Medicare Premiums to Decrease for Some

Do you know how much the Medicare Part B premiums will be for 2012? How much extra will high-income people pay for Medicare coverage next year?

The Centers for Medicare and Medicaid Services just announced the 2012 premiums for Part B (which covers doctor visits and outpatient care). The good news is some people will see their Medicare Part B premiums decline next year.

Everyone except high-income beneficiaries will pay $99.90 per month for Medicare Part B in 2012, which is a $3.50 monthly increase for most people -- those whose premiums had been frozen at $96.40 for the past two years because there was no Social Security cost-of-living adjustment. But thanks to a 3.6% cost-of-living adjustment in 2012, there will no longer be a patchwork of several different premiums.

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A rule called the hold-harmless provision prohibits a person’s Social Security benefits from declining from one year to the next. Because most retirees have their Medicare Part B premiums deducted from their monthly Social Security payments, an increase in Medicare premiums in a year with no cost-of-living adjustment in Social Security benefits -- such as in 2010 and 2011 -- would result in a smaller check if not for the hold-harmless provision. But new enrollees in Medicare were not protected by the hold-harmless provision in the first year that they signed up, so people who first enrolled in Medicare in 2010 have been paying $110.50 per month for Part B, and those who enrolled in 2011 have been paying $115.40 per month. Their monthly premiums will decrease to $99.90 per month in 2012, too.

However, high-income beneficiaries -- individuals whose modified adjusted gross income is more than $85,000 and married couples with joint income of more than $170,000 -- will continue to pay more, both for Medicare Part B and for Part D prescription-drug coverage:

--Individuals with income from $85,000 to $107,000 (or married couples with income from $170,000 to $214,000) will pay monthly premiums of $139.90 per person for Part B and a Part D surcharge of $11.60 per month (in addition to their regular Part D premiums).

--Individuals with income from $107,000 to $160,000 (and married couples with income from $214,000 to $320,000) will pay $199.80 each per month for Part B and a $29.90 surcharge for Part D.

--Individuals with income from $160,000 to $214,000 (or $320,000 to $428,000 if married) will pay $259.70 each per month for Part B and a $48.10 surcharge for Part D.

--Individuals with income of more than $214,000 (and married couples with income of more than $428,000) will pay $319.70 each per month for Part B and a $66.40 surcharge for Part D.

These surcharges are based on your income in 2010 -- the most recent tax return the IRS has on file. If your income has dropped since then due to a life-changing event, such as retirement, marriage, divorce or widowhood, you may be able to contest the high-income surcharge. See Medicare Premiums: Rules for Higher-Income Beneficiaries for more information. Keep in mind, however, that if your income was unusually high in 2010 but has dropped since then for a reason other than an eligible life-changing event -- perhaps you converted a traditional IRA to a Roth IRA and paid the taxes when you filed your return in 2010 -- then you would not be able to get your surcharge reduced this year. However, your 2013 surcharge will be based on your 2011 income, which may be much lower.