Medicare: Part B Premiums
Patricia A. Davis
Specialist in Health Care Financing
June 11, 2013
Congressional Research Service
7-5700
www.crs.gov
R40082
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Medicare: Part B Premiums

Summary
Medicare is a federal insurance program that pays for covered health care services of most
individuals aged 65 and over and certain disabled persons. In 2013, the program is expected to
cover 52 million persons (43 million aged and 9 million disabled) at a total cost of $594 billion.
Most individuals (or their spouses) who are 65 and older, and have worked in covered
employment and paid Medicare payroll taxes for 40 quarters receive premium-free Medicare Part
A (Hospital Insurance). Those entitled to Medicare Part A (regardless of whether they are eligible
for premium-free Part A), have the option of enrolling in Part B, which covers such things as
physician and outpatient services and medical equipment.
Beneficiaries have a seven-month initial enrollment period, but those who enroll in Part B after
their initial enrollment period and/or reenroll after a termination of coverage may be subject to a
“delayed enrollment penalty” which is equal to a 10% surcharge for each 12 months of delay in
enrollment and/or reenrollment. Under certain conditions, select beneficiaries are exempt from
the delayed enrollment penalty; these include working individuals (and their spouses) with group
coverage, some military retirees, and some international volunteers.
While Part A is financed primarily by payroll taxes paid by current workers, Part B is financed
through a combination of beneficiary premiums and federal general revenues. The standard Part
B premiums are set to cover 25% of projected per capita Part B program costs for the aged, with
federal general revenues accounting for the remaining amount. In general, if projected Part B
costs increase or decrease, the premium rises or falls proportionately.
Most Part B participants must pay monthly premiums, which do not vary with a beneficiary’s age,
health status or place of residence. However, since 2007, higher-income enrollees pay higher
premiums to cover a higher percentage of Part B costs. Premiums of those receiving benefits
through Social Security are deducted from their monthly payments. Additionally, certain low-
income beneficiaries may qualify for Medicare cost-sharing and/or premium assistance from
Medicaid through a Medicare Savings Program. The Social Security Act includes a provision that
holds most Social Security beneficiaries harmless for increases in the Medicare Part B premium;
affected beneficiaries’ Part B premiums are reduced to ensure that their Social Security checks do
not decline from one year to the next.
Each year, the Centers for Medicare & Medicaid Services (CMS) determines the Medicare Part B
premiums for the following year. The standard monthly Part B premium for 2013 is $104.90.
Higher-income beneficiaries, currently defined as those with incomes over $85,000 a year, or
couples with incomes over $170,000 per year, pay $146.90, $209.80, $272.70, or $335.70 per
month, depending on their income levels.
Current issues related to the Part B premium that may come before Congress include the amount
of the premium and the rate of increase in recent years (and the potential net impact on Social
Security benefits), modifications to the late enrollment penalty, and possible increases in
Medicare premiums as a means to reduce federal spending and deficits.


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Medicare: Part B Premiums

Contents
Introduction ...................................................................................................................................... 1
Medicare Part B Eligibility and Enrollment .................................................................................... 2
Initial Enrollment Periods .......................................................................................................... 3
General Enrollment Period ........................................................................................................ 4
Late-Enrollment Premium Penalty and Exceptions ......................................................................... 5
Calculation of Penalty ............................................................................................................... 5
Exemptions to Penalty ............................................................................................................... 6
Current Workers .................................................................................................................. 7
Certain Military Retirees ..................................................................................................... 8
International Volunteers ...................................................................................................... 8
Equitable Relief ................................................................................................................... 8
Collection of the Part B Premium .................................................................................................... 9
Deduction of Part B Premiums from Social Security Checks ................................................... 9
Part B Enrollees Who Do Not Receive Social Security Benefits ............................................ 10
Determining the Part B Premium ................................................................................................... 10
Premium Calculation for 2013 ................................................................................................ 11
Contingency Reserve ............................................................................................................... 11
Income-Related Premiums ............................................................................................................. 12
Determination of Income ......................................................................................................... 13
Income Thresholds and Premium Adjustments ....................................................................... 14
Premium Assistance for Low-Income Beneficiaries ...................................................................... 16
Qualified Medicare Beneficiaries (QMBs) ....................................................................... 16
Specified Low-Income Medicare Beneficiaries (SLMBs) ................................................ 17
Qualifying Individuals (QIs) ............................................................................................. 18
Protection of Social Security Benefits from Increases in Medicare Part B Premiums .................. 18
Part B Premiums Over Time .......................................................................................................... 20
Current Issues ................................................................................................................................ 22
Premium Amount and Annual Increases ................................................................................. 22
Proposals to Modify the Late Enrollment Penalty ................................................................... 22
Proposals to Require a Part B Premium Surcharge for Beneficiaries in Medigap Plans
with Near First-Dollar Coverage .......................................................................................... 23
Deficit Reduction ..................................................................................................................... 24

Figures
Figure 1. Monthly Medicare Part B Premiums .............................................................................. 21

Tables
Table 1. Initial Enrollment Period .................................................................................................... 4
Table 2. Monthly Medicare Part B Premiums for 2013 ................................................................. 15
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Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for 2013 ........ 15
Table 4. 2013 Medicare Savings Program Eligibility Standards ................................................... 17
Table A-1. Monthly Part B Premiums, 1966-2013 ........................................................................ 26
Table B-1. Income Levels for Determining Medicare Part B Premium Adjustment and Per
Person Premium Amounts .......................................................................................................... 28
Table B-2. Income Levels for Determining Part B Premium Adjustment for Married
Beneficiaries Filing Separately and Associated Premiums ......................................................... 29
Table C-1. Projected Part B Premiums .......................................................................................... 30

Appendixes
Appendix A. History of the Part B Premium Statutory Policy and Legislative Authority ............. 25
Appendix B. Standard and High-Income Part B Premiums and Income Thresholds: 2007-
2013 ............................................................................................................................................ 28
Appendix C. Estimated Future Part B Premiums .......................................................................... 30
Appendix D. Part A Premiums ....................................................................................................... 31

Contacts
Author Contact Information........................................................................................................... 32
Acknowledgments ......................................................................................................................... 32

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Medicare: Part B Premiums

Introduction
Medicare is a federal insurance program that pays for covered health care services of most
individuals aged 65 and over and certain disabled persons. Medicare serves approximately one in
six Americans and virtually all of the population aged 65 and over. In calendar year (CY)2013,
the program is expected to cover 52 million persons (43 million aged and 9 million disabled) at a
total cost of $594 billion, accounting for approximately 3.6% of GDP.1 The Medicare program is
administered by the Centers for Medicare & Medicaid Services (CMS).
Medicare consists of four parts—Parts A through D. Part A covers hospital services, skilled
nursing facility services, home health visits, and hospice services. Part B covers a broad range of
medical services and supplies, including physician services, laboratory services, durable medical
equipment, and outpatient hospital services. Enrollment in Part B is voluntary, however most
beneficiaries (about 93%) with Part A also enroll in Part B. Part C provides private plan options,
such as managed care, for beneficiaries who are enrolled in both Parts A and B. Part D provides
optional outpatient prescription drug coverage.2
Each part of Medicare is funded differently.3 Part A is financed primarily through payroll taxes
imposed on current workers (2.9% of earnings, shared equally between employers and workers)
which is credited to the Hospital Insurance (HI) Trust Fund, and beneficiaries generally do not
pay premiums for Part A. In 2013, total Part A expenditures are expected to reach $271 billion
representing about 46% of program costs. Parts B and D, the voluntary portions, are funded
through the Supplementary Medical Insurance (SMI) Trust Fund which is financed primarily by
general revenues (transfers from the Treasury) and premiums paid by enrollees. In 2013, about
$2.7 billion in fees on manufacturers and importers of brand-name prescription drugs will also be
used to supplement the SMI trust fund.4 In 2013, Part B expenditures are expected to reach about
$251 billion and Part D expenditures, about $72 billion, representing 42% and 12% of program
costs respectively. (Part C is financed proportionately through the HI and SMI Trust Funds.)
Part B beneficiary premiums are set at a rate each year equal to 25% of expected per capita Part B
program costs for the aged for the year.5 In 2013, most beneficiaries pay the standard monthly
Part B premium of $104.90.6 Higher-income enrollees pay higher premiums set to cover a higher
percentage of Part B costs,7 while those with low incomes may qualify for premium assistance

1 Estimates from the 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf.
2 For additional information on the Medicare program, see CRS Report R40425, Medicare Primer, coordinated by
Patricia A. Davis and Scott R. Talaga.
3 See CRS Report R41436, Medicare Financing, by Patricia A. Davis.
4 For additional information see archived CRS Report R41128, Health-Related Revenue Provisions in the Patient
Protection and Affordable Care Act (ACA), by Janemarie Mulvey.
5 Beneficiary premiums cover approximately 12.1% of the costs of “traditional” Medicare (Parts A and B combined),
11.4% from Part B premiums, and 0.7% from voluntary Part A premiums. See Appendix D for information on Part A
premiums.
6 Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850-69859, November 21, 2012,
http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28275.pdf.
7 Depending on their level of income, beneficiaries subject to the income-related monthly adjustment pay a total
monthly premium of 35%, 50%, 65%, or 80% of expected per capita Part B costs for the aged. See “Income-Related
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Medicare: Part B Premiums

through one of several Medicare Savings Programs administered by Medicaid. Individuals who
receive Social Security or Railroad Retirement Board retirement or disability benefits have their
Part B premiums automatically deducted from their benefit checks. Part B premiums are
generally announced in the fall prior to the year that they are in effect (for example, the 2013 Part
B premiums were announced in November 2012).8
In addition to premiums, Part B beneficiaries must also pay other out-of-pocket costs when they
use services. The annual deductible for Part B services is $147 in 2013. After the annual
deductible is met, beneficiaries are responsible for coinsurance costs, which are generally 20% of
Medicare-approved Part B expenses.
This report provides an overview of Medicare Part B premiums, including information on: Part B
eligibility and enrollment; late enrollment penalties; collection of premiums; determination of
annual premium amounts; premiums for high-income enrollees; premium assistance for low-
income enrollees; protections for Social Security recipients from rising Part B premiums; and,
historical Medicare Part B premium trends. This report also provides a summary of various
premium related issues that may be of interest to Congress. Specific Medicare and Social Security
publications and other resources for beneficiaries, and those who provide assistance to them, are
cited where appropriate.
Medicare Part B Eligibility and Enrollment
An individual (or the spouse of an individual) who has worked in covered employment and paid
Medicare payroll taxes for 40 quarters is entitled to receive premium-free Medicare Part A
benefits upon turning 65. Those who have paid in for fewer than 40 quarters, may enroll in
Medicare Part A by paying a premium.9 All persons entitled to Part A (regardless of whether they
are eligible for premium-free Part A) are also entitled to enroll in Part B. An aged person not
entitled to Part A may enroll in Part B if he or she is age 65 or over and either a U.S. citizen, or an
alien lawfully admitted for permanent residence, who has resided in the United States
continuously for the immediately preceding five years.
Those who are receiving Social Security or Railroad Retirement Board (RRB) benefits are
automatically enrolled in Medicare, and coverage begins the first day of the month they turn 65.10
These individuals will receive a Medicare card and a “Welcome to Medicare” package about
three months before their 65th birthday.11 Those who are automatically enrolled in Medicare Part

(...continued)
Premium.”
8 The 2013 Part B premium rates were published on November 21, 2012, 77 Federal Register 69850,
http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28275.pdf.
9 For additional information on Part A premiums, see Appendix D.
10 For additional information on enrolling in Medicare, see Medicare publication “Understanding Medicare Enrollment
Periods” at http://www.medicare.gov/Publications/Pubs/pdf/11219.pdf.
11 See “Welcome to Medicare” publication at http://www.medicare.gov/Publications/Pubs/pdf/11095.pdf. When first
becoming eligible for Medicare, beneficiaries need to make a number of choices regarding the benefits they wish to
sign up for and how they wish to receive them. For example, new enrollees need to decide whether they wish to remain
in traditional Medicare (Parts A and B, the default option) or if they would like to receive their A and B benefits
through a private Medicare Advantage Plan (Part C). Additionally, beneficiaries will need to decide whether they
would like to sign up for an outpatient prescription drug plan (Part D). These options are described in the “Welcome to
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Medicare: Part B Premiums

A are also automatically enrolled in Part B.12 However, because beneficiaries must pay a premium
for Part B coverage, they have the option of turning it down.13 Disabled persons who have
received cash payments for 24 months under the Social Security or RRB disability programs also
automatically receive a Medicare card and are enrolled in Part B unless they specifically decline
such coverage.14 Those who choose to receive coverage through a Medicare Advantage plan (Part
C) must enroll in Part B.
Persons who are not receiving Social Security or RRB benefits, for example because they are still
working or have not yet reached their full retirement benefit eligibility age,15 must file an
application with the Social Security Administration or RRB for Medicare benefits.16 There are
two kinds of enrollment periods, one that occurs when individuals are initially eligible for
Medicare, and the later an annual general enrollment period for those who missed signing up
during their initial enrollment period. A beneficiary may drop Part B enrollment and re-enroll an
unlimited number of times, however premium penalties may be incurred.
Initial Enrollment Periods
Those who are not automatically enrolled in Medicare may sign up during a certain period when
they first become eligible. The initial enrollment period is seven months long and begins three
months before the month in which the individual first turns 65. (See Table 1.) Beneficiaries who
do not file an application for Medicare benefits during their initial enrollment period could be
subject to the Part B delayed enrollment penalty (see “Late-Enrollment Premium Penalty and
Exceptions” below). If an individual accepts the automatic enrollment in Medicare Part B, or
enrolls in Medicare Part B during the first three months of the initial enrollment period, coverage
will start with the month in which an individual is first eligible, e.g., the month of the individual’s
65th birthday. Those who enroll during the last four months, will have their coverage start date
delayed from one to three months after enrollment.17 The initial enrollment period of those

(...continued)
Medicare” package. For free personalized health insurance counseling, beneficiaries may contact their local State
Health Insurance Assistance Programs (SHIPs); contact information may be found at http://www.medicare.gov/
contacts/ and https://www.shiptalk.org/About/SHIProfileSearchForm.aspx.
12 Those who live in Puerto Rico are not enrolled in Medicare Part B automatically. They need to sign up for it during
the initial enrollment period or possibly be subject to a penalty. H.R. 670, introduced in the 113th Congress, would
extend this automatic enrollment to residents of Puerto Rico and create a special enrollment period and reduce late
enrollment penalties for those who did not sign up for Part B when first eligible.
13 Should a beneficiary decline Part B coverage, a new Medicare card will be issued that indicates that the beneficiary
has Part A coverage only.
14 Individuals with Amyotrophic Lateral Sclerosis (ALS) are not subject to the 24 month waiting period and Medicare
coverage begins the first day of the month during which disability benefits start. Additionally, the Medicare coverage
period for persons diagnosed with end-stage renal disease (ESRD) generally begins in the third month after the month
when dialysis begins.
15 In the past, individuals were generally eligible to receive both full Social Security retirement benefits and Medicare
coverage starting at age 65. However, the age to receive full retirement benefits has changed for some people,
depending on the year they were born. For example, some people won’t be eligible for full Social Security benefits
until age 67. See http://www.ssa.gov/pubs/10530.html.
16 To apply, individuals can call or visit their local Social Security office or call Social Security at 1-800-772-1213.
Some people may also apply online if they meet certain rules, at http://www.ssa.gov/medicareonly/. For RRB retirees,
application information may be found at http://www.rrb.gov/forms/opa/rb20/rb20.asp.
17 An eligibility and enrollment date calculator may be found on the Medicare.gov website at http://www.medicare.gov/
MedicareEligibility/home.asp?version=default&browser=IE%7C8%7CWindows+7&language=English.
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Medicare: Part B Premiums

eligible for Medicare based on disability or permanent kidney failure is linked to the date the
disability or treatment began.18
Table 1. Initial Enrollment Period
Month of Enrollment and Effective Dates

3 months before the
The month during which
Up to 3 months after the
month one turns 65
one turns 65
month one turns 65
Effective Dates
If one signs up during the
If one enrolls during one’s
The start date will be delayed if one
first 3 months of one’s initial
birthday month, the start date enrolls during the last 3 months of
enrollment period, Part B
will be the 1st day of the next
the initial enrollment period.
coverage starts the 1st day of
month.
one’s birthday month.a
•
If one signs up in the month
after the month one turns 65,
coverage starts 2 months after
enrollment.
•
If one signs up 2 or 3 months
after the month one turns 65,
coverage starts 3 months after
enrollment.
Example for someone If one enrolls in March, April, If one enrolls in June,
•
If one enrolls in July, coverage
turning 65 during the
or May, coverage begins June coverage begins July 1st.
begins September 1st.
month of June
1st.
•
If one enrolls in August,
The 7 month initial
coverage begins November 1st.
enrollment period would
run from March 1st
•
If one enrolls in September,
through September 30th.
coverage begins December 1st.
Source: SSA Publication No. 05-10043.
a. If one’s birthday falls on the 1st of the month, then the enrollment period starts a month earlier and
coverage may begin on the 1st day of the month prior to one’s birthday month.
General Enrollment Period
An individual who does not sign up for Medicare during the initial enrollment period must wait
until the next general enrollment period. In addition, persons who decline Part B coverage when
first eligible, or terminate Part B coverage, must also wait until the next general enrollment period
to enroll or re-enroll. The general enrollment period lasts for three months from January 1st to
March 31st of each year, with coverage beginning on July 1st of that year. A delayed enrollment
penalty may apply.19

18 For additional information on eligibility for the disabled under 65, see CRS Report RS22195, Social Security
Disability Insurance (SSDI) and Medicare: The 24-Month Waiting Period for SSDI Beneficiaries Under Age 65, by
Scott Szymendera.
19 The Part B general enrollment period is different from the Medicare Advantage and Part D annual enrollment period
which runs from October 15 to December 7 each year, with coverage effective the following January.
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Late-Enrollment Premium Penalty and Exceptions
Beneficiaries who enroll in Part B after their initial enrollment period and/or reenroll after a
termination of coverage may be subject to a “delayed enrollment penalty.” In 2011, about 1.3% of
Part B enrollees (about 600,000) paid this penalty.20 On average, their total premiums (standard
premium plus penalty) were about 32% higher than what they would have been had they not been
subject to the penalty.
The penalty provision was included in the original Medicare legislation enacted in 1965 to help
prevent adverse selection by creating a strong incentive for all eligible beneficiaries to enroll in
Part B.21 Adverse selection occurs when only those persons who think they need the benefits
actually enroll in the program. When this happens, per capita costs are driven up, and premiums
go up, thereby causing more persons (presumably the healthier, and less costly ones) to drop out
of the program.22 With most eligible persons over 65 enrolled in Part B, the costs are spread over
the majority of this population and per capita costs are less than would be the case if adverse
selection had occurred.
Those who receive premium assistance through a Medicare Savings Program do not pay this
penalty; it is paid on their behalf by Medicaid. Additionally, for those disabled persons under 65
subject to a premium penalty, once the individual reaches age 65, he or she qualifies for a new
enrollment period and would no longer pay a penalty.
Calculation of Penalty
The delayed enrollment penalty is equal to a 10% premium surcharge for each full 12 months of
delay in enrollment and/or reenrollment during which the beneficiary was eligible for Medicare.23
The length of the period equals: (1) the number of months that elapse between the end of the
initial enrollment period and the end of the enrollment period in which the individual actually
enrolls; or (2) for a person who re-enrolls, the months that elapse between the termination of
coverage and the close of the enrollment period in which the individual enrolls.
Generally, individuals who do not enroll in Part B within a year of the end of their initial
enrollment period would be subject to the premium penalty. For example, if an individual’s initial
enrollment period ended in September 2010 and the individual subsequently enrolled during the
2011 general enrollment period (January 1st through March 31st ), the delay would be less than 12
months and the individual would not be subject to a penalty. However, if that individual delayed
enrolling until the 2013 general enrollment period, the premium penalty would be 20%.

20 Figures provided to CRS by the Centers for Medicare & Medicaid Services, March 2012.
21 Social Security Act §1839(b).
22 Specifically, adverse selection occurs when beneficiaries, who generally have more information than insurers about
their own health status and expected health care needs, make insurance purchasing decisions based on their expected
use of the insurance benefit. Their decision to purchase insurance is based on a comparison of the value of the
insurance coverage, given their expected use, and the cost of the insurance. Should only (or disproportionately) persons
who are high health care users enroll in the program, per capita costs would increase, thereby making the health
insurance purchase decision less attractive for healthier, and presumably less costly, beneficiaries who then, in turn,
might drop out of the program. Subsequent iterations of this cycle would drive premium costs higher and higher for a
smaller and smaller subset of ever sicker and costlier beneficiaries.
23 Social Security Act §1839(b).
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(Although the elapsed time covers a total of 30 months of delayed enrollment, the episode
includes only two full 12-month periods.) An individual who waits more than 10 years to enroll in
Part B would pay twice the standard premium amount.
The surcharge is calculated as a percentage of the monthly standard premium amount (e.g., in
2013, $104.90), and that amount is added to the beneficiary’s premium each month.24 For the
example above, in which the individual is subject to a 20% premium penalty, the total premium in
2013 would be calculated as follows:

Premium Penalty = Standard Premium x Applicable Percentage
Standard premium + Premium Penalty = Penalty Adjusted Premium
Example of a 20% penalty in 2013: $104.90 + ($104.90 x 20%) = $125.88

For those subject to the high-income premium (see “Income-Related Premium”), the late
enrollment surcharge applies only to the standard monthly premium amount and not to the higher
income adjustment portion of their premiums. Using the example above, should the beneficiary
have an income of between $85,000 and $107,000, the applicable income-related adjustment of
$42.00 would be added onto the penalty adjusted premium of $125.88, for a total monthly
premium of $167.88.25
There is no upper limit on the amount of the surcharge that may apply, and the penalty continues
to apply for the entire time the individual is enrolled in Part B. Each year the surcharge is
calculated using the standard premium amount for that particular year. Therefore, if premiums
increase in a given year, the dollar value of the surcharge will increase as well.
Exemptions to Penalty
Under certain conditions, select beneficiaries may be exempt from the delayed enrollment
penalty. Beneficiaries who are exempt include working individuals (and their spouses) with group
coverage, some military retirees, some international volunteers, and those who based their non-
enrollment decision on incorrect information provided by a federal representative. Individuals
who are permitted to delay enrollment have their own special enrollment periods (SEP).

24 A late premium calculator may be found on the Medicare.gov website at http://www.medicare.gov/
MedicareEligibility/home.asp?dest=
NAV%7CHome%7CResources%7CSurchargeCalcQuestions%7CResourcesOverview&version=default&browser=
IE%7C8%7CWindows+7&language=English.
25For additional information, see SSA Programs Operation Manual Section HI 01101.031, “How IRMAA is Calculated
and How IRMAA Affects the Total Medicare Premium,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0601101031.
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Current Workers
A working individual and/or the spouse of a working individual may be able to delay enrollment
in Medicare Part B without being subject to the delayed enrollment penalty. Delayed enrollment
is permitted when an individual 65 or over has group health insurance coverage based on the
individual’s or spouse’s current employment (with an employer with 20 or more employees).
About 1.7 million of the 2.8 million working aged population are enrolled in Part A only, with
most of the rest enrolled in both Parts A and B.26 Delayed enrollment is also permitted for certain
disabled persons who have group health insurance coverage based on their own or a family
member’s current employment with a large group health plan. For the disabled, a large group
health plan is defined as one which covers 100 or more employees.
Specifically, persons permitted to delay coverage without penalty are those persons whose
Medicare benefits are determined under the Medicare secondary payer (MSP) program.27 Under
MSP, an employer (with 20 or more employees) is required to offer workers aged 65 and over
(and workers’ spouses aged 65 and over) the same group health insurance coverage that is made
available to other employees. The worker has the option of accepting or rejecting the employer’s
coverage. If he or she accepts the coverage, the employer plan is primary (i.e., pays benefits first)
for the worker and/or spouse over age 65, and Medicare becomes the secondary payer (i.e., fills in
the gaps in the employer plan, up to the limits of Medicare’s coverage). Similarly, a group health
plan offered by an employer with 100 or more employees is the primary payer for its employees
under 65 years of age, or their dependents, who are entitled to Medicare because of disability.28
Such individuals may sign up for Medicare Part B (or Part A) anytime that they (or their spouse)
are still working, and they are covered by a group health plan through the employer or union
based on that work. Additionally, those who qualify for Medicare based on age (i.e., over 65),
may sign up during the 8-month period after employment or group health plan coverage ends,
whichever happens first. Disabled individuals whose group plan is involuntarily terminated have
six months to enroll without penalty.29
Individuals who fail to enroll during this special enrollment period are considered to have delayed
enrollment and thus could become subject to the penalty. For example, even though an individual
may have continued health coverage through the former employer after retirement or have

26 Medicare Working-Aged Beneficiary Counts, Through December 2012, from CMS 100% Unloaded Enrollment
Database.
27 Social Security Act §1837(i) and 42 CFR §407.20. See Medicare Publication “Medicare and Other Health Benefits:
Your Guide to Who Pays First,” http://www.medicare.gov/publications/pubs/pdf/02179.pdf and CMS Medicare
Secondary Payer & You web page at https://www.cms.gov/Medicare/Coordination-of-Benefits/
MedicareSecondPayerandYou/index.html?redirect=/MedicareSecondPayerandYou/.
28 For Medicare-eligible beneficiaries employed by organizations with fewer than 20 employees (or fewer than 100
employees for the disabled), Medicare generally pays primary and the employer group health plan is secondary. In such
cases, employers may offer coverage that wraps around the Medicare benefit, and beneficiaries would need to enroll in
Medicare Part B when first eligible to avoid a gap in coverage. Individuals who are turning 65 and still working should
check with their employers’ benefit administrator to learn how their employer health coverage works with Medicare.
29 The Balanced Budget Act of 1997 (BBA, P.L. 105-33) added this exception to the penalty. This exception is for
disabled persons who: (a) at the time they first become eligible for Part B are enrolled in a group health plan (regardless
of size) by virtue of their current or former employment, and (b) whose continuous enrollment under the plan is
involuntarily terminated at a time when their enrollment in the plan is by virtue of their or their spouse’s former (i.e.,
not current) employment. These individuals have a special six-month enrollment period beginning on the first day of
the month in which the termination occurs.
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COBRA coverage, he or she must sign up for Part B within 8 months of retiring to avoid paying a
Part B penalty if the individual eventually enrolls. Individuals who return to work and receive
health care coverage through that employment may be able to drop Part B coverage, qualify for a
new special enrollment period upon leaving that employment, and re-enroll in Part B again
without penalty as long as enrollment is completed within the specified timeframe.
Certain Military Retirees
Some military retirees may also be exempt from the late enrollment penalty. Health care coverage
for military retirees was expanded by the Floyd D. Spence National Defense Authorization Act
for FY2001 (P.L. 106-398). This law established the TRICARE For Life (TFL) program, which
acts as a secondary payer to Medicare and provides supplemental coverage to TRICARE-eligible
beneficiaries who are entitled to Medicare Part A and have Medicare Part B, based on age,
disability, or end-stage renal disease (ESRD). The Patient Protection and Affordable Care Act
(ACA, P.L. 111-148, Section 3110) establishes a 12-month special enrollment period (SEP) for
certain individuals who are otherwise eligible for TRICARE and are entitled to Medicare Part A
based on disability or ESRD, but have declined Part B. The Secretary of Defense is required to
identify and notify individuals of their eligibility for this Special Enrollment Period. The SEP
begins the first day of the month following the end of the individual’s initial enrollment period, or
if later, the month the individual is notified that s/he is entitled to Medicare Part A and Part B. The
late enrollment surcharge is waived for those who enroll during the SEP. (If the individual does
not enroll during the SEP, he or she may only enroll during the General Enrollment Period and the
late enrollment surcharge could apply.)
International Volunteers
Some international volunteers may also be exempt from the Part B late enrollment penalty. The
Deficit Reduction Act of 2005 (P.L. 109-171) permits certain individuals to delay enrollment in
Part B without a delayed enrollment penalty if they volunteered outside of the United States for at
least 12 months through a program sponsored by a tax-exempt organization defined under Section
501(c)(3) of the Internal Revenue Code.30 The individuals must demonstrate they had health
insurance coverage while serving in the international program. Individuals permitted to delay
enrollment have a six-month special enrollment period, which begins on the first day of the first
month they no longer qualify under this provision.
Equitable Relief
Under certain circumstances, a special enrollment period may be created and/or late enrollment
penalties may be waived if a Medicare beneficiary can establish that an error, misrepresentation,
or inaction of a federal worker or an agent of the federal government (such as an employee of the
Social Security Administration (SSA), CMS, or a Medicare administrative contractor) resulted in
late Part B enrollment.31 In order to qualify for an exception under these conditions, the
beneficiary must provide documentary evidence of the error, which “can be in the form of

30 Social Security Act §1837(k) and 42 CFR §407.21.
31 Social Security Act §1837(h) and 42 CFR §407.32.
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statements from employees, agents, or persons in authority that the alleged misinformation,
misadvice, misrepresentation, inaction, or erroneous action actually occurred.”32
Collection of the Part B Premium
If a person is enrolled in both Medicare Part B and Social Security, the Part B premiums are
deducted from the person’s Social Security benefit.33 In addition, railroad retirees and civil
service annuitants have their Part B premiums deducted from their monthly checks when
possible. This withholding does not apply to those beneficiaries receiving state public assistance
through a Medicare Savings Program as their premiums are paid by their state Medicaid program
(see “Premium Assistance for Low-Income Beneficiaries”). Beneficiaries who are not entitled to
a monthly cash benefit from Social Security, a railroad retirement annuity or pension, or a federal
civil service annuity must pay the Part B premium directly to CMS.34
Deduction of Part B Premiums from Social Security Checks
Ultimately, everyone who is eligible for Social Security retirement or disability benefits qualifies
for Medicare. Most people who elect to participate in the Part B program pay the Medicare Part B
premium.35 By law, a Social Security beneficiary who is also enrolled in Medicare Part B must
have the Part B premium automatically deducted from his or her Social Security benefits.36
Automatic deduction from the Social Security benefit check also applies to Medicare Advantage
participants, who are enrolled in private health-care plans in lieu of traditional Medicare.37
About 65% of Social Security beneficiaries (37 million persons) have Medicare Part B premiums
deducted from their benefit checks.38 Social Security beneficiaries who do not pay Medicare Part
B premiums include those who are under the age of 65 and don’t yet qualify for Medicare (e.g.,
began receiving Social Security benefits at age 62), receive low-income assistance from Medicaid
to pay the Part B premium, have started to receive Social Security disability insurance (SSDI) but
are not eligible for Medicare Part B because they have not received SSDI for 24 months, or chose
not to enroll in Medicare Part B.

32 For additional information, see Social Security Program Operations Manual Section HI 00805.170 Conditions for
Providing Equitable Relief, https://secure.ssa.gov/poms.nsf/lnx/0600805170 and Section HI 00805.175 Evidence of
Government Error or Delay, https://secure.ssa.gov/poms.nsf/lnx/0600805175.
33 Social Security Act §1840(a)(1).
34 42 C.F.R. §408.60.
35 Some beneficiaries do not pay Medicare premiums because they receive low-income assistance.
36 Social Security Act §1840(a)(1).
37 Beneficiaries who receive their Parts A and B benefits through Medicare Advantage (MA, Part C), must still pay the
monthly Part B premium, but may pay different amounts. For example, some MA plans may offer an additional benefit
by reducing the amount one pays for the Part B premium. Alternatively, some MA plans may be more expensive than
traditional Medicare, for example because they provide benefits beyond what is provided under traditional Medicare,
and may charge an additional premium in addition to the Part B premium. SSA has in place a “safety net” to prevent
the deduction of more than $300 of Part C and Part D plan premiums from a single Social Security check. For amounts
over $300, the enrollee may be billed directly.
38 Number of people as of January 2013. Figures provided to CRS by the Social Security Administration.
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The amount of an individual’s Social Security benefits cannot go down one year to the next as a
result of the annual Part B premium increase, except in the case of higher-income individuals
subject to income-related premiums. (See “Protection of Social Security Benefits from Increases
in Medicare Part B Premiums.”) For those beneficiaries “held-harmless,” the dollar amount of
their Part B premium increases would be held below or equal to the amount of the increase in
their monthly Social Security benefits.
Part B Enrollees Who Do Not Receive Social Security Benefits
About 2% of Medicare Part B enrollees do not receive Social Security benefits. For example,
certain persons who spent their careers in employment that was not covered by Social Security,
including certain federal, state, or local government workers, and certain other categories of
workers, do not receive Social Security benefits, but may still qualify for Medicare. For those
who receive benefit payments from the Railroad Retirement Board (RRB),39 or the Civil Service
Civil Service Retirement System,40 Part B premiums are deducted from the enrollees’ monthly
benefit payments but net retirement benefit amounts are not “held harmless” from increases in the
Part B premium. For those who do not receive these types of benefit payments, Medicare will bill
directly for their premiums every 3 months.41 Nonpayment of premiums results in termination of
enrollment in the Part B program, although a grace period (through the last day of the third month
following the month of the due date) is allowed for beneficiaries who are billed and pay directly.42
Determining the Part B Premium
Each year, the CMS actuaries estimate total per capita Part B costs for beneficiaries aged 65 and
older over for the following year and set the Part B premium to cover 25% of these expected
expenditures.43 However, because prospective estimates may differ from the actual spending for
the year, contingency reserve adjustments are made to ensure sufficient income to accommodate
potential variation in actual expenditures during the year. The Part B premium is a single national
amount that does not vary with a beneficiary’s age, health status or place of residence. Premiums
may be adjusted, however, for late enrollment (see “Late-Enrollment Premium Penalty and
Exceptions”) and for beneficiaries with high incomes (see “Income-Related Premiums”).

39 Social Security Act §1840(b)(1).
40 Generally, employees of the federal government hired before 1984 are covered by the Civil Service Retirement
System (CSRS) and are not covered by Social Security. Most federal workers first hired into federal service on or after
January 1984, participate in the Federal Employees’ Retirement System (FERS) which includes Social Security
coverage.
41 Payment may be made by check, money order, or credit card; or one may schedule it to be automatically deducted
from one’s bank account. Premium billing form and information may be found at https://secure.ssa.gov/poms.nsf/lnx/
0600825914.
42 This grace period may be extended for up to an additional three months if the enrollee can establish that non-payment
was due to circumstances beyond his or her control, such as being physically or mentally incapable of making premium
payments or due to an administrative error.
43 Part B premium announcements are generally made in the fall prior to the effective year. For example, the Part B
premium rate was announced in November of 2012.
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Premium Calculation for 201344
Monthly Part B premiums are based on the estimated amount that would be needed to finance
Part B expenditures on an incurred basis during the year. In estimating needed income and to
account for potential variation, CMS takes into consideration the difference in prior years of
estimated and actual program costs, the likelihood and potential impact of potential legislation
affecting Part B in the coming year, and the expected relationship between incurred and cash
expenditures (e.g., payments for some services provided during a particular year may not be paid
until the following year). Once the premium has been set for a year, it will not be changed during
that year.
While both aged and disabled Medicare beneficiaries may enroll in Part B, the statute provides
that Part B premiums are to be based only on the expected benefit costs, i.e., the monthly
actuarial rate, for the aged (those over 65). (See Appendix A for a discussion of the history of
the premium methodology.) Part B costs not covered by premiums are paid for through transfers
from the general fund of the Treasury. The monthly actuarial rates for both the aged and disabled
enrollees are used to determine the needed amount of general revenue funding per beneficiary
each month (one-half of the expected average monthly cost for each aged enrollee and one-half of
the expected cost for each disabled enrollee).
To determine the 2013 monthly Part B premium amount, CMS first estimated the monthly
actuarial rate for enrollees age 65 and older using actual per-enrollee costs by type of service
from program data through 2011 and projected these costs for subsequent years. For 2013, CMS
estimated that the monthly amount needed to cover one-half of the total benefit and
administration costs for the aged would be $198.11. However, because of expected variations
between projected and actual costs, a contingency adjustment of $14.07 was added to this amount
(see “Contingency Reserve” below). After a reduction of $2.38 to account for expected interest on
trust fund assets, the monthly actuarial rate for the aged was determined to be $209.80. As
premiums are only based on projections of expected costs of the aged, and the actuarial monthly
amount for the aged accounts for one-half of projections of total costs (with the actuarial monthly
amount for the disabled making up the other half), the 2013 Part B premium amount is one-half
of $209.80, or $104.90 per month (25% of the monthly expected per capita costs of the aged).
Contingency Reserve
The contingency reserve is the amount set aside to cover an appropriate degree of variation
between actual and projected costs. In recent years, CMS has noted that Part B expenditures have
been higher than expected under current law.45 In some cases, legislation that resulted in
increased Medicare Part B expenditures for the year was enacted after the premium for the year
had been set. For example, current law specifies a physician payment formula called the
sustainable growth rate system (SGR) for calculating the annual update to the conversion factor

44 “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning
January 1, 2013,” 77 Federal Register 69850, November 21, 2012,http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/
2012-28275.pdf.
45 Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850, November 21, 2012,
http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28275.pdf.
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used to determine payments under the physician fee schedule.46 The SGR formula has called for a
reduction in the update factor (i.e., lower reimbursement rates) for each year since 2003.
However, Congress has overridden the payment cut in every year except one, by passing
legislation that has either frozen or slightly increased the reimbursement rates. These actions have
often led to discrepancies between the actual and projected Part B costs.
In calculating the premium for 2013, CMS recognized the possibility that Congress would
override the scheduled reduction of about 27% in physician fees for 2013 (thereby significantly
increasing Part B expenses), and provided for the maintenance of a somewhat higher contingency
reserve than would otherwise be necessary in calculating the 2013 premium.47
Additionally, CMS assumed that the reduction in Medicare benefit payments under the Budget
Control Act of 2011 (P.L. 112-25) scheduled to start in 2013 would be modified or postponed.48
CMS estimated that Part B expenditures would be reduced by $4.3 billion in 2013 under
sequestration. The contingency margin was adjusted to accommodate the possibility that
sequestration would not occur.49
Additionally, starting in 2011, manufacturers and importers of brand-name drugs began paying a
fee that is allocated to the SMI trust fund. The contingency reserve was thus reduced to account
for this additional revenue. Further, certain payment incentives to encourage the development and
use of health information technology (HIT) by Medicare physicians, are excluded from premium
determinations. (HIT bonuses or penalties will be directly offset through transfers of general
funds from the Treasury.) The downward 2013 contingency margin adjustment of $14.07 reflects
the expected net effects of all of these factors.
Income-Related Premiums
For the first forty-one years of the Medicare program, all Part B enrollees paid the same Part B
premium regardless of their income. However, the Medicare Modernization Act of 2003 (MMA;
P.L. 108-173)50 required that, beginning in 2007, high-income enrollees pay higher premiums.51
About 4% of Part B enrollees were estimated to have paid this higher premium in 2012.52

46 For additional information on the Medicare physician rate system, see CRS Report R40907, Medicare Physician
Payment Updates and the Sustainable Growth Rate (SGR) System, by Jim Hahn and Janemarie Mulvey.
47 The American Taxpayer Relief Act of 2012 (P.L. 112-240), signed into law on January 2, 2013, prevented the
reduction in Medicare physician payment rates slated to begin on January 1, 2013, and instead froze payment rates at
their current level though December 31, 2013.
48 For a comprehensive discussion of the BCA, see CRS Report R41965, The Budget Control Act of 2011, by Bill
Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan. For Medicare specific rules under BCA, see CRS Report
R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules, coordinated by Karen Spar.
49 The American Taxpayer Relief Act of 2012 (P.L. 112-240), signed into law on January 2, 2013, postponed the
automatic reduction by two months. See CRS Report R42884, The “Fiscal Cliff” and the American Taxpayer Relief
Act of 2012, coordinated by Mindy R. Levit. No additional action has been taken, and payment reductions are
scheduled to go into effect in April 2013.
50 The MMA would have phased in the increase over five years; however, the Deficit Reduction Act of 2005 (DRA,
P.L. 109-171) shortened the phase-in period to three years.
51 At the time of enactment of the MMA, the Congressional Budget Office (CBO) estimated that 1.2 million persons
(3% of beneficiaries) would pay higher premiums in 2007; and 2.8 million persons (6% of beneficiaries) would pay
higher premiums in 2013. CBO further estimated that the MMA provision would reduce federal outlays by $13.3
(continued...)
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Adjustments are made to the Part B premiums for high-income beneficiaries with the share of
expenditures paid by beneficiaries increasing with income. This share ranges from 35% to 80% of
the value of Part B coverage. In 2013, individuals whose income exceeds $85,000, and couples
whose income exceeds $170,000, are subject to higher premium amounts. Income thresholds used
in determining high-income Part B premiums for 2011 through 2019 are frozen at the 2010
levels.53 The current law provision that prevents a beneficiary’s Social Security benefits from
decreasing from one year to the next as a result of the Part B premium increase does not apply to
those subject to an income-related increase in their Part B premiums. (See “Protection of Social
Security Benefits from Increases in Medicare Part B Premiums.”)
Determination of Income
To determine those subject to the high-income premium, Social Security uses the most recent
Federal tax return provided by IRS. In general, the taxable year used in determining the premium
is the second calendar year preceding the applicable year. For example, the 2012 tax return (2011
income) was used to determine who would pay the 2013 high-income premiums.54
High-income adjustments to Part B premiums are referred to as the income-related monthly
adjustment amount (IRMAA). The income definition on which these premiums are based is
modified adjusted gross income (MAGI) which is different from total income. Specifically, gross
income equals total income (from all sources) minus certain exclusions (e.g., nontaxable Social
Security benefits). From gross income, adjusted gross income (AGI) is calculated to reflect a
number of deductions, including trade and business deductions, losses from sale of property, and
alimony payments. MAGI is defined as AGI55 plus certain foreign earned income and tax-exempt
interest.56
If a person had a one-time increase in taxable income in a particular year (such as from the sale of
income producing property), that increase would be considered in determining the individual’s
total income for that year and thus liability for the income-related premium two years ahead. It
would not be considered in the calculations for future years.

(...continued)
billion over the 2007-2013 period. CBO estimated that the DRA provision accelerating the phase-in would increase
premium collections by $1.6 billion over the 2007-2010 period. The MMA estimate and the DRA estimate were each
made by CBO at the time of enactment of each law. Both estimates were based on the CBO budget baseline in effect at
the time. As is the case for all CBO estimates, the earlier estimates are incorporated into subsequent CBO baselines.
Therefore the two savings estimates cannot be added together.
52Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850, November 21, 2012,
http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28275.pdf.
53 Section 3402 of the Patient Protection and Affordable Care Act (P.L. 111-148).
54 If an enrollee amended his or her tax return and it changed the income used to determine the high-income
adjustments, the updated information should be provided to Social Security so that it may correct or remove the
income-related monthly adjustment amounts.
55 Internal Revenue Code, Section 62.
56 The definition of MAGI for IRMAA in Medicare is different from the MAGI definition in certain ACA Medicaid
provisions. See CRS Report R41997, Definition of Income for Certain Medicaid Provisions and Premium Credits in
ACA, coordinated by Janemarie Mulvey.
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In the case of certain major life-changing events that result in a significant reduction in modified
MAGI, an individual may request to have the determination made for a more recent year than the
second preceding year.57 Major life-changing events include (1) death of a spouse; (2) marriage;
(3) divorce or annulment; (4) partial or full work stoppage for the individual or spouse; (5) loss
by individual or spouse of income from income-producing property when the loss is not at the
individual’s direction (such as in the case of a natural disaster); or (6) reduction or loss for
individual or spouse of pension income due to termination or reorganization of the plan or
scheduled cessation of the pension.
If Medicare enrollees disagree with decisions regarding their income-related monthly adjustment
amounts, they may file an appeal with Social Security. Enrollees may either submit a “Request
for Reconsideration”58 or contact their local Social Security office to file an appeal. (An enrollee
does not need to file an appeal if he or she is requesting a new decision based on a life-changing
event described above, or if the enrollee has shown that Social Security used the wrong
information to make the original decision.)
Income Thresholds and Premium Adjustments
Depending on their level of income, beneficiaries may be classified into one of five income
categories.59 In 2013, individuals with incomes less than $85,000 a year ($170,000 for a couple)
pay the standard premium which is based on 25% of the average Part B per capita cost.
Individuals with income over $85,000 per year and couples with income over $170,000 per year
pay a higher percentage of Part B costs. Depending on one’s level of income over these threshold
amounts, premiums may be adjusted to cover 35%, 50%, 65%, or 80% of the value of Part B
coverage (with the rest being subsidized through federal general revenues). The five income
categories and associated premiums for 2013 are shown below in Table 2. When both members
of a couple are enrolled in Part B, each pays the applicable premium amount.

57 Social Security Form SSA-44, http://www.ssa.gov/online/ssa-44.pdf.
58 Social Security Form SSA-561-U2, http://www.ssa.gov/online/ssa-561.pdf.
59 Social Security Act §1839(i).
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Table 2. Monthly Medicare Part B Premiums for 2013
Income-
Total
Levels of Premium
Related
Monthly
Adjustment and
Monthly
Premium
Percentage of
Beneficiaries who file an
Adjustment
(standard
Costs Covered by
individual tax return with
Beneficiaries who file a joint
Amount
premium +
Premiums
income:
tax return with income:
(IRMAA)
adjustment)
Standard = 25%
Less than or equal to $85,000
Less than or equal to $170,000
$0.00
$104.90
Level 1 = 35%
Greater than $85,000 and less
Greater than $170,000 and less
than or equal to $107,000
than or equal to $214,000
$42.00
$146.90
Greater than $107,000 and less Greater than $214,000 and less
Level 2 = 50%
than or equal to $160,000
than or equal to $320,000
$104.90
$209.80
Greater than $160,000 and less Greater than $320,000 and less
Level 3 = 65%
than or equal to $214,000
than or equal to $428,000
$167.80
$272.70
Level 4 = 80%
Greater than $214,000
Greater than $428,000
$230.80
$335.70
Source: Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial
Rates, Premium Rate, and Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850, November
21, 2012, http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28275.pdf.
Married persons who lived with their spouse at some point during the year, but who filed separate
returns, are subject to different premium amounts. There are two higher income categories that
determine the additional monthly premium adjustment for these beneficiaries. The income levels
and premium amounts are shown in Table 3.
Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for
2013
Beneficiaries who are married and
lived with their spouse at any time
Income-Related
Total Monthly Premium
during the year, but file a separate
Monthly Adjustment
(standard premium
tax return from their spouse:
Amount (IRMAA)
+adjustment)
Less than or equal to $85,000
$0.00
$104.90
Greater than $85,000 and less than or
equal to $129,000
$167.80
$272.70
Greater than $129,000
$230.80
$335.70
Source: “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible
Beginning January 1, 2013,” 77 Federal Register 69850, November 21, 2012, http://www.gpo.gov/fdsys/pkg/FR-
2012-11-21/pdf/2012-28275.pdf.
The original provision establishing the Part B income related premiums set the initial income
threshold and high-income level ranges. Prior to 2010, annual adjustments to these levels were
based on annual changes in the consumer price index for urban consumers (CPI-U), rounded to
the nearest $1,000. However, the ACA froze the income thresholds and ranges at the 2010 level
through 2019, rather than allowing them to rise with inflation.60 Therefore, the thresholds will

60 Section 3402 of the ACA (P.L. 111-148). Because more beneficiaries are expected to pay this higher premium over
time and therefore reduce the amount of general revenues needed to fund Part B, CBO scored this provision as saving
the federal government $25 billion over 10 years (FY2010-FY2019), http://www.cbo.gov/sites/default/files/cbofiles/
(continued...)
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remain at $85,000 and $170,000 through 2019. This means that over time, as income rises with
inflation, including increases in Social Security benefits, a greater share of Medicare enrollees
may pay the high-income premiums. In 2020 and subsequent years, the income thresholds are
again to be indexed to inflation as if they had not been frozen between 2011 and 2019.
Premium Assistance for Low-Income Beneficiaries
Medicare beneficiaries with limited income and resources may be able to qualify for assistance
with their premiums and other out-of-pocket expenses.61 About one in five Medicare beneficiaries
receives Part B premium subsidies.
Medicare beneficiaries who qualify for full Medicaid benefits (full dual-eligibles) have the
majority of their health care expenses paid for by either Medicare or Medicaid. For these
individuals, Medicaid covers the majority of Medicare premium and cost-sharing expenses, and
supplements Medicare by providing coverage for services not covered under Medicare, such as
dental services and long-term services and supports (LTSS). In cases where services are covered
by both Medicare and Medicaid, Medicare pays first and Medicaid picks up most of the
remaining costs. Each state has different rules about eligibility and applying for Medicaid.62
Beneficiaries who do not meet their respective state’s eligibility criteria for Medicaid may still
qualify for assistance with Part B premiums if they have incomes of less than 135% of the federal
poverty level (FPL) and assets of less than $7,080 for an individual or $10,620 for a couple in
2013.63 These assistance programs are commonly referred to as Medicare Savings Programs
(MSP).64 Eligible individuals fall into one of the following coverage groups:
Qualified Medicare Beneficiaries (QMBs)
Aged or disabled persons with incomes at or below FPL may qualify for the QMB program.65 In
2013, the QMB monthly qualifying income levels are $958 for individuals and $1,293 for a

(...continued)
ftpdocs/113xx/doc11379/amendreconprop.pdf.
61 See Medicare.gov, “Help with Medical and Drug Costs” at http://www.medicare.gov/navigation/medicare-basics/
medical-and-drug-costs.aspx. Subsidies are also available for low-income beneficiaries enrolled in Part D, the
outpatient prescription drug benefit. Those who are eligible for assistance with Part B premiums through their Medicaid
programs are automatically eligible to receive the Part D low-income subsidy. Other low-income beneficiaries with
incomes below 150% of the federal poverty level, and who meet the resource tests, may also be eligible for the drug
subsidy.
62 See CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz.
63 Income and asset requirements may vary by state and change each year. These amounts do not include a burial fund
allowance of $1,500 per person.
64 For additional information about these programs and to learn whether a beneficiary might qualify for Medicare
premium assistance, one should contact one’s State Medical Assistance (Medicaid) office. (As the names of these
programs may vary by state, one should specifically inquire about Medicare Savings Programs.) The contact
information for state Medicaid offices may be obtained by calling 1-800-MEDICARE (1-800-633-4227) or by visiting
the following Medicare website: http://www.medicare.gov/contacts.
65 The federal poverty levels for 2013 are $11,490 per year for an individual and $15,510 for a couple. (These levels are
slightly higher in Alaska and Hawaii.) See The 2013 HHS Poverty Guidelines at http://aspe.hhs.gov/poverty/
13poverty.cfm.
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couple (annual income of $11,490 and $15,510, respectively).66 QMBs are entitled to have their
Medicare Parts A and B cost-sharing charges, including the Part B premium and all deductibles
and coinsurance, paid for by Medicaid.67 (See Table 4.) For QMBs, Medicaid coverage is limited
to the payment of Medicare cost-sharing charges (i.e., the Medicare beneficiary is not entitled to
coverage of Medicaid plan services, unless the individual is otherwise entitled to Medicaid).
Table 4. 2013 Medicare Savings Program Eligibility Standards
Monthly
Incomea
Resourcesb
Benefits
Qualified Medicare
At or below 100% FPLc
$7,080 – single
Part B premiumd
Beneficiary (QMB)
$958 – single
$10,620 – couple
Coverage of Parts A and B
deductibles and coinsurance
$1,293 – couple
Specified Low-Income
Above 100% but less than
$7,080 – single
Part B premium
Medicare Beneficiary
120% FPLc
(SLMB)
$10,620 – couple
$958.01 – $1,149 – single
$1,293.01 – $1,551 – couple
Qualifying Individual (QI)
At or above 120% but less
$7,080 – single
Part B premium
than 135% FPLc
$10,620 – couple
$1,149.01 – $1,293 – single
$1,551.01 – $1,745 – couple
Source: Social Security Program Operations Manual Section HI 00815.023 (Income Limits),
https://secure.ssa.gov/poms.nsf/lnx/0600815023, and CRS calculations based on the 2013 FPL Poverty Guidelines,
http://aspe.hhs.gov/poverty/13poverty.cfm.
a. These amounts do not include a $20 general income exclusion where $20 from any income is not counted
towards these income limits; in most cases, $20 may be added to the above monthly income limits.
b. Resources include money in checking and savings accounts, stocks, bonds, mutual funds, and Individual
Retirement Accounts (IRAs). Resources don’t include one’s primary residence, a life insurance policy worth
up to $1,500, one car, burial plots, up to $1,500 per person for burial expenses, and household items. Some
states have no limits on resources.
c. Federal Poverty Levels (FPLs) are updated each year, usually in January or February. Income levels are
higher for Hawaii and Alaska and for those living with dependents.
d. Most people do not pay a premium for Part A because they have worked 40 or more quarters in covered
employment. For those without sufficient work history to qualify for premium-free Part A, Medicaid will
also pay Part A premiums for QMBs.
Specified Low-Income Medicare Beneficiaries (SLMBs)
Individuals whose income is more than 100% but less than 120% of FPL may qualify for
assistance as a SLMB. In 2013, the monthly income limits are $1,149 for an individual and

66 The qualifying levels are slightly higher than the monthly federal poverty level because, by law, $20 per month of
unearned income is disregarded in the calculation. See SSA Program Operations Manual HI 00815.023 Medicare
Savings Programs Income Limits at https://secure.ssa.gov/poms.nsf/lnx/0600815023.
67 The QMB program does not provide assistance with drug costs. Low-income beneficiaries who qualify for a
Medicare Savings Program are automatically enrolled in Medicare Part D; their premiums and most cost-sharing is paid
for by the Part D low-income subsidy which is financed through Medicare. States pay some of the costs for Part D low-
income assistance through state transfer payments.
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$1,551 for a couple (annual income of $13,788 and $18,612, respectively).68 Medicaid pays the
Medicare Part B premiums for SLMBs, but not other cost-sharing.
Qualifying Individuals (QIs)
Individuals whose income is between 120% and 135% of the federal poverty level may qualify
for assistance as QIs. In 2013, the monthly income limit for a QI is $1,293, and for a couple,
$1,745 (annual income of $15,512 and $20,939, respectively). Medicaid protection for these
individuals is limited to payment of the monthly Medicare Part B premium. Expenditures under
the QI program are, however, paid for (100%) by the federal government from the Medicare SMI
trust fund up to the state’s allocation level.69 A state is only required to cover the number of
people who would bring its spending on these population groups in a year up to its allocation
level. Any expenditures beyond that level are voluntary and paid entirely by the state.
Funding for the QI program was first made available by the Balanced Budget Act of 1997
(BBA97; P.L. 105-33),70 and was continued through subsequent legislation. Most recently, the
American Taxpayer Relief Act of 2012 (P.L. 112-240) extended the program and the amounts
available through allocation until December 31, 2013.71
Protection of Social Security Benefits from Increases
in Medicare Part B Premiums
After a person becomes eligible to receive Social Security benefits, his or her monthly benefit
amount is increased annually to maintain purchasing power over time. Near the end of each year,
the Social Security Administration announces the cost-of-living adjustment (COLA) payable in
January of the following year. The amount of the COLA is based on inflation as measured by the
Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W).72 If the CPI-W
decreases, Social Security benefits stay the same—benefits are not reduced during periods of
deflation.
In instances when the annual Social Security COLA is not sufficient to cover the standard
Medicare Part B premium increase, most beneficiaries are protected by a hold harmless provision
in the Social Security Act.73 Specifically, if in a given year, the increase in the standard Part B
premium would cause a beneficiary’s Social Security check to be less, in dollar terms, than it was
the year before, then the Part B premium is reduced to ensure that the amount of the individual’s

68 The qualifying levels are calculated the same way as for the QMB program.
69 In general, Medicaid payments are normally shared between the federal government and the states according to
matching formulas.
70 Section 4732(c) of BBA97 added §1933(c) of the Social Security Act.
71 See CRS Report R42944, Medicare, Medicaid, and Other Health Provisions in the American Taxpayer Relief Act of
2012, coordinated by Jim Hahn.
72 The CPI-W tracks the prices of a fixed market basket of goods and services over time. Social Security’s COLA is
calculated as the change in the CPI-W from the third quarter of the prior calendar year to the third quarter of the current
calendar year. If the CPI-W increases during this period, Social Security benefits for the next year increase
proportionately. See CRS Report 94-803, Social Security: Cost-of-Living Adjustments, by Gary Sidor.
73 Social Security Act §1839(f). The hold harmless provision was first implemented in January 1987.
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Social Security check does not decline.74 To be held harmless in a given year, a Social Security
beneficiary must have received Social Security benefit checks in both December of the previous
year and January of the current year, and must also have had Part B premiums deducted from
both checks.75 The hold harmless provision operates by comparing the net dollar amounts of the
two monthly benefit payments—if the net Social Security benefit for January of the current year
is lower than in December of the previous year, then the hold harmless provision takes effect for
most individuals.76 This determination is made by the Social Security Administration.
Several groups are not covered by the hold harmless provision.
• Lower-Income Beneficiaries. Lower-income beneficiaries who receive premium
subsidies are not held harmless for premium increases; however, the Medicaid
program pays the full amount of any increase in their Part B premiums. (See
“Premium Assistance for Low-Income Beneficiaries.”)
• Higher-Income Beneficiaries. Higher-income beneficiaries who are required to pay
income-related Part B premiums are not held harmless for premium increases. They
are required to pay the full amount of any increase in their Part B premiums. (See
“Income-Related Premiums.”)
• Beneficiaries with no history of Social Security benefit checks with deductions to
cover the Medicare Part B premium. This includes new enrollees in either Social
Security or Medicare Part B, and Part B enrollees who do not receive Social Security
benefits. As noted above, in order to be held harmless in a given year, a Social
Security beneficiary must have received Social Security benefit payments in both
December of the previous year and January of the current year, and must have had
Part B premiums deducted from both checks. (See “Part B Enrollees Who Do Not
Receive Social Security Benefits.”)
As described earlier, an individual’s Social Security COLA is determined by multiplying his or
her benefit amount by the inflation rate (i.e., the CPI-W). Part B premiums are determined by
projected Part B program costs. Thus, the number of people held harmless can vary widely from
year to year, depending on annual inflation rates and projected Part B costs. For most years, the
hold harmless provision has affected a relatively small number of beneficiaries. However, due to
low inflation, no COLA adjustments were made to Social Security benefits in 2010 and 2011.
Most Medicare beneficiaries (about 73%) were protected by the hold harmless provision and
continued to pay the 2009 standard monthly premium of $96.40 in both 2010 and 2011.77 Because

74 For more information on the hold harmless provision, see CRS Report R40561, Interactions Between the Social
Security COLA and Medicare Part B Premiums, by Jim Hahn.
75 Note that Social Security benefit checks reflect benefit entitlements for the previous month while Part B premiums
are deducted in advance. For example, a November Social Security benefit check is not received until December, but
has December’s Part B premium deducted from it.
76 Part D premiums are not covered by the hold harmless provision; therefore some people protected by the Part B hold
harmless provision may still see a decrease in their Social Security checks due to an increase in Medicare Part D
premiums. Beneficiaries who qualify for the Part D low-income subsidies, however, would not be affected.
77 The standard Part B premium in 2009 was also the same as that in 2008, $96.40; however, the lack of change in those
years was not a result of the “hold harmless” provision. At the end of 2008, it was determined that Part B premiums and
general revenue financing in recent years had been set at somewhat higher levels than would otherwise be required to
maintain an adequate contingency reserve, and that the level of assets in the Part B account of the SMI trust fund were
more than adequate. Therefore, it was estimated that an adequate level of assets could be maintained throughout the
next year, 2009, without an increase in premiums.
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Part B expenditures were still expected to increase in those years, and beneficiary premiums are
required to cover 25% of those costs, the premiums for those not held harmless (27% of
beneficiaries) were higher than they would have been had the rest of the beneficiaries not been
held harmless. The standard monthly premiums paid by those not held harmless was $110.50 in
2010 and $115.40 in 2011.78 In 2011, of the 27% who were not eligible to be held harmless, about
3% were new enrollees, about 5% were high-income, about 17% had their premiums paid for by
Medicaid, and the remaining 2% did not have their premiums withheld from Social Security
benefit payments.
In 2012, Social Security beneficiaries received a 3.6% COLA which increased the average
monthly Social Security benefit payments by about $43 per month. This Part B premium increase
was more than offset by the increase in Social Security benefits, and the hold-harmless provision
was not applicable in 2012 for most beneficiaries. Similarly, the 2013 Social Security COLA of
1.7%79 increased the average monthly Social Security benefit by about $21 per month,80 which
more than offset the $5 increase per month in standard Medicare premiums. Therefore, the hold-
harmless provision will not be applicable to most beneficiaries in 2013.
Part B Premiums Over Time
Part B premium changes through time generally reflect the growth in total Part B expenditures,
although the exact relationship between Part B expenditures covered by the Part B premium has
been changed by statute at various points. (See Appendix A.) The Part B premium has risen from
$3.00 in 1966 to $104.90 in 2013. (See Figure 1.) For comparison, during a similar time period,
average annual Part B benefit costs per beneficiary have increased from about $101 in 1970
(about $8.42 per month) to a projected $5,222 per beneficiary (about $435 per month) in 2012.81
Prior to 2000, the Part B premium decreased from year to year twice: once from 1989 ($31.90) to
1990 ($28.60) as a result of the repeal of the Medicare Catastrophic Coverage Act of 1988 (P.L.
100-360), and once from 1995 ($46.10) to 1996 ($42.50) as a result of the transition from a
premium as determined by a fixed dollar amount under the Omnibus Reconciliation Act of 1990
(P.L. 101-508) to 25% of costs as directed under the Omnibus Budget Reconciliation Act of 1993
(P.L. 103-66).
More recently, because of the absence of a Social Security COLA in 2010 and 2011, most
beneficiaries were “held-harmless” and paid the 2009 premium of $96.40 per month during those
years. The standard 2010 and 2011 premiums, paid by those who were not held harmless, were
thus higher than they would have been had the hold harmless provision not been in effect. (See

78 Most new enrollees in 2010 were eligible to be held harmless in the second year of no COLA, i.e., 2011; these
individuals continued to pay the 2010 standard premium of $110.50 in 2011.
79 Social Security Administration, “Cost-of-Living Adjustment (COLA) Information for 2013,”
http://www.socialsecurity.gov/cola/.
80 SSA Fact Sheet, “2013 Social Security Changes,” http://www.ssa.gov/pressoffice/factsheets/colafacts2013.htm.
81 For additional information on Part B and total Medicare cost growth, see CRS Report R41436, Medicare Financing,
by Patricia A. Davis. For data on recent growth in specific Part B benefits, see the 2013 Report of the Medicare
Trustees, pp. 133-148, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
ReportsTrustFunds/Downloads/TR2013.pdf.
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“Protection of Social Security Benefits from Increases in Medicare Part B Premiums” for
additional detail.)
Figure 1. Monthly Medicare Part B Premiums
1966-2013
120
Most enrollees "held-harmless" in 2010 and
2011, and paid 2009 premium amount
100
Transition from fixed dollar amount under
OBRA 90 (1991-1995) to 25% of costs
under OBRA 93 and BBA 97 (1996 on)
80
ium
em 60
hly Pr
$4 catastrophic coverage premium added by Catastrophic
ont
Coverage Act of 1988, repealed the next year
M
40
20
0

Source: CRS figure, based on the 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance
and Federal Supplemental Medical Insurance Trust Funds, Table V.E2 and Centers for Medicare & Medicaid Services,
“Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning
January 1, 2013,” 77 Federal Register 69850, November 21, 2012.
Since 2000, the Medicare Part B premium has more than doubled, increasing from $45.50 in 2000
to the current premium of $104.90 in 2013. Increases have been due to a number of factors that
have increased per capita Part B expenditures during that time, including rising prices of health
care services and equipment, new technologies, and increased utilization of Medicare Part B
services. The CMS Office of the Actuary suggests that over the next 10 years, Part B premiums
will increase more slowly than they have over the past decade, primarily due to ACA changes to
Medicare payment methodologies that are expected to slow the rate of growth in spending for
most Part B services.82 Estimates of premiums in future years through 2022 may be found in
Appendix C.

82 The ACA did not make changes to the physician payment rate (SGR) formula. Solomon M. Mussey, CMS Office of
the Actuary, Estimated Effects of the “Patient Protection and Affordable Care Act,” as Amended, on the Year of
Exhaustion for the Part A Trust Fund, Part B Premiums, and Part A and Part B Coinsurance Amounts, April 22, 2010,
http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/downloads/
PPACA_Medicare_2010-04-22.pdf.
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Current Issues
Premium Amount and Annual Increases
The Medicare trustees estimate that over the next decade, Medicare Part B premiums will
increase, on average, by over 5% each year. (See Appendix C.) Rising Medicare premiums could
have a large effect on Social Security beneficiaries, particularly on those on those who rely on
Social Security as their primary source of income. For example, among Americans aged 65 and
older, 53% of married couples and 74% of unmarried persons receive more than half of their
income from Social Security, and 23% of married couples and 46% of unmarried persons receive
more than 90% of their income from Social Security.83 Some of these beneficiaries may see a
decline in their standard of living as their Medicare premiums rise.
Once a person has retired and elects to receive Social Security, his or her benefit is indexed to
inflation and thereafter grows with annual Social Security COLAs.84 However, Medicare
premiums are based on the per capita cost growth of Part B benefits which reflect the growth in
earnings of health care providers, and in the utilization and intensity of services used by
beneficiaries, factors that have historically grown faster than CPI-U. This means that, over time,
Medicare premiums represent a growing proportion of most beneficiaries’ Social Security
income.85 Since 2000, Social Security’s annual COLA has resulted in a cumulative benefit
increase of about 36%, significantly less than the Part B premium growth of close to 120%. The
Medicare trustees estimated that average Part B plus Part D premiums in 2013 would represent
close to 11% of the average Social Security benefit, and increase to an estimated 19% in 2087.86
Proposals to Modify the Late Enrollment Penalty
Periodically, proposals have been offered to modify or eliminate the Part B premium penalty
either for all enrollees or alternatively for a selected population group. Some have suggested
modifying the penalty provision to limit both the amount and the duration of the surcharge, such
as is the case for delayed Part A enrollment which has a maximum 10% surcharge, and a duration
of twice the number of years that enrollment was delayed. (See Appendix D for information on
the Part A premium and late enrollment penalty.)
Some have also suggested that Medicare Part B have a creditable coverage exemption, similar to
that under Part D, that would allow Medicare beneficiaries with equivalent coverage to postpone
enrollment in Part B without being subject be subject to a penalty. For example, under the Part D

83 Social Security Basic Facts, http://www.ssa.gov/pressoffice/basicfact.htm.
84 The COLA increases the benefits paid to current beneficiaries. In contrast, average Social Security benefits (those
paid to new and current beneficiaries) have risen at a faster rate than the annual COLA, because the formula for
calculating initial Social Security benefits is linked to wage growth, whereas the COLA is based on price growth.
Generally, wages rise faster than prices.
85 A “hold harmless” provision, described earlier, caps the annual Part B premium increase (but not the Part D increase)
at the dollar amount of a beneficiary’s COLA.
86 Similarly, average cost-sharing was estimated to be about 12% of the Social Security benefit in 2013, and expected
to increase to approximately 21% in 2087. 2013 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplemental Medical Insurance Trust Funds, pp. 41-42, http://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf.
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prescription drug benefit, individuals are not subject to a late enrollment penalty if they have
maintained “creditable” prescription drug coverage prior to enrollment, i.e., coverage that is
expected to pay at least as much as Medicare’s standard prescription drug coverage.87 Creditable
prescription drug coverage includes such things as employer-based prescription drug coverage;
qualified State Pharmaceutical Assistance Programs (SPAPs); and military-related coverage (e.g.,
VA and TRICARE).88
In recent Congresses, several bills have been introduced to address the Part B late enrollment
penalty. For example, H.R. 1654, introduced in the 112th Congress, would have established a
special Medicare Part B enrollment period for individuals enrolled in COBRA (Consolidated
Omnibus Budget Reconciliation Act) continuation coverage who elected not to enroll in Part B
during their initial enrollment period. The legislation would have also created a continuous
enrollment period that would have allowed Medicare eligible beneficiaries to sign up for Part B
outside of the general enrollment period, and receive health coverage the following month.
Additionally, the proposed legislation would have directed the Government Accountability Office
to study problems with Part B enrollment. Also introduced in the 112th Congress, H.R. 103 would
have, among other changes, eliminated late-enrollment penalties for those between the ages of 65
and 70. In the 111th Congress, H.R. 2235 would have limited the penalty for late Part B
enrollment to 10% and twice the period of no enrollment, similar to the Part A late enrollment
penalty. It would also have excluded periods of COBRA and retiree coverage from the penalty.
Proposals to Require a Part B Premium Surcharge for Beneficiaries
in Medigap Plans with Near First-Dollar Coverage
In addition to the payment of Part B premiums, Medicare beneficiaries enrolled in Parts A and B
(traditional Medicare) must also pay other out-of-pocket costs when they use services, such as
deductibles, co-payments, and co-insurance. Because this cost-sharing can be substantial, and
there is no “catastrophic” cap on out-of-pocket spending, most Medicare beneficiaries have some
form of supplemental coverage, for example, through Medicaid or an employer. About 30% of
beneficiaries enrolled in traditional Medicare buy Medigap policies from private insurance
companies which cover some or all of Medicare’s cost-sharing. Individuals who purchase
Medigap must pay a monthly premium which is set by, and paid to, the insurance company
selling the policy.89 There are 10 standardized Medigap plans with varying levels of coverage.
Two of the 10 standardized plans cover Parts A and B deductibles and coinsurance in full (i.e.,
offer “first-dollar” coverage). In 2010, over 60% of all beneficiaries who purchased Medigap
insurance were covered by one of these two plans.
There is some concern that beneficiaries enrolled in Medigap plans with low-cost sharing
requirements may have less incentive to consider the cost of health care services, and may thus
increase costs to the Medicare program. Some have proposed imposing a Part B premium

87 See Medicare publication “Your Guide to Medicare Prescription Drug Coverage,” http://www.medicare.gov/
Publications/Pubs/pdf/11109.pdf, p. 17.
88 Employers or unions may also qualify for a federal subsidy to maintain prescription drug coverage for their retirees.
Such subsidies are generally less expensive to the federal government than providing full coverage to such enrollees
under Part D. 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal
Supplemental Medical Insurance Trust Funds, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf, Tables II.B1 and IV.B10.
89 See CRS Report R42745, Medigap: A Primer, by Carol Rapaport.
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surcharge for Medicare beneficiaries who purchase certain types of Medigap plans. For example,
the President’s FY2014 budget proposal90 would impose a Part B premium surcharge of
approximately 15% of the average Medigap premium (about 30% of the Part B premium) for new
Medicare beneficiaries who enroll in a near first-dollar Medigap plan.
Deficit Reduction
As Medicare currently represents about 13% of federal spending, most proposals to reduce
federal deficits include suggestions to reduce Medicare program spending and/or increase
program income. For example, some recent proposals would increase Medicare premiums as a
portion of total program funding (i.e., decrease the amount of government subsidies).
Certain proposals would limit premium increases to high-income beneficiaries. For example, the
President’s FY2014 budget proposal would increase the applicable percentage of the program’s
cost per aged enrollee for higher income beneficiaries from the current 35% to 80% to between
40% and 90%. The proposal would also continue the ACA freeze on income thresholds until 25%
of beneficiaries were subject to the high-income premiums.
Other proposals would increase premiums paid by all beneficiaries. For example, a proposal
introduced by Senators Lieberman and Coburn91 suggests raising the standard Part B premium
from the current 25% of program costs to 35% over five years.
Finally, other proposals, such as that put forth in the FY2014 House Budget,92 would place limits
on the amount of the federal subsidy, and premiums would vary depending on the plan in which
the beneficiary enrolled. In general, such “premium support” proposals would limit federal
spending by changing the current Medicare program from a defined benefit to a defined
contribution system.93 Most such proposals limit the growth in the annual federal premium
subsidy; for example, the House Budget proposal suggests a growth limit of GDP plus 0.5%.
Depending on how such a proposal is designed, and should Medicare costs grow more quickly
than the limit, beneficiary premiums could increase more rapidly than the amount of the premium
subsidy.
Some of the issues that would need to be addressed when evaluating these types of proposals
include (1) the ability of Medicare beneficiaries to absorb increased costs given their current
levels of income and assets, as well as their other out-of-pocket expenditures (both health and
non-health related); (2) the willingness of high-income beneficiaries to continue participating in
Medicare Part B should their premiums continue to increase; and (3) the capacity of the Medicaid
program to continue providing premium assistance to low-income beneficiaries should premiums
increase.

90 See CRS Report R43073, Centers for Medicare & Medicaid Services: President’s FY2014 Budget, coordinated by
Alison Mitchell.
91 A Bipartisan Plan to Save Medicare and Reduce Debt, June 28, 2011, http://www.coburn.senate.gov/public//
index.cfm?a=Files.Serve&File_id=1ea8e116-6d15-46ba-b2e0-731258583305.
92 See CRS Report R43017, Overview of Health Care Changes in the FY2014 Budget Proposal Offered by House
Budget Committee Chairman Ryan, by Patricia A. Davis, Alison Mitchell, and Bernadette Fernandez.
93 Most premium support models combine Parts A and B benefits, and the premium subsidy and beneficiary premiums
would apply to both of these parts of Medicare.
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Appendix A. History of the Part B Premium
Statutory Policy and Legislative Authority
The basis for determining the Part B premium amount has changed several times since the
inception of the Medicare program, reflecting different legislative views of what share
beneficiaries should bear as expenditures increased. When the Medicare program first went into
effect in July 1966, the Part B monthly premium was set at a level to cover 50% of Part B
program costs. Legislation enacted in 1972 limited the annual percentage increase in the premium
to the same percentage by which Social Security benefits were adjusted for changes in the cost-
of-living (i.e., COLAs). Under this formula, revenues from premiums soon dropped from 50% to
below 25% of program costs because Part B program costs increased much faster than inflation as
measured by the Consumer Price Index on which the Social Security COLA is based (Table A-1).
From the early 1980s, Congress regularly voted to set Part B premiums at a level to cover 25% of
program costs, in effect overriding the COLA limitation. The 25% provisions first became
effective January 1, 1984, with general revenues covering the remaining 75% of Part B program
costs. Premiums increased in 1989 as a result of the Medicare Catastrophic Coverage Act of 1988
(P.L. 100-360), which added a catastrophic coverage premium to the Part B premium. The Act
was repealed in November 1989, and the Part B premium for 1990 fell as a result.
Congress returned to the general approach of having premiums cover 25% of program costs in the
Omnibus Budget Reconciliation Act of 1990 (OBRA 90, P.L. 101-508). However, OBRA 90 set
specific dollar figures, rather than a percentage, in law for Part B premiums for the years 1991-
1995. These dollar figures reflected CBO estimates of what 25% of program costs would be over
the five-year period. However, program costs grew more slowly than anticipated, in part due to
subsequent legislative changes and as a result, the 1995 premium of $46.10 actually represented
31.5% of Medicare Part B program costs.
The Omnibus Budget Reconciliation Act of 1993 (OBRA 93, P.L. 103-66) extended the policy of
setting the Part B premium at a level to cover 25% of program costs for the years 1996-1998. As
was the case prior to 1991, a percentage rather than a fixed dollar figure was used, which meant
that the 1996 premium ($42.50) and the 1997 premium ($43.80) were lower than the 1995
premium ($46.10). BBA 97 permanently set the premium at 25% of program costs so that,
generally speaking, premiums rise or fall with Part B program costs.94
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-
173), as modified by the Deficit Reduction Act of 2005 (DRA, P.L. 109-171), required that
beginning in 2007, higher-income beneficiaries pay higher Part B premiums.95 The income
thresholds used to determine eligibility for the high-income premium are to be adjusted each year

94 BBA 97 made a change that had the effect of increasing the Part B premium over time. Prior to BBA 97, both Parts
A and B of Medicare covered home health services. Payments were made under Part A, except for those few persons
who had no Part A coverage. In order to extend the solvency of the Part A (hospital insurance) trust fund, BBA 97
gradually transferred coverage of some home health visits from Part A to Part B. Beginning January 1, 2003, Part A
covers only post-institutional home health services for up to 100 visits, except for those persons with Part A coverage
only who are covered without regard to the post-institutional limitation. Part B covers other home health services.
95 MMA increased the Part B premium percentage for high-income enrollees; DRA accelerated the phase-in period for
such premiums.
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by the growth in the consumer price index.96 The Patient Protection and Affordable Care Act (P.L.
111-148, Section 3402), however, froze these thresholds for the period of 2011 through 2019 at
the 2010 levels.
Table A-1. Monthly Part B Premiums, 1966-2013
Monthly
Effective
Year
premium
date
Governing policy; legislative authority
1966
$3.00
7/66
Fixed dollar amount; Social Security Amendments (SSA) of 1965
1967
$3.00

Fixed dollar amount; SSA of 1965
1968
$4.00
4/68
Fixed dollar amount through March; Medicare Enrollment Act of 1967.
Beginning April: 50% of costs; SSA of 1965
1969
$4.00

50% of costs; SSA of 1967
1970
$5.30
7/70
50% of costs; SSA of 1967
1971
$5.60
7/71
50% of costs; SSA of 1967
1972
$5.80
7/72
50% of costs; SSA of 1967
1973
$6.30
9/73
50% of costs; SSA of 1967 (COLA limit, added by SSA of 1972, could
have applied, but was not needed). Limitations imposed by Economic
Stabilization program set 7/73 amount at $5.80 and 8/73 amount at
$6.10.
1974
$6.70
7/74
50% of costs; SSA of 1967 (COLA limit, added by SSA of 1972, could
have applied, but was not needed)
1975
$6.70

Technical error in law prevented updating
1976
$7.20
7/76
COLA limit; SSA of 1972
1977
$7.70
7/77
COLA limit; SSA of 1972
1978
$8.20
7/78
COLA limit; SSA of 1972
1979
$8.70
7/79
COLA limit; SSA of 1972
1980
$9.60
7/80
COLA limit; SSA of 1972
1981
$11.00
7/81
COLA limit; SSA of 1972
1982
$12.20
7/82
COLA limit; SSA of 1972
1983
$12.20

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) had set 25%
rule for updates in 7/83 and 7/84. However, SSA of 1983 froze
premiums 7/83-12/83 and changed future updates to January.
1984
$14.60
1/84
25% of costs; TEFRA, as amended by SSA of 1983
1985
$15.50
1/85
25% of costs; TEFRA, as amended by SSA of 1983
1986
$15.50
1/86
25% of costs; Deficit Reduction Act (DEFRA) of 1984
1987
$17.90
1/87
25% of costs; DEFRA of 1984
1988
$24.80
1/88
25% of costs, Consolidated Omnibus Budget Reconciliation Act of
1985
1989
$31.90
1/89
25% of costs, OBRA 87, plus $4 catastrophic coverage premium added
by Medicare Catastrophic Coverage Act of 1988

96 Social Security Act §1839(i)(5).
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Monthly
Effective
Year
premium
date
Governing policy; legislative authority
1990
$28.60
1/90
25% of costs; OBRA 89. Medicare Catastrophic Coverage Repeal Act
of 1989 repealed additional catastrophic coverage premium, effective
1/90
1991
$29.90
1/91
Fixed dollar amount; OBRA 90
1992
$31.80
1/92
Fixed dollar amount; OBRA 90
1993
$36.60
1/93
Fixed dollar amount; OBRA 90
1994
$41.10
1/94
Fixed dollar amount; OBRA 90
1995
$46.10
1/95
Fixed dollar amount; OBRA 90
1996
$42.50
1/96
25% of costs; OBRA 93
1997
$43.80
1/97
25% of costs; OBRA 93
1998
$43.80
1/98
25% of costs; OBRA 93 and BBA 97
1999
$45.50
1/99
25% of costs; BBA 97
2000
$45.50
1/00
25% of costs; BBA 97
2001
$50.00
1/01
25% of costs; BBA 97
2002
$54.00
1/02
25% of costs; BBA 97
2003
$58.70
1/03
25% of costs; BBA 97
2004
$66.60
1/04
25% of costs; BBA 97
2005
$78.20
1/05
25% of costs; BBA 97
2006
$88.50
1/06
25% of costs; BBA 97
2007
$93.50
1/07
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees: 1st year of 3-year phase-in)
2008
$96.40
1/08
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees: 2nd year of 3-year phase-in)
2009
$96.40
1/09
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees: 3rd year of 3-year phase-in)
2010
$110.50
1/10
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees, fully phased-in; hold-harmless provision applied
to most enrollees who paid the 2009 rate of $96.40
2011
$115.40
1/11
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees, fully phased-in; ACA freezes income thresholds
at 2010 levels from 2011 through 2019); hold-harmless provision
applied to most enrollees who paid the 2009 rate of $96.40
2012
$99.90
1/12
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees, fully phased-in; ACA freezes income thresholds
at 2010 levels from 2011 through 2019)
2013
$104.90
1/13
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrollees, fully phased-in; ACA freezes income thresholds
at 2010 levels from 2011 through 2019)
Source: Various Annual Trustee Reports, including the 2013 Annual Report of the Board of Trustees of the
Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Fund, May 2013; and Centers for
Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and
Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850, November 21, 2012.
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Appendix B. Standard and High-Income Part B
Premiums and Income Thresholds: 2007-2013
Table B-1. Income Levels for Determining Medicare Part B Premium Adjustment
and Per Person Premium Amounts
2007-2013 (in nominal dollars)
2007 2008 2009 2010 2011 2012 2013
Standard
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
Premium
equal to
equal to
equal to
equal to
equal to
equal to
equal to
$80,000
$82,000
$85,000
$85,000
$85,000
$85,000
$85,000
individual
individual
individual
individual
individual
individual
individual
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
equal to
equal to
equal to
equal to
equal to
equal to
equal to
$160,000
$164,000
$170,000
$170,000
$170,000
$170,000
$170,000
couple
couple
couple
couple
couple
couple
couple
$93.50
$96.40
$96.40a
$110.50b
$115.40b
$99.90
$104.90
Level 1
$80,001-
$82,001-
$85,001-
$85,001-
$85,001-
$85,001-
$85,001-
$100,000
$102,000
$107,000
$107,000
$107,000
$107,000
$107,000
individual
individual
individual
individual
individual
individual
individual
$160,001-
$164,001-
$170,001-
$170,001-
$170,001-
$170,001-
$170,001-
$200,000
$204,000
$214,000
$214,000
$214,000
$214,000
$214,000
couple
couple
couple
couple
couple
couple
couple
$105.80
$122.20
$134.90
$154.70
$161.50
$139.90
$146.90
Level 2
$100,001-
$102,001-
$107,001-
$107,001-
$107,001-
$107,001-
$107,001-
$150,000
$153,000
$160,000
$160,000
$160,000
$160,000
$160,000
individual
individual
individual
individual
individual
individual
individual
$200,001-
$204,001-
$214,001-
$214,001-
$214,001-
$214,001-
$214,001-
$300,000
$306,000
$320,000
$320,000
$320,000
$320,000
$320,000
couple
couple
couple
couple
couple
couple
couple
$124.40
$160.90
$192.70
$221.00
$230.70
$199.80
$209.80
Level 3
$150,001-
$153,001-
$160,001-
$160,001-
$160,001-
$160,001-
$160,001-
$200,000
$205,000
$213,000
$214,000
$214,000
$214,000
$214,000
individual
individual
individual
individual
individual
individual
individual
$300,001-
$306,001-
$320,001-
$320,001-
$320,001-
$320,001-
$320,001-
$400,000
$410,000
$426,000
$428,000
$428,000
$428,000
$428,000
couple
couple
couple
couple
couple
couple
couple
$142.90
$199.70
$250.50
$287.30
$299.90
$259.70
$272.70
Level 4
$200,000+
$205,000+
$213,000+
$214,000+
$214,000+
$214,000+
$214,000+
individual
individual
individual
individual
individual
individual
individual
$400,000+
$410,000+
$426,000+
$428,000+
$428,000+
$428,000+
$428,000+
couple
couple
couple
couple
couple
couple
couple
$161.40
$238.40
$308.30
$353.60
$369.10
$319.70
$335.70
Source: Centers for Medicare & Medicaid Services, Annual Notices, “Medicare Program; Medicare Part B Monthly
Actuarial Rates, Premium Rate, and Annual Deductible,” 2007 through 2012, and “Medicare Program: Medicare Part B
Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2013,” 77 Federal Register 69850,
November 21, 2012.
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Note: When both are enrolled in Part B, each person in a couple pays the same individual premium amount.
a. The standard Part B premium in 2009 was the same as that in 2008; however, the lack of change was not
due to the “hold harmless” provision. CMS determined that 2008 premiums and revenues were slightly
higher than needed to cover costs in that year, and that 2009 financing would be adequate at the same
premium level.
b. Due to no Social Security COLA in 2010 and 2011, most Part B enrollees were “held-harmless” and paid
the 2009 standard monthly premium of $96.40.

Table B-2. Income Levels for Determining Part B Premium Adjustment for Married
Beneficiaries Filing Separately and Associated Premiums
2007-2013 (in nominal dollars)
Income
Level
2007 2008 2009 2010 2011 2012 2013
Standard
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
Less than or
equal to
equal to
equal to
equal to
equal to
equal to
equal to
$80,000
$82,000
$85,000
$85,000
$85,000
$85,000
$85,000
$93.50
$96.40
$96.40
$110.50
$115.40
$99.90
$104.90
Lower
Greater than
Greater than
Greater than
Greater than
Greater than
Greater than
Greater than
adjustment
$80,000 and
$82,000 and
$85,000 and
$85,000 and
$85,000 and
$85,000 and
$85,000 and
category
less than or
less than or
less than or
less than or
less than or
less than or
less than or
equal to
equal to
equal to
equal to
equal to
equal to
equal to
$120,000
$123,000
$128,000
$129,000
$129,000
$129,000
$129,000
$142.90
$199.70
$250.50
$287.30
$299.90
$259.70
$272.70
Higher
Greater than
Greater than
Greater than
Greater than
Greater than
Greater than
Greater than
adjustment
$120,000
$123,000
$128,000
$129,000
$129,000
$129,000
$129,000
category
$161.40
$238.40
$308.30
$353.60
$369.10
$319.70
$335.70
Source: Centers for Medicare & Medicaid Services, Annual Notices, “Medicare Program; Medicare Part B
Monthly Actuarial Rates, Premium Rate, and Annual Deductible,” 2007 through 2012, and “Medicare Program:
Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2013,” 77
Federal Register 69850, November 21, 2012.



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Medicare: Part B Premiums

Appendix C. Estimated Future Part B Premiums
Table C-1. Projected Part B Premiums

Percentage of Program Costs Represented by Premium
25%
35% 50% 65% 80%
(Standard)
2014
$104.90
$146.90
$209.80
$272.70
$335.70
2015
110.70 154.90 221.30 287.70 354.10
2016
115.40 161.60 230.80 300.00 369.30
2017
120.90 169.20 241.70 314.20 386.70
2018
127.40 178.30 254.70 331.10 407.50
2019
134.40 188.20 268.80 349.40 430.10
2020
141.80 198.50 283.60 368.70 453.80
2021
150.00 209.90 299.90 389.90 479.80
2022
160.50 224.70 321.00 417.30 513.60
Source: 2013 Report of the Medicare Trustees, Tables V.E2 and V.E3.
Notes: These figures only represent estimates of future premiums. Actual premiums are determined each year
in the fall prior to the actual year the premium will be in effect. Additionally, these projections do not take into
account legislation enacted subsequent to the issuance of the Trustees’ report in May 2013 nor reflect economic
assumptions that may have been updated since that time. The premiums above include an above-average
contingency margin for the likely legislative override of the scheduled reduction in physician payment rates.
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Medicare: Part B Premiums

Appendix D. Part A Premiums
The vast majority of persons turning age 65 are automatically entitled to Medicare Part A based
on their own or their spouse’s work in covered employment. However, individuals age 65 and
over who are not otherwise eligible for Medicare Part A benefits and certain disabled individuals
who have exhausted other entitlement may voluntarily purchase Part A coverage.97 In most cases,
persons who voluntarily purchase Part A must also purchase Part B. The periods during which
one can enroll are the same as those for Part B (see “Medicare Part B Eligibility and
Enrollment”).
The monthly Part A premium is equal to the full average per capita value of the Part A benefit
($441 per month in 2013). Persons who have at least 30 quarters of covered employment (or
married to someone who has such coverage) pay a premium that is 45% less than the full Part A
premium ($243 per month in 2013). CMS estimates that in 2013, about 604,000 individuals will
voluntarily enroll in Part A by paying the full premium and about 50,000 will pay the reduced
premium.98
Similar to Part B, a penalty is imposed for persons who delay Part A enrollment beyond their
initial enrollment period (which is the same seven-month period applicable for enrollment in Part
B).99 However, both the amount of the penalty and the duration of the penalty are different than
under Part B. Persons who delay Part A enrollment for at least 12 months beyond their initial
enrollment period are subject to a 10% premium surcharge.100 The surcharge is 10% regardless of
the length of the delay. Further the surcharge only applies for a period equal to twice the number
of years (i.e., 12-month periods) during which an individual delays enrollment. Thus, an
individual who delays enrollment for three years under Part A would be subject to a 10% penalty
for six years, whereas a person who delays enrollment for the same three-year period under Part
B would be subject to a permanent 30% penalty.101


97 An individual eligible to enroll must be a resident of the United States. Further, the individual must either be a citizen
or an alien lawfully admitted for permanent residence who has resided in the United States continuously for the
immediately preceding five years. Section 1818A of the Social Security Act provides for voluntary enrollment in
Medicare Part A for certain disabled individuals who were entitled to coverage due to their receipt of disability
benefits, but who have lost those benefits because they have returned to work and their incomes exceed the level of
“substantial gainful activity.” For additional information on Part A benefits for the disabled returning to work, see
Social Security website “Working While Disabled,” http://www.socialsecurity.gov/pubs/10095.html.
98“Medicare Program; Medicare Part A Premiums for CY 2013 for the Uninsured Aged and for Certain Disabled
Individuals Who Have Exhausted Other Entitlement,” 77 Federal Register 69859, November 21, 2012,
http://www.gpo.gov/fdsys/pkg/FR-2012-11-21/pdf/2012-28274.pdf.
99 The Consolidated Appropriations Act of 2001 (P.L. 106-554) exempts certain state and local retirees, retiring prior to
January 1, 2002, from the Part A delayed enrollment penalty. These are groups of persons for whom the state or local
government elects to pay the Part A delayed enrollment penalty for life. The amount of the penalty which would
otherwise be assessed is to be reduced by an amount equal to the total amount of Medicare payroll taxes paid by the
employee and the employer on behalf of the employee. The provision applies to premiums beginning January 2002.
100 Similar to Part B, if one qualifies for and signs up during a special enrollment period, e.g., within 8 months of
retiring, one may not be subject to a penalty.
101 Prior to enactment of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272), there
was no upper limit on the amount of the Part A surcharge or duration of the surcharge. COBRA limited the amount of
the Part A surcharge to 10% and the duration to twice the period of delayed enrollment.
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Author Contact Information

Patricia A. Davis

Specialist in Health Care Financing
pdavis@crs.loc.gov, 7-7362

Acknowledgments
Jim Hahn and Jennifer O’Sullivan authored prior versions of this report. Barbara English also made
contributions to this report.



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