Medicare Premium Changes

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Next year, most seniors will see their monthly Medicare Part B premiums rise to $93.50, an increase of approximately 5.6 percent over this year’s premium of $88.50. But seniors with higher incomes will, for the first time in the program’s history, face a more substantial premium increase than other beneficiaries. Depending on their income level and tax filing status, higher-income seniors will pay between $106.00 and $162.10 per month for Medicare Part B coverage in 2007.

According to Medicare officials, approximately 4 percent of all Medicare beneficiaries will pay an income-related premium next year, with 1 percent of beneficiaries paying the highest rate of $162.10 per month. These higher premiums only apply to single beneficiaries with modified adjusted gross incomes of more than $80,000 and married beneficiaries with modified adjusted gross incomes of more than $160,000. The Social Security Administration will notify all beneficiaries who are affected.

What’s behind the premium increase?

Current Medicare law requires that Medicare beneficiaries pay a Part B premium equivalent to 25 percent of the program’s cost ($93.50 per month in 2007), with the government picking up the other 75 percent ($280.50 per month in 2007). But the Medicare Modernization Act of 2003 included a provision requiring beneficiaries with higher incomes to pay a Part B premium that covers a greater percentage of the program’s cost. This change will go into effect in 2007, and will be phased in over a three-year period. By the end of the phase-in period, higher-income beneficiaries will pay a monthly premium equal to 35, 50, 65, or 80 percent of the total program cost, depending on their income level and tax filing status.