Who Will Pay Higher Medicare Part B Premiums?

Would you discuss the new Part B premiums for Medicare starting this year? Premiums are now going to rise for people with high taxable income. It seems very unfair. What options are there to avoid these premiums?

--Anthony E. Maas, Mechanicsburg, Pa.

As you note, this is the first year that higher-income retirees are being charged extra for Medicare Part B, which covers doctor visits and outpatient care. The standard monthly premium is $93.50, but a small portion of beneficiaries are paying up to $161.40 a month. The change is estimated to affect about 4% of Medicare beneficiaries.

Part B premiums are now based on what's called "modified adjusted gross income," which is a combination of your adjusted gross income and tax-exempt interest income, and tax -filing status. The government uses information from your most recent tax return. For this year, it is 2005. If your MAGI was more than $80,000 that year, or if you and your spouse filed a joint return with a MAGI of more than $160,000, you are subject to the higher premiums. Premiums are $105.80 a month, for example, for individuals with a MAGI from $80,001 to $100,000, or for couples with a MAGI from $160,001 to $200,000.

What if your income has fallen since 2005? You can ask the Social Security Administration to use income from a more recent tax year to determine your premium. Common reasons for an income drop include divorce or a spouse's death. Social Security Publication 10161 has details on the new rules, and Publication 10162 spells out Part B premium information in general for people who are newly eligible for Medicare. For either guide, or for the form to request a premium reduction, go to www.socialsecurity.gov/mediinfo.htm (note the double "i") and scroll down to the lower part of the page.

The "initial enrollment period" for Medicare Part B starts three months before you turn 65 and lasts for seven months. If you miss that window, you have to wait (in most cases) to sign up in what's called the "general enrollment period," which runs from Jan. 1 through March 31 every year, and wait until the following July 1 for coverage to start. Your premium may go up 10% for each 12 months you were eligible and didn't sign up.

In certain cases, you can delay enrolling in Medicare Part B without having to pay higher premiums. If you don't enroll in Part B when you first become eligible because you or your spouse were working and had health coverage through the workplace, you can sign up for Part B anytime while you are still covered by that health insurance, or anytime during the eight months following the month your employment ends or the coverage ends (whichever comes first). If you miss that window, you have to wait for the next general enrollment period.