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Why Some People Pay Less for Medicare Than Others

the Editors of Kiplinger's Retirement Report
What you need to know about Medicare premiums -- and how to reduce yours under certain circumstances.

[QUESTION]I can't get my head around the Medicare Part B premium. I've read that the basic premium is supposed to be $134 for 2017, but that most seniors will pay $109 a month and some will pay more than $400. Can you clear things up?

SEE ALSO: 11 Costly Medicare Mistakes

[ANSWER]We'll try. The 2017 premium is officially $134, but about 70% of beneficiaries (those receiving Social Security benefits in December and not subject to high-income surcharges) will pay much less, averaging about $109. The law forbids an increase in Part B premiums to reduce January 2017 benefits below the amount received in December 2016. This means that different people will pay different premiums: last year's $104.90 plus the amount that the 2017 0.3% cost-of-living adjustment adds to their Social Security benefit. The rising premium offsets the COLA, but it can't reduce the benefit below December's level.

Those who start receiving benefits in 2017 will pay $134 a month, because they're not protected by the "benefits can't go down" rule, unless that is, their income is high enough to trigger a surcharge. Those surcharges can drive 2017 premiums as high as $428.60 a month. Beneficiaries will get a notice from Social Security pinpointing what they'll pay.

[QUESTION2]I'll retire in April, and I'm sure my income for 2017 will fall below the level that triggers the high-income surcharge for Medicare. But if the government sets the premium based on my 2015 tax return, I'll have to pay almost $350 a month. Am I stuck with the surcharge until Medicare gets my 2017 tax return showing lower income?[QUESTION2END]

[ANSWER]No. Because retirement is considered a "life changing" event, you can appeal to have your estimated 2017 income used to set the premium. The basic premium for Medicare Part B for someone who signs up this year is $134 a month. The surcharges, which start when adjusted gross income plus tax-free interest exceeds $85,000 for single filers and $170,000 for joint filers, can drive that monthly cost as high as $428.60.

You'll need to file Form SSA-44 with Social Security to avoid a surcharge. We've heard that the most efficient way to handle this is to call Social Security (800-772-1213) to set up a face-to-face meeting at a local office. If you wind up paying the surcharge for a month or two before your appeal is approved, Social Security will reimburse you for the overpayment.

SEE ALSO: 10 Things You Must Know About Medicare

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Copyright 2017 The Kiplinger Washington Editors