Medicare costs the same whether you work or not, but working can change what you owe

Your Medicare premiums — the monthly payments you make to have coverage — do not go up because you have a job. Part A (hospital insurance) is free for most people at 65. Part B (doctor visits) costs the same for everyone: $164.90 per month in 2024, though this amount changes each year. Part D (prescription drugs) varies by plan you choose.

What does change is your income-related monthly adjustment amount, or IRMAA. If you earn above a certain threshold while working, Medicare charges you more for Part B and Part D. For 2024, if you file taxes as single and your modified adjusted gross income exceeds $97,000, your Part B premium rises. If you file as married filing jointly and earn over $194,000 combined, the same happens. These thresholds shift each year.

You may also owe Social Security taxes on your wages even after you start Medicare. If you work and earn wages, you and your employer each pay 1.45% of your earnings toward Medicare Part A, with no income limit. This is separate from your Medicare premiums.

Key Takeaways

  • Part A is free at 65 for most people; Part B costs $164.90 per month in 2024 regardless of whether you work.
  • If your income from work pushes you above $97,000 (single) or $194,000 (married filing jointly), Medicare charges you an extra amount on top of your regular Part B premium.
  • You pay 1.45% Medicare tax on your wages as long as you work, even after you turn 65 and have Medicare.
  • Your employer also pays 1.45% Medicare tax on your wages, but this does not reduce your own paycheck.
  • The income thresholds that trigger higher premiums are based on your income from two years ago, so a recent job change may not affect your costs when ready.

How income-related premiums work

Medicare looks at your modified adjusted gross income from your tax return from two years before the year you are paying for. If you turned 65 in 2024, Medicare used your 2022 tax return to set your 2024 premiums. This two-year lag means a recent raise or job change will not affect what you pay this year.

The income brackets for 2024 are: single filers earning $97,000 to $121,000 pay an extra $70.30 per month for Part B; those earning $121,000 to $145,000 pay an extra $176; those earning $145,000 to $169,000 pay an extra $281.90; those earning $169,000 to $193,000 pay an extra $387.80; and those earning over $193,000 pay an extra $493.70. For married couples filing jointly, the brackets are roughly double. These amounts change each year.

Part D premiums follow the same income thresholds. If you hit an IRMAA bracket, your Part D plan charges you an extra amount on top of the plan's base premium. The exact amount depends on which plan you chose.

Medicare taxes you pay from your paycheck

As long as you work and earn wages, you pay Medicare payroll tax of 1.45% on every dollar you earn. This comes out of your paycheck automatically. Your employer matches this with another 1.45%, though you do not see that amount — it is a separate employer cost. There is no income limit on Medicare payroll tax, so high earners pay it on all their wages.

If you are self-employed, you pay both the employee and employer portions: 2.9% total on your net self-employment income. You can deduct half of this as a business expense on your tax return.

This payroll tax is not the same as your Medicare premiums. You pay it whether or not you have signed up for Medicare. It funds the Medicare Part A trust fund. Your premiums pay for your actual coverage.

When to report income changes to Medicare

If your income drops significantly — for example, you retire mid-year or take a lower-paying job — you can ask Medicare to recalculate your IRMAA using your current year's income instead of the two-year-old figure. This is called a life-changing event request.

You must file this request with Social Security within 60 days of the event. Acceptable events include retirement, job loss, death of a spouse, or divorce. A voluntary job change to a lower-paying position usually qualifies. You will need to provide proof: a letter from your employer, a tax return, or a notice from Social Security showing your benefit amount before and after.

If you do not report a change, you will pay the higher IRMAA amount until Medicare recalculates based on your next tax return two years later.

Part A and Part B costs while working

Part A (hospital insurance) is premium-free for people 65 and older who have worked and paid Medicare taxes for at least 10 years (40 quarters). If you do not meet this requirement, you can buy Part A for $278 to $505 per month in 2024, depending on how many quarters you worked. Part A has a deductible of $1,632 per hospital stay in 2024, which you pay before Medicare covers anything.

Part B (doctor and outpatient care) costs $164.90 per month in 2024 for most people. You pay a $240 annual deductible, then Medicare covers 80% of approved services and you pay 20%. If your income is above the IRMAA threshold, you pay the base premium plus the extra amount.

If you delay signing up for Part B after you turn 65, you may owe a late enrollment penalty of 10% of the Part B premium for each year you did not have it. This penalty stays on your premium for life. However, if you have health insurance through your employer, you may be able to delay Part B without penalty — ask your employer's benefits office whether your plan qualifies as "creditable coverage."

Part D prescription drug costs while working

Part D is optional coverage for prescription drugs. Plans vary widely in cost and which drugs they cover. Monthly premiums range from roughly $7 to $100 depending on the plan, plus any IRMAA surcharge. You also pay out-of-pocket costs for drugs: a copay or coinsurance for each prescription, and you hit a coverage gap (the "donut hole") where you pay more if your drug costs are high.

Like Part B, if you go without Part D coverage when you first become may be able to access and later sign up, you may owe a late enrollment penalty equal to 1% of the national average Part D premium for each month you were not covered. This penalty is added to your premium permanently. The exception is if you have other drug coverage through your employer that is at least as good as Part D — again, check with your benefits office.

How employer coverage interacts with Medicare

If your employer offers health insurance, you can keep that coverage and delay Medicare Part B and Part D without penalty, as long as your employer has 20 or more employees. Your employer coverage is considered primary, meaning it pays first, and Medicare pays second. Once you leave the job or lose the coverage, you have a special enrollment period to sign up for Medicare Part B and Part D without the late penalty.

You still must sign up for Part A at 65, even if you have employer coverage, because Part A is free and you cannot be penalized for having it. Part A does not conflict with employer insurance.

When you do leave your job, notify Social Security within three months. Bring your final pay stub, a letter from your employer confirming your coverage ended, and your Medicare card. Social Security will help you understand your enrollment options and any penalties you may have avoided.

Frequently Asked Questions

Do I have to stop working to get Medicare?

No. You become may be able to access for Medicare at 65 regardless of whether you work. You can continue working full-time, part-time, or not at all. Your Medicare coverage does not depend on your employment status, though your income from work may affect how much you pay.

Will my Medicare premiums go up if I get a raise?

Not when ready. Medicare uses your income from two years ago to set your premiums. A raise you receive this year will not affect your premiums until two years from now. If you retire or take a significant pay cut, you can ask Social Security to recalculate using your current income within 60 days of the change.

What happens to my Medicare if I go back to work after retiring?

Your Medicare coverage continues unchanged. You keep your Part A, Part B, and Part D coverage. You will pay Medicare payroll tax on your new wages (1.45% as an employee, matched by your employer). If your new income is high enough, your IRMAA may increase when Medicare recalculates based on your next tax return.

Can I use my employer's health insurance instead of Medicare?

If your employer has 20 or more employees, you can delay Part B and Part D while you have employer coverage. Part A is still free and you should sign up at 65. Once you leave the job, you have a special enrollment period to sign up for Part B and Part D without penalty. If your employer has fewer than 20 employees, Medicare becomes primary at 65 and you should sign up.

Do I pay Social Security taxes and Medicare taxes if I work past 65?

Yes. You pay both Social Security tax (6.2% of wages, matched by your employer) and Medicare tax (1.45% of wages, matched by your employer) as long as you earn wages. There is no age limit on these payroll taxes. The Social Security tax stops once you reach the annual wage cap, but Medicare tax has no cap.