Rules for Beneficiaries with Higher Incomes

By Melissa A. Brown
eMedicareSupplements Contributor

There have been changes in the laws which directly affect how monthly Medicare Part B and prescription drug premiums are calculated for higher income beneficiaries. Higher premiums will be paid for Part B and for prescription drug coverage by this population. This change affects less than 5 percent of Medicare recipients, so the majority of people will not be affected.

Am I Affected?

Social Security will look at the information on your most recent federal tax return to determine if you will pay the new inflated premiums. If you are affected, adjustments will be made according to a sliding scale, based on your modified adjusted gross income (MAGI) — this is your adjusted gross income plus tax-exempt interest income.

If you file your federal tax return as “married, filing jointly” in 2011 and your MAGI is greater than $170,000, your premiums will increase. If you file using a different status and your MAGI is greater than $85,000, your premiums will increase.

If the IRS information designates you as someone who must pay a higher premium, you will receive a letter from the Social Security Administration explaining the increase and the reason behind it. If you are enrolled in Medicare Part B or the Medicare Part D drug plan, your premiums will increase.

If you have only one of the two parts (B or D), you will pay a monthly adjustment based on your income. If you add the second plan later and are already paying the adjusted premium, the adjustment will be applied to the added plan as well. If your income is lower than the above limits, your premiums will not increase.

What Data Does Social Security Use?

Your 2011 monthly adjustment amount will be based on information found on your 2009 federal tax return, filed in 2010. The IRS may only provide information from the tax return from the year prior.

If you amended your tax return and it affects the income involved in this decision, you will need to contact Social Security and send the a copy of the amended tax return, along with a receipt from the IRS acknolwedging the amended return.

What If My Income Has Changed?

If your income has dropped for any of the following reasons since your most recent tax return was filed, contact Social Security immediately:

• Your marital status has changed.
• You or your spouse became unemployed or reduced your work hours.
• A disaster or other event outside of your control destroyed income-producing property.
• Your employer’s pension plan has ceased, ended, or been reorganized.
• You or your spouse received a settlement because your place of employment closed its doors, reorganized, or filed bankruptcy.