Why Are My Medicare Premiums So High?

I just received my first Medicare Part B bill of the year, and my monthly premium is $115.40, rather than the $96.40 that most people are paying. Why am I paying so much more than everyone else? I don’t earn enough to be hit by the high-income surcharge, and I’ve been covered by Medicare for several years. I’m 68, but I haven’t started collecting Social Security benefits.

You are correct: Most people are still paying $96.40 per month for Medicare Part B benefits, which cover doctors’ visits and outpatient care. That’s because the majority of Medicare beneficiaries are protected by the so-called hold-harmless provision, which prohibits their Social Security benefits from shrinking.

Here’s how it works: There was no cost-of-living adjustment in Social Security benefits for 2011 because inflation has been so low. Because most people have their monthly Medicare premiums deducted from their Social Security check, applying the increase in Medicare Part B premiums would have resulted in a reduced benefit.

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Therefore, most existing Medicare beneficiaries are exempt from the premium increase. But because you do not yet collect Social Security benefits, you are not protected by the hold-harmless provision and you have to pay the increased premium for Medicare Part B.

There are other exceptions. People who enroll in Medicare Part B for the first time in 2011 are not protected by the hold-harmless provision because they have not received Medicare benefits in the past. Likewise, retirees who aren’t part of the Social Security system -- for example, some former public-sector employees -- are not protected by the hold-harmless provision. Both groups must pay the $115.40 monthly premium.

A few other groups will also pay more than $96.40 a month for Part B. Retirees who enrolled in 2010 will pay $110.50 per month, which is the same premium that they paid last year. And individuals with modified adjusted gross income of $85,000 or more (or $170,000 or more if married filing jointly) will pay a high-income surcharge on both their Part B and their Part D premiums (see How to Avoid the Medicare High-Income Surcharge for information about who is subject to the extra income-based premiums).

For more information about who pays what Medicare premiums in 2011, see How Much You’ll Pay for Medicare in 2011.