Medicare Premiums Now Tied to Income

The flat monthly cost for the standard Medicare Part B premium in 2007 is $93.50. For the first time, however, a supplemental premium applies to those whose modified adjusted gross income ("MAGI") for the second preceding year exceeds certain levels. MAGI essentially is AGI plus tax exempt interest income.

The supplemental cost, depending on income tax filing status and MAGI, can be quite substantial in relation to the standard premium. The maximum monthly supplemental cost for 2007, $67.90, applies when MAGI exceeds $400,000 on a joint return or $200,000 on a single return. When MAGI is less than $160,000 on a joint return or $80,000 on a single return, only the standard premium applies. When MAGI is more than $160,000 joint/$80,000 single, but less than $400,000 joint/$200,000 single, supplemental charges less than the maximum are applied.

The supplemental cost for 2007 is only part of the story: 2007 supplemental charges are just one-third of the increase being phased-in ratably over 2007, 2008, and 2009. By 2009, those being charged the maximum supplemental premium can expect to be paying well over $3,000 per year for Medicare Part B coverage.

Supplemental premiums, like standard premiums, are withheld from social security benefits.