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What Are Medicare Premiums?
A premium is the monthly amount you pay for your Medicare coverage or Medicare insurance plan. Premium amounts can change each year. The Centers for Medicare & Medicaid Services (CMS) will generally publish the Medicare Part A and Medicare Part B rate changes for the following calendar year around the middle of October or November. New premium rates for Medicare Part D and Medicare Advantage Plans become available starting October 1, when plan sponsors are allowed to start marketing their plans.
Medicare Part A Premiums
Most beneficiaries do not pay a monthly premium for Medicare Part A coverage if they or their spouse paid Medicare taxes while working. In fact, according CMS, approximately 99% of Medicare beneficiaries do not have to pay Medicare premiums on Part A because they have over 10 years (or 40 quarters) of Medicare-covered employment. For the small percentage of people who do have to pay Medicare premiums, the amount per month depends on the number of quarters of Medicare-covered employment the person (or his/her spouse) has:
- People with 30 to 39 quarters of Medicare-covered employment pay a monthly premium of $243 in 2013.
- Those with less than 30 quarters of Medicare-covered employment and who are not eligible for free or reduced Medicare premiums for any other reason pay a monthly premium of $441 in 2013.
- Premium amounts may change for the 2014; CMS generally announces rate changes for the following calendar year around the middle of October each year.
Medicare Part B Premiums
The Medicare Part B premium is set each year at a level calculated to pay for 25 percent of the average cost of coverage. The standard premium—the premium for most enrollees—applies to those with annual household incomes that do not exceed a set threshold amount. For 2013, the standard Part B premium is $104.90. In 2013, the threshold is $85,000 for single filers or married couples who file separately and $170,000 for couples who file jointly, based on 2011 tax returns.
Although most beneficiaries pay the standard rate, there are three provisions that alter the premium rate for certain Part B enrollees:
- There is a premium surcharge for those beneficiaries who enroll after their initial enrollment period.
- A "hold-harmless" provision can lower the premium rate for those who have their premiums deducted from their Social Security check. This provision limits the dollar increase in the Part B premium to the dollar increase in the person's Social Security benefit.
- There are higher "income-related" premiums for those whose annual income exceeds the threshold amount. These premiums are calculated to pay for 35, 50, 65, or 80 percent of the average cost of coverage, depending on income level.
2013–2014 Part B Income-Related Premium Amounts*
|If Your Annual Income Is||Percent of cost covered||Actual 2013 premium†||Estimated 2014 premium†|
|Individual Tax Return||Joint Tax Return|
|$85,000 or less||$170,000 or less||25%||$104.90||$123.10|
|$85,001 - $107,000||$170,001 - $214,000||35%||$146.90||$156.90|
|$107,001 - $160,000||$214,001 - $320,000||50%||$209.80||$224.20|
|$160,001 - $213,000||$320,001 - $426,000||65%||$272.70||$291.50|
|Over $213,000||Over $426,000||80%||$335.70||$358.70|
*Source: 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medicare Insurance Trust Funds. Premium amounts for 2014 are intermediate estimates only. Actual premium amounts for 2014 will be released sometime around November 2013.
†Premium amounts for 2013 are intermediate estimates only. Actual premium amounts for 2013 will be released in October 2012.
Medicare Part D Premiums
The monthly Medicare Part D base premium is set to pay 25.5 percent of the cost of standard coverage, based on bids submitted annually by Part D plans. CMS releases the Medicare Part D base premium in early August each year. Actual premiums are based on this set premium, but can vary greatly by plans and regions.
As of 2011, beneficiaries with higher incomes must pay a premium adjustment based on their income. This premium adjustment is called the Income-Related Monthly Adjustment Amount (IRMAA), and is paid directly to the Federal government (it is deducted from your Social Security, Railroad Retirement Board, or Office of Personnel Management benefits).
2013 Part D Income-Related Monthly Adjustment Amounts
|If Your Annual Income Is||2012 IRMAA|
|Individual Tax Return||Joint Tax Return|
|$85,000 or less||$170,000 or less||N/A|
|$85,001 - $107,000||$170,001 - $214,000||$11.60|
|$107,001 - $160,000||$214,001 - $320,000||$29.90|
|$160,001 - $213,000||$320,001 - $426,000||$48.30|
|Over $213,000||Over $426,000||$66.60|
Medicare Part A Deductibles
Medicare Part A pays all covered hospital, skilled nursing facility, and home health care services for each benefit period except for the deductible. For 2013, the deductible is $1,184 for any hospital stay 60 days or less. For any hospital stay lasting longer than 60 days, a Medicare copayment will apply:
- 61 to 90 days: $296 per day
- 91 to 150 days: $592 per day
- More than 150 days within a single benefit period: Full cost
For people on Medicare who receive care in a skilled nursing facility, Medicare will cover days 1 through 20 in full. In 2013, there is a copayment of $148 per day for days 21 through 100, and no coverage after day 100 in a benefit period.
Medicare Part B Deductible
Medicare Part B includes a yearly deductible of $147 in 2013. This deductible will be applied to health care costs that involve physician services, outpatient hospital services, certain home health services, and durable medical equipment. Once the deductible is met, you will be required to pay only 20% of the Medicare-approved amount charged by providers for your health care services. Because of the new health care law, many preventive services are also provided at no cost to you. These free benefits are not subject to a deductible.
Medicare Part D Deductible
The annual deductible for the standard Medicare Part D benefit is $325 in 2013, which is an increase of j$5 from the 2012 deductible. No Medicare drug plan may have a deductible more than $325 in 2013, although some plans may have a lower deductible or no deductible at all. For 2014, the standard Part D deductible will only be $310.