Medicare premiums depend on your income, the coverage you choose, and when you first enrolled

Your Medicare premium is not a flat fee everyone pays the same amount for. Instead, it changes based on your modified adjusted gross income (MAGI) from two years ago, which coverage parts you have, and whether you signed up on time. Part A (hospital insurance) is usually free if you or your spouse paid Medicare taxes for at least 10 years. Part B (doctor visits) and Part D (prescription drugs) have monthly premiums that rise if your income is higher. Part C (Medicare Advantage) premiums vary by plan and insurer.

The income threshold that triggers higher premiums is called the Income-Related Monthly Adjustment Amount, or IRMAA. If your MAGI exceeds a certain level, you pay a surcharge on top of your base premium. These thresholds change each year, and they are different for single filers and married couples filing jointly.

Key Takeaways

  • Part A premiums are usually free, but Part B and Part D premiums increase if your income from two years ago was above a set threshold.
  • The income used to calculate your premium comes from your tax return from two years before the current year, not your current income.
  • If your income drops due to retirement, job loss, or other life changes, you can request that Medicare recalculate your premium using current-year income.
  • Delaying Part B or Part D enrollment after you first become may be able to access can result in a permanent penalty added to your monthly premium.
  • Your premium can change each January, so review your Medicare Summary Notice every year to catch errors or changes.

How income affects your Part B and Part D premiums

Medicare uses your Modified Adjusted Gross Income (MAGI) from your federal tax return from two years prior. For example, in 2024, Medicare looks at your 2022 tax return. This two-year lag means your premium does not when ready reflect a recent job loss or major income change.

If your MAGI is above the threshold for your filing status, you pay a surcharge called the Income-Related Monthly Adjustment Amount (IRMAA). The thresholds and surcharge amounts change each year. For 2024, the thresholds start at $97,000 for single filers and $194,000 for married couples filing jointly, but these figures vary annually. The higher your income above the threshold, the higher your surcharge.

Part A (hospital insurance) does not have income-related premiums. You either pay nothing if you have enough work history, or you pay a standard monthly premium if you do not. Part C (Medicare Advantage) premiums are set by individual insurance companies and do not have automatic income-related adjustments, though some plans may charge more based on your income.

When you enroll affects your lifetime cost

If you delay enrolling in Part B after you first become may be able to access, Medicare adds a permanent penalty to your monthly premium. The penalty is 10 percent of the base Part B premium for each full 12-month period you were may be able to access but did not enroll. This penalty stays with you for life, even if you later drop your income below the IRMAA threshold.

The same rule applies to Part D (prescription drug coverage). If you go without creditable drug coverage for more than 63 days in a row after you first become may be able to access, you pay a permanent late-enrollment penalty when you do enroll. The penalty is calculated as 1 percent of the national average Part D premium for each month you were without coverage.

There are exceptions to these penalties. If you have employer coverage or retiree coverage that is considered "creditable," you can delay enrollment without penalty. You must tell Medicare about your creditable coverage when you enroll. If you miss the important date by mistake, you may be able to request a Special Enrollment Period to enroll without penalty, but you must act quickly.

How Part C (Medicare Advantage) premiums work differently

Medicare Advantage plans are sold by private insurance companies, so each plan sets its own premium. Some plans charge zero premium beyond what you already pay for Part B, while others charge $50 to $200 or more per month. The premium you pay depends on the specific plan you choose and the insurance company offering it.

Medicare Advantage plans must cover everything Original Medicare covers, but they often include prescription drug coverage, dental, vision, and hearing benefits that Original Medicare does not. The trade-off is that you use the plan's network of doctors and hospitals, and you may pay copays or coinsurance when you use care.

Unlike Part B and Part D, Medicare Advantage premiums do not automatically adjust based on income through IRMAA. However, if you have a very high income, you may still pay an IRMAA surcharge on top of your plan premium if you also have Part D coverage through that plan.

What to do if your income drops

If your income falls due to retirement, job loss, death of a spouse, or other major life changes, you can ask Medicare to recalculate your IRMAA surcharge using your current-year income instead of the two-year-old tax return. This is called a Life-Changing Event request.

You must file the request within 60 days of the event that caused your income to drop. You will need to provide proof of the change, such as a termination letter from your employer, a death certificate, or a divorce decree. Medicare will review your request and may adjust your premium retroactively to the month the event occurred.

If you do not request a recalculation and your income has genuinely dropped, you may be overpaying your premium for the entire year. It is worth contacting Social Security or Medicare to ask about a Life-Changing Event adjustment if you have experienced a major income loss.

Understanding your Medicare Summary Notice

Every year, Medicare sends you a Medicare Summary Notice (MSN) that shows your current premiums, any IRMAA surcharges, and your coverage details. This notice arrives in the mail, usually in the fall, and shows what you will pay starting January of the next year. Review it carefully to make sure the income amount Medicare used is correct and that your coverage choices match what you intended.

If you see an error on your MSN — for example, if Medicare used the wrong income figure or listed a surcharge you do not think you owe — you can file an appeal. You have 120 days from the date on the notice to request a review. Contact Social Security or Medicare directly to start an appeal; do not wait until January when the new premium takes effect.

If your income or life situation changed during the year, your MSN is the right time to check whether you should request a Life-Changing Event adjustment before the new premium year begins.

How to estimate your 2024 and 2025 premiums

To estimate what you will pay, you need to know three things: your filing status, your MAGI from the relevant tax year, and which coverage parts you want. Start by finding the IRMAA income thresholds for the year you are asking about — these are published by Medicare and Social Security each fall.

Compare your MAGI to the threshold for your filing status. If your income is below the threshold, you pay only the base premium for Part B and Part D. If your income is above the threshold, you pay the base premium plus a surcharge that increases in steps as your income rises.

For Part B in 2024, the base premium is $164.90 per month, but this changes each year. For Part D, the base premium varies by plan, but the surcharge structure is the same. You can find current premium amounts and income thresholds on Medicare.gov or by calling Social Security at 1-800-772-1213.

Frequently Asked Questions

Why does Medicare use my income from two years ago instead of my current income?

Medicare uses a two-year lag because it takes time to process tax returns and calculate premiums for millions of people. The system is designed to be predictable — you know what you will pay based on a tax return you have already filed. If your current income is much lower, you can request a Life-Changing Event adjustment within 60 days of the event that caused the drop.

Can I avoid the IRMAA surcharge by filing taxes differently?

No. Medicare uses your Modified Adjusted Gross Income (MAGI) as reported on your federal tax return. You cannot reduce your MAGI by filing separately if you are married, and you cannot exclude certain types of income. If you have questions about how your specific income is counted, ask your tax preparer or contact Social Security directly.

What happens if I enroll late in Part B or Part D?

You will pay a permanent penalty added to your monthly premium for as long as you have that coverage. For Part B, the penalty is 10 percent of the base premium for each 12-month period you delayed. For Part D, it is 1 percent of the national average premium for each month you were without creditable coverage. These penalties do not go away, even if your income later drops below the IRMAA threshold.

Do I pay IRMAA surcharges on Medicare Advantage plans?

Only if your Medicare Advantage plan includes Part D prescription drug coverage. If you have a standalone Part D plan in addition to your Medicare Advantage plan, you pay IRMAA on the Part D portion. If your plan includes drug coverage, the IRMAA surcharge is added to your plan premium.

How do I know if my Medicare Summary Notice has an error?

Check that the income amount listed matches your tax return from two years ago. Verify that your coverage parts (A, B, D, or C) are listed correctly. If you see a surcharge you do not expect, confirm that your income is actually above the IRMAA threshold for your filing status. If something does not match, call Social Security at 1-800-772-1213 to request a review within 120 days of receiving the notice.