FAQ About New Medicare Part B Rules

www.ssa.gov

The Medicare Modernization Act of 2003 changed how Part B premiums are calculated for some higher income beneficiaries. Currently the government pays a substantial portion—75 percent—of the costs for the vast majority of beneficiaries and the beneficiary pays the remaining 25 percent. In 2007, the government portion was reduced for higher income beneficiaries who began paying a larger percentage of the premium. The law affects only about 4 to 5 percent of Medicare beneficiaries so most people will continue to pay the standard premium, without an income-related adjustment.

If you are affected by the new law, the information provided below should answer most questions you may have.

To determine your Part B premium, they use the most recent tax return information provided by the Internal Revenue Service (IRS). In most cases, this information is for two years prior to the year for which you must pay an income-related premium. For example, they usually used your 2005 tax return information for your 2007 premium. For 2008, they generally would use your 2006 tax return information.

If your income has gone down due to any of these circumstances and the change will make a difference in the income level we suggest you contact them as soon as possible to explain that you have new information and want a new decision about your Income-Related Part B premium. You will need to show them evidence of the event and provide proof or an estimate of your reduced income. Evidence of the event could be an original or certified marriage certificate, death certificate or divorce decree. For example, proof of a change in your 2007 income could be a copy of your return for tax year 2007 or an estimate if you have not yet filed your 2007 taxes. If your income will not change until the following year, you can give them an estimate of what you think your income will be.

If your income has gone down because you or your spouse retired, stopped working or reduced your work hours, or your insured pension plan stopped or went down, and the change will make a difference in the income level they consider, let them know as soon as possible. Tell them you have new information and want a new decision about your Income-Related Plan B premium. You will need to show them evidence of the event and provide proof or an estimate of your reduced income. Evidence of the event could be a letter from your employer about your retirement of something similar. Proof of the change in your income could be a copy of your return for the tax year or an estimate if you have no yet filed your taxes for that year. If your income will not change until the following year, you can give them an estimate of what you think your income will be.

The government generally considers your income from property sales or capital gains to determine your premium. To determine your Part B premium, they use the most recent tax information provided by the Internal Revenue Service (IRS). In most cases, this information is for two years prior to the year in question. For example, they generally would have used your 2006 tax return information for your 2008 premium. They use your modified adjusted gross income (MAGI) from your tax return to make this determination. Your MAGI is a combination of your adjusted gross income and tax exempt interest income.

No. Each year they request your most recent tax return information from the Internal Revenue Service (IRS) to determine your current Part B premium. IRS generally provides information for two years prior to the year in question. For example, they generally would use your 2006 tax return information for your 2008 premium. For 2009, they generally would use your 2007 tax return information. They use your modified adjusted gross income (MAGI) from your income tax return to determine your premium for one year. Your MAGI is a combination of your adjusted gross income and tax exempt interest income.

In the example, your 2006 tax return will reflect only your income for that year. So, if your premium increased in 2008 because you sold a property in 2006, it could decrease in 2009. Your 2008 Part B premium depends on your income for tax year 2007.

It possibly will. If you cashed an IRA two years ago, it could affect your premium for this year. To determine your current Part B premium, they use the most recent tax return information provided by the Internal Revenue Service (IRS). Generally, this information is for two years prior to the year in question. For example, they generally would use your 2006 tax return information for your 2008 premium. They use your modified adjusted gross income (MAGI) from your tax return to determine your premium for one year. Your MAGI is a combination of your adjusted gross income and tax exempt interest income. In the example, your 2006 tax return will reflect only your income for that year. So, if your premium increased in 2008 because you cashed in an IRA in 2006, it could decrease in 2009. Your 2008 Part B premium depends on your income for tax year 2006. Your 2009 Part B premium depends on your income for tax year 2007.

You can request a new decision and ask that they use more recent tax return information if:

• They used three year old tax data to determine your current premium and you have a signed copy of your tax return from two years ago;
• They used three year old tax data to determine your current premium and you sign a statement indicating that you were not required to file a tax return two years ago;
• One of the following happened and the change will make a difference in the income level they consider;

  • You married;
  • You divorced or your marriage was annulled;
  • You became a widow/widower;
  • You or your spouse stopped working or reduced work hours;
  • You or your spouse lost income from income-producing property due to a disaster or other event beyond your control; or
  • You or your spouse’s benefits from an insured pension plan stopped or were reduced
  • Once you show them evidence of the event and provide proof or an estimate of your reduced income, they will update their records and correct your Part B premiums back to the earliest time in the year you had Part B.

You can request a new decision and ask that they use more accurate tax return information if:

• You amended your tax return for the year they used to determine your premium and it changes the income they count;
• You provide proof from IRS of an error in the tax return information they used to make our decision; or
• Your tax filing status for the year they used to determine your premium was "married filing separately" and you did not live with your spouse at any time during that year.

How much are the 2008 monthly premiums for Medicare Part B?

Most people will pay the standard monthly Part B premium of $96.40 in 2008. Some people will pay a higher premium based on their modified adjusted gross income.

Your monthly premium will be higher if you file an individual tax return and your annual income is more than $82,000, or if you are married (file a joint tax return) and your annual income is more than $164,000.

If you meet this criteria, Social Security will use the income reported two years ago on your IRS income tax return to determine your premium (if unavailable, SSA will use income from three years ago). For example, the income reported on your 2006 tax return will be used to determine your monthly Part B premium in 2008. If your income has decreased since 2006, you can ask that the income from a more recent tax year be used to determine your premium, but you must meet certain criteria.

At the end of each year, Social Security will send you a letter if your Part B premium will increase based on the level of your income and tell you what you can do if you disagree. For more information about Part B premiums based on income, call Social Security at 1-800-772-1213. TTY users should call 1-800-325-0778.

The chart below shows the Part B monthly premium amounts based on income.

These amounts change each year. There may be a late-enrollment penalty.