Understanding Medicare Part B Premiums

By Ronald A. Fatoullah, Esq. and Joseph Breningstall

{3:41 minutes to read} It is important for those enrolling, or already enrolled, in Medicare to understand how the premiums work and when they may be adjusted. All beneficiaries of Medicare Part B are required to pay a monthly premium. The standard Part B premium in 2017 is $134 monthly; however, the premium rises when the beneficiary's income passes certain thresholds. The standard Part B premium applies to beneficiaries with a Modified Adjusted Gross Income (MAGI) of $85,000 or less ($170,000 if married and filing a joint return), but the premium can rise by an additional $294.60 for beneficiaries that have a MAGI of $214,000 or more ($428,000 if married and filing a joint return). Medicare refers to these higher premiums as Related Monthly Adjustment Amount (IRMAA). The Social Security Administration (SSA) uses the MAGI reported on a beneficiary's IRS tax return two years prior to determine whether he or she must pay a premium surcharge. Thus, the income reported on a beneficiary's 2015 tax return determines the 2017 premium.

Most beneficiaries of Medicare Part B pay the standard premium; however, an issue arises when a beneficiary who is paying a premium surcharge experiences a life event or change in circumstances that results in a significant drop in income. Whether an individual can request an adjustment to his or her premium would depend on the specific nature of the event. The Social Security Administration allows a beneficiary to request a review of his or her income when the individual experiences any of the following circumstances:

• The individual is married, divorced or became widowed;
• The individual or his/her spouse has stopped working or reduced his/her work hours;
• The individual or his/her spouse has lost income-producing property because of a disaster or other event beyond his or her control;
• The individual or his/her spouse has experienced a scheduled cessation, termination or reorganization of an employer's pension plan; and
• The individual or his/her spouse has received a settlement from an employer or former employer because of the employer's closure, bankruptcy or reorganization.

The SSA will require the beneficiary to complete Form SSA-44 and provide documentation verifying the change in circumstance and the resulting reduction in income. Several examples of the required documentation include a death or marriage certificate, a divorce decree, a letter from an employer regarding a beneficiary's retirement, or an insurance company adjuster's statement of loss. If the beneficiary filed a tax return for the year in question, he or she will need to provide that as well.

There are many instances in which a beneficiary may experience a significant loss of income but unfortunately would not be eligible for an adjustment to his or her premium. A bad investment or major downturn in the stock market would be one example of this situation.

There is, however, one case in which the Social Security Administration will review income even though it does not fall into one of the enumerated categories, and that is when a beneficiary filed his taxes as "married filing separately," but lived apart from his spouse at all times during the year. Given that this is a slightly more complex situation, the Social Security Administration directs that a beneficiary who finds himself in this circumstance should contact the SSA directly rather than filing the standard Form SSA-44.

Anyone who feels that one or more of the circumstances above applies to him or someone they know can locate Form SSA-44 with the accompanying instructions here .

Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Joseph Breningstall is a law clerk with the firm. The law firm can be reached at 718-261-1700, 516-466-4422, or toll-free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also a partner with Advice Period, a wealth management firm, and he can be reached at 424-256-7273.