. It includes your adjusted gross income plus tax-exempt interest income.

What is an income-related monthly adjustment amount?

 An income-related monthly adjustment amount (IRMAA) is an additional amount that some Medicare beneficiaries need to pay for Part B and Part D coverage if their income exceeds certain thresholds.

How are Medicare premiums calculated?

 Medicare premiums are calculated based on a variety of factors, including your income, the type of Medicare Plan you have (Original Medicare or Medicare Advantage), and the specific plan you choose.

Do I need to pay higher premiums for Medicare Part C (Medicare Advantage) Plans?

 Medicare Advantage Plans (Part C) may have different premiums than Original Medicare. The costs of Medicare Advantage Plans can vary depending on the specific plan you choose and your income.

Will my income affect the cost of my Medicare Plan Part D (prescription drug coverage) Plan?

 Yes, your income can affect the cost of your Medicare Part D Plan. If your income exceeds certain thresholds, you may be required to pay a higher premium for Part D coverage.

What is the income-related monthly adjustment amount for Medicare Part B costs in 2023?

The income-related monthly adjustment amount for Medicare Part B costs in 2022 and 2023 will depend on your income. The specific amounts are subject to change and will be determined based on the income limits set by the Centers for Medicare & Medicaid Services.

Do I have to pay a premium for Medicare Part A?

 Most people do not have to pay a premium for Medicare Part A and b if they or their spouse paid Medicare taxes while working. However, if you do not qualify for premium-free Part A and Part B, you will need to pay a premium.

 Are Medicare premiums different for each individual?

Yes, Medicare premiums can vary depending on factors such as your income, the type of Medicare Plan you have, and the specific plan costs.