Remember the so-called doc fix? Congress recently came up with a solution to avoid dramatic cuts in Medicare physician fees and in the process change the way doctors are paid. How was this change paid for? Mostly it wasn’t paid for, it just adds millions in new federal deficits. [Medicare actuaries always had to assume the cuts would take place even though they never were allowed by Congress].
However, to help pay for the increase in physician payments, Part B premiums for higher income beneficiaries are going up … by 30% in some cases. As you see below, low to moderate income beneficiaries are not affected … well, sort of.
The income levels at which higher premiums kick-in are frozen and not adjusted for inflation. This means over time more and more households will be affected. In addition, just because your regular income may be below the extra premium level, a required withdrawal from your 401k or IRA or the sale of a stock or other irregular income may cause you to pay higher premiums for a given year. Remember, the premiums for couples are determined on household income so even if one spouse has no income, they will both pay the extra premiums.
Also, for those affected, higher premiums also apply to Medicare Part D prescription coverage.
Here is a link to the 2015 Medicare premiums and income brackets.
Lower to moderate income households unaffected
Medicare Part B covers doctor and outpatient visits. Premium amounts are determined using modified adjusted gross income, or MAGI, per one’s federal income tax return two years prior to the current year. MAGI is adjusted gross income plus tax-exempt interest.
There are currently five MAGI brackets. Each of the married filing joint bracket amounts is double the corresponding single bracket amounts. Annual premiums range from $1,258.80 to $4,028.40 per person depending upon your bracket.
Individuals in the first two brackets, that is, those whose MAGI doesn’t exceed $107,000 using single filing status or $214,000 filing joint, will continue to pay the premiums they’re paying now.
New income bracket
The third MAGI bracket, which is currently $107,001 up to $160,000 for single individuals, with an associated annual Part B premium of $2,517.60, will be split into two brackets with a premium of $3,272.40 for the fourth bracket per the table below. Per the table, single individuals with MAGI between $133,501 and $160,000 will pay an additional $754.80, or 30%, for their Medicare Part B premiums beginning in 2018.
An annual premium of $3,272.40 is currently paid by single individuals whose MAGI is between $160,001 and $214,000. Beginning in 2018, those who fall into this bracket will pay $4,028.40. This represents an increase of $756.00, or 23.1%. The top premium of $4,028.40 is currently paid by single and joint filing status individuals whose MAGI exceeds $214,000 and $428,000, respectively.
via Medicare Part B premiums increasing up to 30% – MarketWatch.
QUINNSCOMMENTARY 
Looking at the chart, it looks like the change effectively brings people who were in the 4th tier in 2015 ($133,501 to $214,000) with an income above $160,000 into the top tier in 2018 in that the new tier $160,001 to $214,000 the premiums are identical to the tier above it. For all intents and purposes the number of tiers remains the same. This adds to the progressivity of the means tested premiums and accelerates the number of people who will be affected by non-adjusted for inflation premiums in years to come. Can means testing of social security be far behind?
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