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Medicare Premiums Means Testing and Reassessment

| June 14, 2019

Typically, when a retiree reaches age 65 they sign up for Medicare which is the foundation of their health insurance plan. Medicare consists of several parts. Part A, which covers hospital expenses, is no cost. Part B, which covers care provider expenses, and Part D, which covers prescription drugs, require a monthly premium which is often deducted from a retirees’ Social Security benefits.

The premiums for both Medicare Part B and D are means tested which means higher income households pay a higher premium. The amount of the premium is determined by the income reported on a beneficiary’s income tax return with a two-year lag from when the return was filed. So, a year of high income can cause an individual’s Medicare premiums to increase sharply.

In some cases, household incomes may be expected to remain high which will require them to pay the higher Medicare premium. In other cases, a life-changing event may cause household income to decline to below the Medicare means testing income limits. In the case of a life-changing event an individual can complete Social Security Form 44 to report their change in income and have their Medicare premiums reduced.