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Medicare: Part B Premiums
Patricia A. Davis
Specialist in Health Care Financing
September 29, 2015
Congressional Research Service
7-5700
www.crs.gov
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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 2015, the program is expected to
cover about 55 million persons (46 million aged and 9 million disabled) at a total cost of $649
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 7-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 through their current employment, 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. However, 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 benefits do not decline from one year to the next.
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.
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 2015 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 its rate of increase (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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Contents
Introduction ..................................................................................................................................... 1
Medicare Part B Eligibility and Enrollment .................................................................................... 2
Initial Enrollment Periods ......................................................................................................... 4
General Enrollment Period ........................................................................................................ 5
Late Enrollment Premium Penalty and Exemptions ........................................................................ 5
Calculation of Penalty ............................................................................................................... 6
Exemptions to Penalty ............................................................................................................... 7
Current Workers .................................................................................................................. 7
Certain Military Retirees ..................................................................................................... 9
International Volunteers ...................................................................................................... 9
Equitable Relief .................................................................................................................. 9
Collection of the Part B Premium ................................................................................................. 10
Deduction of Part B Premiums from Social Security Checks ................................................. 10
Part B Enrollees Who Do Not Receive Social Security Benefits ............................................. 11
Determining the Part B Premium ................................................................................................... 11
Premium Calculation for 2015 ................................................................................................. 11
Contingency Reserve .............................................................................................................. 12
Income-Related Premiums ............................................................................................................ 13
Determination of Income ........................................................................................................ 14
Income Thresholds and Premium Adjustments ....................................................................... 15
Premium Assistance for Low-Income Beneficiaries ..................................................................... 17
Qualified Medicare Beneficiaries............................................................................................ 18
Specified Low-Income Medicare Beneficiaries ...................................................................... 18
Qualifying Individuals ............................................................................................................ 19
Protection of Social Security Benefits from Increases in Medicare Part B Premiums .................. 19
Part B Premiums Over Time.......................................................................................................... 22
Current Issues ................................................................................................................................ 24
Premium Amount and Annual Increases ................................................................................. 24
Proposals to Modify the Late Enrollment Penalty .................................................................. 25
Deficit Reduction Proposals .................................................................................................... 27
Increasing Medicare Premiums ......................................................................................... 27
Impose a Part B Premium Surcharge for Beneficiaries in Medigap Plans with
Near First-Dollar Coverage ........................................................................................... 27
Limit Federal Subsidies .................................................................................................... 28
Considerations .................................................................................................................. 28
Figures
Figure 1. Monthly Medicare Part B Premiums.............................................................................. 23
Tables
Table 1. Initial Enrollment Period ................................................................................................... 4
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Table 2. Monthly Medicare Part B Premiums for 2015................................................................. 15
Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for 2015 ........ 16
Table 4. Income Thresholds for High-Income Premiums in 2018 and 2019 ................................. 17
Table 5. 2015 Medicare Savings Program Eligibility Standards ................................................... 18
Table A-1. Monthly Part B Premiums, 1966-2015 ........................................................................ 30
Table B-1. Income Levels for Determining Medicare Part B Premium Adjustment and Per
Person Premium Amounts .......................................................................................................... 33
Table B-2. Income Levels for Determining Part B Premium Adjustment for Married
Beneficiaries Filing Separately and Associated Premiums ........................................................ 34
Table C-1. Projected Part B Premiums .......................................................................................... 35
Appendixes
Appendix A. History of the Part B Premium Statutory Policy and Legislative Authority ............ 29
Appendix B. Standard and High-Income Part B Premiums and Income Thresholds: 2007-
2015 ............................................................................................................................................ 33
Appendix C. Estimated Future Part B Premiums .......................................................................... 35
Appendix D. Part A Premiums ...................................................................................................... 36
Contacts
Author Contact Information .......................................................................................................... 37
Acknowledgments ......................................................................................................................... 37
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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) 2015,
the program is expected to cover about 55 million persons (46 million aged and 9 million
disabled) at a total cost of $649 billion, accounting for approximately 3.5% 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 92%) with Part A also enroll in Part B. Part C (Medicare Advantage) 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. Beginning in 2013, workers with
annual wages over $200,000 for single tax filers, or $250,000 for joint filers, pay an additional
0.9%.4 Beneficiaries generally do not pay premiums for Part A. In 2015, total Part A (HI)
expenditures are expected to reach $276 billion, representing about 43% 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 2015, about $3 billion in fees on manufacturers and importers of
brand-name prescription drugs will also be used to supplement the SMI trust fund.5 In 2015, Part
B expenditures are expected to reach about $281 billion and Part D expenditures are expected to
reach about $93 billion, representing 43% and 14% of program costs, respectively. (Part C is
financed proportionately through the HI and SMI Trust Funds; expenditures for Parts A and B
services provided under Part C are included in the above expenditure figures.)
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.6 In 2015, most beneficiaries pay the standard monthly
Part B premium of $104.90.7 Higher-income enrollees pay higher premiums set to cover a higher
1 Estimates from the 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds, July 22, 2015, at https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2015.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 R43122, Medicare Financial Status: In Brief, by Patricia A. Davis, and CRS Report R41436,
Medicare Financing, by Patricia A. Davis.
4 See Internal Revenue Service, Questions and Answers for the Additional Medicare Tax, at http://www.irs.gov/
Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax.
5 For additional information see archived CRS Report R41128, Health-Related Revenue Provisions in the Patient
Protection and Affordable Care Act (ACA), by Janemarie Mulvey.
6 Beneficiary premiums cover approximately 13.2% of the costs of “traditional” Medicare (Parts A and B combined),
12.6 % from Part B premiums, and 0.6 % from voluntary Part A premiums. See Appendix D for information on Part A
premiums.
7 Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10, 2014, at
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Medicare: Part B Premiums
percentage of Part B costs,8 while those with low incomes may qualify for premium assistance
through one of several Medicare Savings Programs administered by Medicaid.9 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 2015 Part
B premiums were announced in October 2014).10
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 2015. 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.11 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 aged 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 65.12
These individuals will receive a Medicare card and a “Welcome to Medicare” package about
three months before their 65th birthday.13 Those who are automatically enrolled in Medicare Part
(...continued)
http://www.gpo.gov/fdsys/pkg/FR-2014-10-10/pdf/2014-24248.pdf.
8 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
Premium.”
9 See Medicare.gov, “Medicare Savings Programs” at http://www.medicare.gov/your-medicare-costs/help-paying-
costs/medicare-savings-program/medicare-savings-programs.html.
10 The 2014 Part B premium rates were announced on October 9, 2014. See U.S. Department of Health and Human
Services, “2015 Medicare Part B Premiums and Deductibles to Remain the Same as Last Two Years,” press release,
October 9, 2014, at http://www.hhs.gov/news/press/2014pres/10/20141009a.html.
11 For additional information on Part A premiums, see Appendix D.
12 For additional information on enrolling in Medicare Parts A and B, see Medicare publication “Enrolling in Medicare
Part A & Part B,” at http://www.medicare.gov/Pubs/pdf/11036.pdf.
13 See “Welcome to Medicare” publication at http://www.medicare.gov/Publications/Pubs/pdf/11095.pdf. When first
(continued...)
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A are also automatically enrolled in Part B.14 However, because beneficiaries must pay a premium
for Part B coverage, they have the option of turning it down.15 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.16 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
working17 or have deferred enrollment because they have not yet reached their full retirement
benefit eligibility age,18 must file an application with the Social Security Administration or RRB
for Medicare benefits.19 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 reenroll an unlimited number of times, however premium penalties may be
incurred.
(...continued)
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
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.
14 Those who live in Puerto Rico are not automatically enrolled in Medicare Part B. See Social Security Administration
Publication “Medicare in Puerto Rico,” at http://www.socialsecurity.gov/pubs/EN-05-10521.pdf. They need to sign up
for it during the initial enrollment period or possibly be subject to a penalty. H.R. 1418, S. 1453, and S. 1961
introduced in the 114th 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.
15 Should a beneficiary decline Part B coverage, a new Medicare card will be issued that indicates that the beneficiary
has Part A coverage only.
16 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.
17 For additional information, see CMS, “Helping You Help Your Employees with Medicare Enrollment,” September
25, 2015, at http://blog.cms.gov/2015/09/25/helping-you-help-your-employees-with-medicare-enrollment/ and CMS,
“Employer Community: Information about Medicare Enrollment,” at https://www.cms.gov/Outreach-and-Education/
Find-Your-Provider-Type/Employers/Employer-Community.html.
18 In the past, individuals were generally eligible to receive both full Social Security retirement benefits and Medicare
coverage starting at the age of 65. However, the age to receive full retirement benefits has changed for some people,
depending on the year they were born. For example, those turning 65 in 2015 will not be eligible for full Social
Security benefits until the age of 66. See http://www.ssa.gov/planners/retire/retirechart.html.
19 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. See also Social Security
Administration Publication “Apply Online For Medicare In Less Than 10 Minutes—Even If You Are Not Ready To
Retire,” at http://www.socialsecurity.gov/pubs/EN-05-10530.pdf, and “How to Apply Online for Medicare Only,” at
http://www.socialsecurity.gov/pubs/EN-05-10531.pdf.
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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
Exemptions” 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, that is, 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.20 The initial enrollment period of
those eligible for Medicare based on disability or permanent kidney failure is linked to the date
the disability or treatment began.21
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 enrol s during one’s
The start date wil be delayed if one
first 3 months of one’s initial
birthday month, the start date enrol s during the last 3 months of
enrol ment period, Part B
wil be the 1st day of the next
the initial enrol ment period.
coverage starts the 1st day of
month.
If one signs up in the month
one’s birthday month.a
after the month one turns 65,
coverage starts 2 months after
enrol ment.
If one signs up 2 or 3 months
after the month one turns 65,
coverage starts 3 months after
enrol ment.
Example for someone If one enrol s in March, April, If one enrol s in June,
If one enrol s 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 enrol s in August,
The 7 month initial
coverage begins November 1st.
enrol ment period would
run from March 1
If one enrol s in September,
st
coverage begins December 1st.
through September 30th.
Source: Social Security Administration Publication No. 05-10043.
a. If one’s birthday falls on the 1st of the month, then the enrol ment period starts a month earlier and
coverage may begin on the 1st day of the month prior to one’s birthday month.
20 An eligibility, enrollment date, and premium calculator may be found on the Medicare.gov website at
https://www.medicare.gov/eligibilitypremiumcalc/.
21 For additional information on eligibility for the disabled under 65, see archived CRS Report RS22195, Social
Security Disability Insurance (SSDI) and Medicare: The 24-Month Waiting Period for SSDI Beneficiaries Under Age
65, by Scott D. Szymendera.
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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 reenroll. 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.22
Late Enrollment Premium Penalty and Exemptions
Beneficiaries who do not sign up for Part B when first eligible, or who drop it and then sign up
again later, may have to pay a late enrollment penalty for as long as they are enrolled in Part B.23
Monthly premiums for Part B may go up 10% for each full 12-month period that one could have
had Part B, but did not sign up for it (see “Calculation of Penalty” below). Some may be exempt
from paying a late enrollment penalty if they meet certain conditions that allow them to sign up
for Part B during a Special Enrollment Period (SEP). (See “Exemptions to Penalty.”) In 2014,
about 1.4% of Part B enrollees (about 750,000) paid this penalty.24 On average, their total
premiums (standard premium plus penalty) were about 29% higher than what they would have
been had they not been subject to the penalty.
Those who receive premium assistance through a Medicare Savings Program do not pay the late
enrollment penalty.25 Additionally, for those disabled persons under the age of 65 subject to a
premium penalty, once the individual reaches the age of 65, he or she qualifies for a new
enrollment period and would no longer pay a 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.26 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.27 With most eligible persons over the age of 65 enrolled in Part B, the costs are
22 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.
23 For more information, see Medicare.gov “Part B Late Enrollment Penalty,” at http://www.medicare.gov/your-
medicare-costs/part-b-costs/penalty/part-b-late-enrollment-penalty.html.
24 Figures provided to CRS by the Centers for Medicare & Medicaid Services, September 2015.
25 The state pays the standard premium regardless of the date the beneficiary first became eligible for Medicare Part B.
See Social Security Program Operations Manual, Section HI 00815.001, “State Buy-In Program General Description”
at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600815001; and Section HI 00815.039, “Effect of Buy-In on the
Individual” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600815039.
26 Social Security Act §1839(b).
27 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.
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spread over the majority of this population and per capita costs are less than would be the case if
adverse selection had occurred.
As the Part B late enrollment penalty is tied to Medicare eligibility and not to access to covered
services, individuals who live in areas where Medicare benefits are generally not provided, such
as outside of the United States or in prison, could still be subject to the Part B late enrollment
penalty if they do not sign up for (or if they drop) Part B when eligible.28 To illustrate, if a retired
Medicare-eligible individual stopped paying Part B premiums while living overseas for a three-
year period, and reenrolled when returning to the United States, he or she would not be entitled to
a SEP. This individual would instead need to enroll during the general enrollment period, and
may also be subject to late enrollment penalties based on that three-year lapse in coverage.
Additionally, Part B does not have a “creditable” coverage exemption similar to that under the
Part D outpatient prescription drug benefit.29 Except for certain circumstances discussed below,
having equivalent coverage does not entitle one to a SEP should one decide to enroll in Part B
later. For example, an individual who has retiree coverage similar to Part B and therefore decides
not to enroll in Part B when first eligible, could be subject to late enrollment penalties if he or she
enrolls in Part B at a later time (for example, because the retiree coverage was discontinued).
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.30
The period of the delay is equal to (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 reenrolls, 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 2012 and the individual subsequently enrolled during the
2013 general enrollment period (January 1st through March 31st), the delay would be less than 12
28 By comparison, to be eligible for the outpatient prescription drug benefit under Part D, a Medicare beneficiary must
reside in a geographic area where a Part D plan is available. Individuals who are incarcerated or who live outside the
United States are therefore not eligible to enroll in (or continue enrollment in) Part D. Because the Part D penalty is
based on periods when one is eligible but not enrolled, periods of incarceration or extended residence outside of the
United States would not be included in that calculation. For example, an individual living outside of the country during
his or her initial enrollment period would be given a special enrollment period (SEP) upon returning to the United
States and would be able to sign up for Part D at that time without penalty. See Social Security Administration Program
Operations Manual Section HI 03001.001 “Description of the Medicare Part D Prescription Drug Program,” at
https://secure.ssa.gov/poms.nsf/lnx/0603001001, and CMS Publication, “Understanding Medicare Part C & D
Enrollment Periods,” at http://www.medicare.gov/Pubs/pdf/11219.pdf.
29 Under Part D, individuals who have maintained drug coverage equivalent to Medicare’s standard prescription drug
coverage prior to enrolling in Part D are not subject to a late enrollment penalty. Examples of “creditable” Part D drug
coverage include drug coverage from a former employer or union, TRICARE, the Department of Veteran Affairs (VA),
the Federal Employees Health Benefits Program (FEHBP), or the Indian Health Service. As an illustration, if an
individual did not sign up for Part D when first becoming eligible because he or she already had equivalent coverage
through a former employer, the individual could sign up for Part D at any time without penalty during the time he or
she maintained creditable coverage. Should that coverage end, the individual would be entitled to a special enrollment
period and could enroll in Part D without penalty. Beneficiaries who have a break in creditable prescription drug
coverage usually have 63 consecutive days to enroll in Part D during a SEP.
30 Social Security Act §1839(b).
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Medicare: Part B Premiums
months and the individual would not be subject to a penalty. However, if that individual delayed
enrolling until the 2015 general enrollment period, the premium penalty would be 20% of that
year’s standard premium. (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
2015, $104.90), and that amount is added to the beneficiary’s premium each month.31 Using the
example above, in which the individual is subject to a 20% premium penalty, the total monthly
premium in 2015 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 2015: $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 $167.88.32
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).
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 aged 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).
31 A late premium calculator may be found on the Medicare.gov website at http://www.medicare.gov/your-medicare-
costs/part-b-costs/penalty/part-b-late-enrollment-penalty.html.
32 For additional information, see Social Security Administration 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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About 1.9 million of the 2.6 million working aged population are enrolled in Part A only, with
most of the rest enrolled in both Parts A and B.33 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 program.34 Under the
Medicare Secondary Payer rules, 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.35 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 aged 65 or over, 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.36
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 may sign up
during the eight-month period after employment or group health plan coverage ends, whichever
happens first. (If an individual’s group health plan coverage, or the employment on which it is
based, ends during the initial enrollment period, that individual would not qualify for a SEP.)37
Disabled individuals whose group plan is involuntarily terminated have six months to enroll
without penalty.38
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
33 2014 Medicare Working-Aged Beneficiary Counts from CMS 100% Unloaded Enrollment Database.
34 Social Security Act §1837(i) and 42 CFR §407.20. See Medicare Publication “Medicare and Other Health Benefits:
Your Guide to Who Pays First,” at http://www.medicare.gov/publications/pubs/pdf/02179.pdf and CMS Medicare
Secondary Payer webpage at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-
Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html. Also see CRS Report
RL33587, Medicare Secondary Payer: Coordination of Benefits, by Suzanne M. Kirchhoff.
35 The requirement that large employers’ coverage pays primary for Medicare-eligible employees was created by the
Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) and amended by the Consolidated Omnibus Budget
Reconciliation Act of 1985 (P.L. 99-272).
36 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 generally pays
secondary. In such cases, employers may offer coverage that wraps around the Medicare benefit and beneficiaries may
need to enroll in Medicare Part B when first eligible to avoid potential late enrollment penalties and/or gaps 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.
37 See “Special Enrollment Period” section of Social Security webpage: “Retirement Planner: Applying for Medicare
Only” at http://www.socialsecurity.gov/retire2/justmedicare.htm.
38 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 6-month enrollment period beginning on the first day of the
month in which the termination occurs.
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may have continued health coverage through the former employer after retirement or have
COBRA coverage,39 he or she must sign up for Part B within eight 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 reenroll 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) established 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.40 These individuals must demonstrate that 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, CMS, or a Medicare administrative contractor) resulted in late
Part B enrollment.41 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 statements from
39 For a description of COBRA, see Department of Labor, “COBRA Continuation Coverage,” at http://www.dol.gov/
ebsa/cobra.html.
40 Social Security Act §1837(k) and 42 CFR §407.21.
41 Social Security Act §1837(h) and 42 CFR §407.32.
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Medicare: Part B Premiums
employees, agents, or persons in authority that the alleged misinformation, misadvice,
misrepresentation, inaction, or erroneous action actually occurred.”42
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.43 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.44
Deduction of Part B Premiums from Social Security Checks
By law, a Social Security beneficiary who is enrolled in Medicare Part B must have the Part B
premium automatically deducted from his or her Social Security benefits.45 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.46 About 66% of Social
Security beneficiaries (39 million persons) have Medicare Part B premiums deducted from their
benefit checks.47
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 the age of 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.
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.
42 For additional information, see Social Security Program Operations Manual Section HI 00805.170 Conditions for
Providing Equitable Relief, at https://secure.ssa.gov/poms.nsf/lnx/0600805170 and Section HI 00805.175 Evidence of
Government Error or Delay, at https://secure.ssa.gov/poms.nsf/lnx/0600805175.
43 Social Security Act §1840(a)(1).
44 42 C.F.R. §408.60.
45 Social Security Act §1840(a)(1).
46 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 a premium in addition to the Part B premium. The Social Security Administration 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.
47 Number of people as of April 2015. Figures provided to CRS by the Social Security Administration.
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Part B Enrollees Who Do Not Receive Social Security Benefits
About 3% of Medicare Part B enrollees do not receive Social Security benefits.48 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)49 or the Civil Service
Retirement System (CSRS),50 Part B premiums are deducted from the enrollees’ monthly benefit
payments. While RRB retirement benefit amounts are protected by the hold-harmless provision,
CSRS benefits 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 three
months.51 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.52
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.53 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
Exemptions”) and for beneficiaries with high incomes (see “Income-Related Premiums”).
Premium Calculation for 201554
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
48 Figure provided to CRS by the Centers for Medicare & Medicaid Services, September 2015.
49 Social Security Act §1840(b)(1).
50 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. However, the Tax Equity and Fiscal Responsibility Act (P.L. 97-248) enabled federal workers to be eligible
for Medicare based on their federal employment. See CRS Report R42741, Laws Affecting the Federal Employees
Health Benefits (FEHB) Program, by Kirstin B. Blom and Ada S. Cornell.
51 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 http://www.medicare.gov/forms-help-
and-resources/mail-about-medicare/notice-of-medicare-premium-payment-due.html.
52 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.
53 Part B premium announcements are generally made in the fall prior to the effective year. For example, the 2015 Part
B premium rate was announced in October of 2014.
54 Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10, 2014, at
http://www.gpo.gov/fdsys/pkg/FR-2014-10-10/pdf/2014-24248.pdf.
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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 program costs, that is, the monthly
actuarial rate, for the aged (those 65 and over). (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 2015 monthly Part B premium amount, CMS first estimated the monthly
actuarial rate for enrollees aged 65 and older using actual per-enrollee costs by type of service
from program data through 2013 and projected these costs for subsequent years. For 2015, CMS
estimated that the monthly amount needed to cover one-half of the total benefit and
administration costs for the aged would be $208.61. However, because of expected variations
between projected and actual costs, a contingency adjustment of $3.41 was added to this amount
(see “Contingency Reserve” below). After a reduction of $2.22 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 2015 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.55 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, at the time that the 2015 premiums were being determined, the law
specified a physician payment formula called the sustainable growth rate system (SGR) for
calculating the annual update to the conversion factor used to determine payments under the
physician fee schedule.56 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.
55 Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium
Rate, and Annual Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10, 2014, at
http://www.gpo.gov/fdsys/pkg/FR-2014-10-10/pdf/2014-24248.pdf.
56 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.
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In calculating the premium for 2015, CMS recognized the possibility that Congress would
override the scheduled reduction of about 21.1% in physician fees beginning in April 2015
(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 2015
premium.57
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 2015 contingency margin adjustment of $3.41 reflects the expected
net effects of all of these factors.
Income-Related Premiums
For the first 41 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)58 required that, beginning in 2007, high-income enrollees pay higher premiums.59 About
5.6% of Medicare beneficiaries pay these higher premiums in 2015.60
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 2015, individuals whose income exceeds $85,000, and couples
whose combined income exceeds $170,000, are subject to higher premium amounts. Income
thresholds used in determining high-income Part B premiums for 2011 through 2017 are frozen at
the 2010 levels.61 The current law provision that prevents a beneficiary’s Social Security benefits
57 The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10) was enacted on April 16,
2015. MACRA froze physician payment rates for three months, increased them by 0.5 percent for services furnished
during the last six months of CY2015, and will then increase them by 0.5 percent a year for services furnished during
calendar years 2016 through 2019. Over the next several years, the bill replaces the SGR formula with new payment
systems. For additional information, see CRS Report R43962, H.R. 2: The Medicare Access and CHIP Reauthorization
Act of 2015, coordinated by Jim Hahn and Kirstin B. Blom.
58 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.
59 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
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.
60 Calculation based on “2015 Social Security/SSI/Medicare Information,” at http://www.ssa.gov/legislation/
2015%20Fact%20Sheet.pdf.
61 Section 3402 of the Patient Protection and Affordable Care Act (P.L. 111-148) froze the thresholds used to determine
high-income premiums at the 2010 level. These levels will be maintained through 2017. In 2018 and 2019, Section 402
of the Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10) maintains the freeze on the income
thresholds for the lower two high-income premium tiers but reduces the threshold levels for the two highest income
tiers so that more beneficiaries will fall into the higher percentage categories. Beginning in 2020, the thresholds will be
adjusted annually for inflation. See CRS Report R43962, H.R. 2: The Medicare Access and CHIP Reauthorization Act
of 2015, coordinated by Jim Hahn and Kirstin B. Blom.
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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 2014 tax return (2013
income) was used to determine who would pay the 2015 high-income premiums.62
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)63 which is different from gross income. Specifically,
gross income is all income from all sources, minus certain statutory exclusions (e.g., nontaxable
Social Security benefits).64 From gross income, adjusted gross income (AGI)65 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 AGI plus certain foreign earned income and
tax-exempt interest.66
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.
In the case of certain major life-changing events that result in a significant reduction in MAGI, an
individual may request to have the determination made for a more recent year than the second
preceding year.67 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.68 Certain types of events, such as those that affect expenses
but not income, or result in the loss of dividend income because of the ordinary risk of
investment, are not considered major life-changing events.69
62 If an enrollee amended his or her tax return and it changed the income used to determine the high-income
adjustments, the updated information may be provided to the Social Security Administration so that it may correct or
remove the income-related monthly adjustment amounts.
63 Defined at Social Security Act §1839(i)(4). See also Social Security Program Operations Manual, HI 01101.010,
“Modified Adjusted Gross Income (MAGI),” at https://secure.ssa.gov/poms.nsf/lnx/0601101010.
64 Internal Revenue Code §61.
65 Internal Revenue Code §62.
66 The definition of MAGI for IRMAA in Medicare is different from the MAGI definition in certain ACA Medicaid
provisions. See CRS Report R43861, The Use of Modified Adjusted Gross Income (MAGI) in Federal Health
Programs, coordinated by Evelyne P. Baumrucker.
67 Social Security Form SSA-44, at http://www.ssa.gov/online/ssa-44.pdf.
68 20 CFR §418.1205.
69 20 CFR §418.1210.
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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”70 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.71 In 2015, 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 incomes over $85,000 per year and couples with combined 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 2015 are shown below in Table 2. When
both members of a couple are enrolled in Part B, each pays the applicable premium amount.
Table 2. Monthly Medicare Part B Premiums for 2015
Income-
Total
Levels of Premium
Related
Monthly
Adjustment and
Monthly
Premium
Percentage of
Beneficiaries Who File an
Beneficiaries Who File a
Adjustment
(standard
Costs Covered by
Individual Tax Return with
Joint Tax return with
Amount
premium +
Premiums
Income:
Income:
(IRMAA)
adjustment)
Standard = 25%
Less than or equal to $85,000
Less than or equal to $170,000
$0.00
$104.90
Greater than $85,000 and less
Greater than $170,000 and less
Level 1 = 35%
than or equal to $107,000
than or equal to $214,000
$42.00
$146.90
Level 2 = 50%
Greater than $107,000 and less Greater than $214,000 and less
than or equal to $160,000
than or equal to $320,000
$104.90
$209.80
Level 3 = 65%
Greater than $160,000 and less Greater than $320,000 and less
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, 2015,” 79 Federal Register 61314, October 10,
2014, at http://www.gpo.gov/fdsys/pkg/FR-2014-10-10/pdf/2014-24248.pdf.
Note: The above income thresholds wil remain the same through 2017.
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.
70 Social Security Form SSA-561-U2, at http://www.ssa.gov/online/ssa-561.pdf.
71 Social Security Act §1839(i).
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Medicare: Part B Premiums
Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for
2015
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: Centers for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial
Rates, Premium Rate, and Annual Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10,
2014, at http://www.gpo.gov/fdsys/pkg/FR-2014-10-10/pdf/2014-24248.pdf.
Note: The above income thresholds wil remain the same through 2017.
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.72 This has meant that over time, as
incomes have increased with inflation, a greater share of Medicare enrollees are reaching the
high-income thresholds and paying the high-income premiums than would have been the case
without this freeze.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10)73 makes
changes to the income thresholds in the top two income categories beginning in 2018, as shown
in Table 4 below. Individuals with incomes between $133,500 and $160,000 per year will be in
the 65% applicable percentage group (instead of those with incomes between $160,000 and
$214,000), and the income threshold for the highest group (80%) will be $160,000 (instead of
$214,000). The thresholds for the lower two income groups will remain unchanged. In 2019, the
thresholds will remain the same as in 2018. For the years 2020 and after, the thresholds will be
adjusted annually for inflation based on the new (2018 and 2019) threshold levels.74
72 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), at http://www.cbo.gov/sites/default/files/cbofiles/
ftpdocs/113xx/doc11379/amendreconprop.pdf.
73 CRS Report R43962, H.R. 2: The Medicare Access and CHIP Reauthorization Act of 2015, coordinated by Jim Hahn
and Kirstin B. Blom.
74 Under prior law (ACA §3402), in 2020 and subsequent years, the income thresholds were to be indexed to inflation
as if they had not been frozen between 2011 and 2019. In other words, the income thresholds would have reverted to
the levels they would have reached had they been indexed for inflation since 2007, thereby reducing the proportion of
beneficiaries who would be subject to higher premiums.
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Table 4. Income Thresholds for High-Income Premiums in 2018 and 2019
Beneficiaries Who File Individual Tax Returns
Percentage of Costs Covered by Premiums
with Income:
Less Than or Equal to $85,000
25%
More Than $85,000 but Not More Than $107,000
35%
More Than $107,000 but Not More Than $133,500
50%
More Than $133,500 but Not More Than $160,000
65%
More Than $160,000
80%
Source: Section 402 of the Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10).
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.75 About one in five Medicare beneficiaries
receives Part B premium subsidies.
Medicare beneficiaries who qualify for full Medicaid benefits (full dual-eligibles) have most 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.76
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 $7,280 for an individual or $10,930 for a couple in
2015.77 These assistance programs are commonly referred to as Medicare Savings Programs
(MSP).78 Three of these programs provide assistance with Part B premiums.
75 See Medicare.gov, “Medicare Savings Programs” at http://www.medicare.gov/your-medicare-costs/help-paying-
costs/medicare-savings-program/medicare-savings-programs.html and Medicare Publication, “Get Help with Your
Medicare Costs,” at https://www.medicare.gov/Pubs/pdf/10126.pdf. 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.
76 See CRS Report R43357, Medicaid: An Overview, coordinated by Alison Mitchell. In those states that have extended
Medicaid coverage to individuals 64 years of age and under with incomes of up to 138% of FPL, it is possible that
certain individuals at the higher income levels may no longer qualify for Medicaid when they turn 65. In other words,
traditional Medicaid categorical and income eligibility (i.e., income and asset) rules will apply when an individual
becomes eligible for Medicare.
77 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.
78 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.
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Medicare: Part B Premiums
Qualified Medicare Beneficiaries
Aged or disabled persons with incomes at or below FPL may qualify for the Qualified Medicare
Beneficiary (QMB) program.79 In 2015, the QMB monthly qualifying income levels are $1,001
for individuals and $1,348 for a couple (annual income of $12,012 and $16,176, respectively).80
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.81 (See Table 5.) 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).
Specified Low-Income Medicare Beneficiaries
Individuals whose income is more than 100% but less than 120% of FPL may qualify for
assistance as a Specified Low-Income Medicare Beneficiary (SLMB). In 2015, the monthly
income limits are $1,197 for an individual and $1,613 for a couple (annual income of $14,364
and $19,356, respectively).82 Medicaid pays the Medicare Part B premiums for SLMBs, but not
other cost sharing.
Table 5. 2015 Medicare Savings Program Eligibility Standards
Monthly Incomea
Resourcesb
Benefits
Qualified Medicare
At or below 100% FPLc
$7,280 (single)
Part B premiumd
Beneficiary (QMB)
$1,001 (single)
$10,930 (couple)
Coverage of Parts A and B
$1,348 (couple)
deductibles and coinsurance
Specified Low-Income
Above 100% but less than
$7,280 (single)
Part B premium
Medicare Beneficiary
120% FPLc
$10,930 (couple)
(SLMB)
$1,001–$1,197 (single)
$1,348–$1,613 (couple)
Qualifying Individual (QI)
At or above 120% but less
$7,280 (single)
Part B premium
than 135% FPLc
$10,930 (couple)
$1,197–$1,345 (single)
$1,613–$1,813 (couple)
Source: Social Security Program Operations Manual Section HI 00815.023 (Income Limits), at
https://secure.ssa.gov/poms.nsf/lnx/0600815023, and “Medicare Savings Programs” at http://www.medicare.gov/
your-medicare-costs/help-paying-costs/medicare-savings-program/medicare-savings-programs.html.
79 The federal poverty levels for 2015 are $11,770 per year for an individual and $ 15,930 for a couple. (These levels
are slightly higher in Alaska and Hawaii.) See The 2015 HHS Poverty Guidelines at http://aspe.hhs.gov/2015-poverty-
guidelines.
80 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 Social Security Administration Program Operations Manual HI
00815.023 Medicare Savings Programs Income Limits at https://secure.ssa.gov/poms.nsf/lnx/0600815023.
81 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 are
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.
82 The qualifying levels are calculated the same way as for the QMB program.
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Notes:
a. These amounts include a $20 general income exclusion, under which $20 from any income is not counted
toward the income limits.
b. Resources include money in checking and savings accounts, stocks, bonds, mutual funds, and Individual
Retirement Accounts (IRAs). Resources do not 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 wil
also pay Part A premiums for QMBs.
Qualifying Individuals
Individuals whose income is between 120% and 135% of the federal poverty level may qualify
for assistance as Qualifying Individuals (QIs). In 2015, the monthly income limit for a QI is
$1,345, and for a couple, $1,813 (annual income of $16,140 and $21,756, 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.83 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).84 Subsequent legislation extended the program and the amounts available
through allocation.85 MACRA permanently extended the QI program and appropriated $535
million for the remainder of CY2015 (April 1, 2015, through December 31, 2015) and $980
million for CY2016.86
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).87 If the CPI-W
83 In general, Medicaid payments are normally shared between the federal government and the states according to
matching formulas.
84 Section 4732(c) of BBA97 added §1933(c) of the Social Security Act.
85 See archived CRS Report R43958, Health Care-Related Expiring Provisions, First Session of the 114th Congress,
coordinated by Jim Hahn.
86 The amount of funding for CY2017 and subsequent calendar years will be based on the product of the following: (1)
the previous year’s QI allocation; (2) the increase from the previous year in Medicare Part B premium; and (3) the
estimated increase from the previous year in Part B enrollment.
87 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
(continued...)
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Medicare: Part B Premiums
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.88 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
Social Security check does not decline.89 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.90 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.91 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.”)
(...continued)
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.
88 Social Security Act §1839(f). This provision was originally created by the Deficit Reduction Act of 1984 (P.L. 98-
369, Section 2302), extended by subsequent legislation, and made permanent by the Catastrophic Coverage Act of
1988 (P.L. 100-360, Section 211(b)) (this provision was not repealed when that law was repealed in 1989). Those who
receive RRB benefits are also protected by this provision. The hold-harmless provision was first implemented in
January 1987.
89 For more information on the hold-harmless provision, see archived CRS Report R40561, Interactions Between the
Social Security COLA and Medicare Part B Premiums, by Jim Hahn.
90 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.
91 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.
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As described earlier, an individual’s Social Security COLA is determined by multiplying his or
her benefit amount by the inflation rate, 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 inflation rates and projected Part B costs. For most years, the hold-harmless
provision has affected a relatively small number of beneficiaries.92 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 2011.93 Because 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 were $110.50 in 2010 and $115.40 in 2011.94
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 and 2013, Social Security beneficiaries received a 3.6% and a 1.7% COLA, respectively,
which more than covered the Part B premium increases in those years; therefore, the hold-
harmless provision was not applicable for most beneficiaries. Similarly, in 2014 and 2015, with a
Social Security COLA increase of 1.5% and 1.7% and no increase in Part B premiums, the hold-
harmless provision also was not applicable in those years.95
In 2016, however, the Medicare Trustees project that there will be no Social Security COLA
increase but that there will be an increase in Medicare Part B premiums. Therefore, the Medicare
Trustees expect that the hold-harmless provision will again go into effect for most beneficiaries in
2016.96 Those held harmless (an estimated 70% of Part B enrollees) would pay the 2015 monthly
premium of $104.90, while those not held harmless (the remaining 30%)97 could pay an estimated
92 The hold-harmless provision is applied on a case-by-case basis. For example, in a given year a Social Security
COLA applied to most benefit levels may be sufficient to cover the dollar amount of a Part B premium increase for
most beneficiaries; however, it may not be sufficient to fully cover the increase for someone who receives a smaller
benefit amount, i.e., the COLA percentage is applied to a smaller number, and the resulting dollar increase may not be
sufficient to fully cover the Part B premium increase. In such a case, the hold-harmless provision would apply to that
individual and his/her Part B premiums may be lower than that paid by most beneficiaries in a given year. Thus, the
hold-harmless provision may apply to a small number of beneficiaries each year.
93 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.
94 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.
95 Social Security Administration, “Cost-of-Living Adjustment (COLA) Information for 2015,” at
http://www.socialsecurity.gov/cola/ and Social Security Administration Fact Sheet, “2015 Social Security Changes,” at
http://www.ssa.gov/news/press/factsheets/colafacts2015.html.
96 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary
Medical Insurance Trust Funds, July 22, 2015, at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2015.pdf.
97 Those expected not to be held harmless include those eligible for premium assistance through their state Medicaid
programs (about 19%); those who pay the high-income premiums (about 6%); those who do not receive Social Security
benefits (3%), and new enrollees in 2016 (5%). (As there is some overlap in categories, for example some individuals
may pay the high-income premiums and not yet receive Social Security benefits, these figures sum to more than 30%.)
(continued...)
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Medicare: Part B Premiums
$159.30 per month, a 52% increase. Projections of future premiums may be found in Appendix
C.
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 monthly Part B premium has
risen from $3.00 in 1966 to $104.90 in 2015. (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 $5,310 per beneficiary (about $442.50 per month)
in 2015.98
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 $96.40 per month during those
years. The standard 2010 and 2011 premiums, paid by those who were not held harmless, were
thus higher than they would have been had the hold-harmless provision not been in effect. (See
prior section “Protection of Social Security Benefits from Increases in Medicare Part B
Premiums” for additional detail.)
(...continued)
Estimates provided to CRS by the Centers for Medicare & Medicaid Services, September 2015.
98 For data on recent growth in specific Part B services, see the 2015 Report of the Medicare Trustees, pp. 125-139, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/
Downloads/TR2015.pdf.
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Figure 1. Monthly Medicare Part B Premiums
(1966-2015)
120
Most enrollees "held-harmless" in 2010 and
2011, and paid 2009 premium amount
100
Transition from fixed dollar amount under
OBRA 90 (1991-1995) to 25% of costs
under OBRA 93 and BBA 97 (1996 on)
80
($)
ium
m 60
re
y P
$4 catastrophic coverage premium added by Catastrophic
Coverage Act of 1988, repealed the next year
onthl
M
40
20
0
Source: CRS figure, based on the 2015 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplemental Medical Insurance Trust Funds, Table V.E2.
Since 2000, the Medicare Part B premium has more than doubled from $45.50 in 2000 to the
current premium of $104.90 in 2015. Increases have been due to a number of factors that have
raised 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.
While Part B expenditure growth has slowed in recent years and premiums have remained level
for the past three years, the Medicare Trustees project faster benefit spending growth over the
next five years (a 6.7% Part B average annual growth rate compared with a 5.3% growth rate over
the last five years).
Additionally, the Medicare Trustees project that 2015 Part B expenditures will be higher than they
originally projected in 2014. Their 2015 report noted that “(l)egislation enacted at the end of 2014
and the beginning of 2015 raised Part B physician expenditures substantially compared to the law
in effect in the fall of 2014 when the 2015 financing was established.”99 Higher-than-expected
utilization of Part B services also contributed to this increase. While the Medicare Trustees note
that the financing established for calendar year 2015 should be adequate to cover expected
expenditures, it “would need to be increased in future years in order to restore the financial status
of the Part B account for a satisfactory level.”100
99 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplemental Medical
Insurance Trust Funds, July 22, 2015, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-
and-Reports/ReportsTrustFunds/Downloads/TR2015.pdf, p. 87.
100 2015 Medicare Trustees Report, pp 96-97.
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Because of the projected Part B spending increases and the need to build up an adequate level of
contingency reserves,101 the Medicare Trustees estimate that beneficiary premiums would need to
increase to about $120.70 per month in 2016. However, as previously noted, the Trustees also
expect that there will be no Social Security COLA in 2016 and that the hold-harmless provision
will apply to most beneficiaries. Because about 70% of beneficiaries would be held harmless and
their premiums would remain at the 2015 amount ($104.90 per month), the premiums of the
remaining 30% of beneficiaries would need to cover all of the expected increased costs so that
25% of Part B costs are still covered by beneficiary premiums. In other words, if the hold-
harmless provision is not in effect in 2016, everyone who pays the standard premium will pay
about $120.70 per month; however, if it goes into effect, those not held harmless will be expected
to pay standard premiums of close to $160 per month ($159.30), while those who are held
harmless will continue to pay $104.90 per month. The Trustees project that in 2017, the hold-
harmless provision will no longer be in effect and the standard premium will decrease to about
$120.70. Estimates of premiums in future years through 2024 may be found in Appendix C.
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 about 6% each year. (See Appendix C.) Rising Medicare premiums
could have a large effect on Social Security beneficiaries, particularly on those who rely on Social
Security as their primary source of income.102 In 2014, for example, among Americans aged 65
and older, 52% of married couples and 74% of unmarried persons receive more than half of their
income from Social Security, and 22% of married couples and 47% of unmarried persons receive
more than 90% of their income from Social Security.103 Some of these beneficiaries may see a
decline in their standard of living as their Medicare premiums rise.
Once a person receives Social Security, his or her benefit is indexed to inflation and thereafter
grows with annual Social Security COLAs.104 However, Medicare premiums are based on the per
capita cost growth of Part B benefits which reflect the growth in the cost of medical care, and in
the utilization and intensity of services used by beneficiaries, factors that have historically grown
faster than CPI-W. Additionally, as there has been a continuing shift from providing care in
inpatient (Part A) to outpatient settings (Part B), a greater portion of Medicare spending is
expected to be covered by beneficiary premiums.105 This means that, over time, Medicare
101 The Trustees try to maintain an adequate reserve fund (about 17% of expected costs for the year) in the
Supplementary Medical Insurance Trust fund to cover potential variations in projected and actual costs. Unexpected
expenditures in 2015 are expected to draw down on this reserve so that by the end of the year, reserves are projected to
represent about 12% of expected 2016 costs. Financing for 2016 (premiums and general revenue) will need to be
adjusted to build the reserves back up to 17% of expected costs.
102 Other sources of income may include earnings from employment employer-sponsored pension benefits and
investment earnings. In addition, retirees may draw down on their accumulated assets to supplement their income.
103 Social Security Basic Facts, as of April 2014, at http://www.ssa.gov/pressoffice/basicfact.htm.
104 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.
105 In 2000, the ratio of Part A expenditures to Part B expenditures was 59:41. This ratio decreased to 50:50 in 2014,
and is expected to drop to 46:54 in 2024. This means that over time the proportion of Medicare expenditures covered
(continued...)
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Medicare: Part B Premiums
premiums are expected to represent a growing proportion of most beneficiaries’ Social Security
income.106 Since 2000, Social Security’s annual COLA has resulted in a cumulative benefit
increase of about 39%, 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 2015 would represent
close to 11% of the average Social Security benefit, and increase to an estimated 18% in 2089.107
Should the hold-harmless provision go into effect in 2016 (see “Protection of Social Security
Benefits from Increases in Medicare Part B Premiums”), then about 30% of Medicare Part B
enrollees could see an increase in premiums from $104.90 per month to approximately $159.30
per month. Those who pay the high-income premiums could see premiums of up to $509.80. (See
Appendix B and Appendix C for historical, current, and projected Part B premiums.) In
addition, the late-enrollment penalty is determined as a percentage of the standard premium.
Therefore, even if protected by the hold-harmless provision for their standard premiums, those
who pay the late enrollment penalty could see a large increase in their penalty payments in 2016.
(The penalties are considered nonstandard premiums and are not protected by the hold-harmless
provision.) For example, an individual with a 30% penalty currently pays an additional $31.35
per month on top of the standard premium of $104.90. In 2016, a 30% penalty could increase to
close to $48.00. This amount would be in addition to whatever premium that person pays
($104.90 for those held harmless and an estimated $159.30 for those not held harmless). The
increased premiums for those not held harmless and those subject to enrollment penalties could
cause sufficient financial hardship for some beneficiaries that they may not be able to maintain
their enrollment in Part B.
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. As an increasing number
of new Medicare-eligibles must actively sign up for Medicare because they are not yet receiving
Social Security benefits (e.g., their full retirement Social Security age exceeds the Medicare age
of eligibility), there is concern that more people could become subject to late enrollment
penalties. For example, the Medicare Rights Center reported a large number of calls to its hotline
related to transitioning to Medicare. Their report noted that “(t)housands of callers to the
Medicare Rights Center’s helpline report challenges, misunderstandings and misinformation
related to Medicare enrollment and benefits coordination” and that “such confusion leads to
beneficiaries facing gaps in coverage and premium penalties that many have difficulty
affording.”108
(...continued)
under Part B is expected to increase. While providing more services on an outpatient basis may be more cost effective
for the program as a whole, it also means that beneficiaries will be expected to bear a larger portion of program costs
over time. See CRS Report R43122, Medicare Financial Status: In Brief, by Patricia A. Davis.
106 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.
107 Similarly, average Medicare cost sharing is estimated to be about 12% of the Social Security benefit in 2015, and
expected to increase to approximately 18% in 2089. 2015 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplemental Medical Insurance Trust Funds, July 22, 2015, p. 38, at
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/
Downloads/TR2015.pdf.
108 Medicare Rights Center, “Medicare Trends and Recommendations: An Analysis of 2012 Call Data from the
Medicare Rights Center’s National Helpline,” January 2014, at http://www.medicarerights.org/policy/priorities/2012-
medicare-trends/. The Medicare Rights Center also recently issued a related summary of findings from its helpline
(continued...)
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Medicare: Part B Premiums
Some proposals 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 to a penalty. For example, under the Part D
prescription drug benefit, individuals are not subject to a late enrollment penalty if they have
maintained “creditable” prescription drug coverage prior to enrollment, that is, coverage that is
expected to pay at least as much as Medicare’s standard prescription drug coverage.109 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).110
Other suggestions include formally training employers about Medicare coverage and interaction
with other insurance; improving education on Medicare, including late enrollment penalties, for
those nearing Medicare eligibility age; and expanding equitable relief to include remedies for
actions based on misinformation provided by entities in addition to an agent of the federal
government, such as an agent of state or local government, and/or an employer or insurer.
In recent Congresses, several bills have been introduced to address the Part B late enrollment
penalty. For example, H.R. 2476 introduced in the 114th Congress, would establish 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. Similar legislation introduced in the 112th Congress, H.R. 1654, would
have also created a continuous enrollment period that would allow Medicare eligible beneficiaries
to sign up for Part B outside of the general enrollment period, and receive health coverage the
following month. Additionally, H.R. 1654 would have expanded eligibility for equitable relief to
those who based enrollment decisions on incorrect information provided by group health plans
and plan sponsors, and 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.
(...continued)
entitled “A Costly Mistake: Missing Part B Enrollment,” April 2015, at http://www.medicarerights.org/pdf/medicare-
snapshot-040915.pdf.
109 See Medicare publication “Your Guide to Medicare Prescription Drug Coverage,” p.19, at
http://www.medicare.gov/Publications/Pubs/pdf/11109.pdf.
110 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. 2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal
Supplemental Medical Insurance Trust Funds, July 22, 2015, at https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2015.pdf, Table IV.B9.
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Medicare: Part B Premiums
Deficit Reduction Proposals
As Medicare currently represents about 15% of federal spending,111 many 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, while others would limit the amount of federal contributions.
Increasing Medicare Premiums
Certain proposals would limit premium increases to high-income beneficiaries. For example, the
President’s FY2016 budget proposal would increase the percentage of per capita expenditures
paid by high-income enrollees from the current range of 35% to 80% of expenditures to a range
of between 40% and 90%, and it would increase the number of high-income brackets from four to
five.112 The proposal would also continue the freeze on income thresholds until 25% of
beneficiaries were subject to the high-income premiums.113
Other proposals would increase premiums paid by all beneficiaries. For example, a proposal
introduced by then Senators Lieberman and Coburn114 suggested raising the standard Part B
premium from the current 25% of program costs to 35% over five years.
Impose a Part B Premium Surcharge for Beneficiaries in Medigap Plans with
Near First-Dollar Coverage
About 23% of beneficiaries enrolled in traditional Medicare buy Medigap policies from private
insurance companies which cover some or all of Medicare’s cost sharing.115 Individuals who
purchase Medigap must pay a monthly premium which is set by, and paid to, the insurance
company selling the policy. 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 2013, 66% 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. To address this, Section 401 of MACRA prohibits the
sale of Medigap policies that cover Part B deductibles to newly eligible Medicare beneficiaries
beginning in 2020. Some have also proposed imposing a Part B premium surcharge for Medicare
beneficiaries who purchase certain types of Medigap plans. For example, the President’s FY2016
budget proposal116 suggests imposing 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.
111 The federal spending amount is net of beneficiary premiums.
112 See CRS Report R43934, President’s FY2016 Budget: Centers for Medicare & Medicaid Services (CMS)
Legislative Proposals, coordinated by Alison Mitchell, Kirstin B. Blom, and Patricia A. Davis.
113 MACRA, enacted subsequent to the issuance of the President’s FY2016 budget, changes the threshold for the top
two income categories beginning in 2018; a larger number of people are therefore expected to pay premiums that cover
65% and 80% of spending (see “Income Thresholds and Premium Adjustments”).
114 A Bipartisan Plan to Save Medicare and Reduce Debt, June 28, 2011.
115 See CRS Report R42745, Medigap: A Primer, by Carol Rapaport.
116 See CRS Report R43934, President’s FY2016 Budget: Centers for Medicare & Medicaid Services (CMS)
Legislative Proposals, coordinated by Alison Mitchell, Kirstin B. Blom, and Patricia A. Davis.
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Medicare: Part B Premiums
Limit Federal Subsidies
Finally, other proposals, such as that put forth in the FY2016 House Budget,117 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.118 Most such proposals would limit the growth in the annual federal
premium subsidy. 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.
Considerations
Some of the issues that would need to be addressed when evaluating these types of deficit
reduction 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.
117 H.Con.Res. 27. A similar proposal was included in the FY2015 House Budget. See CRS Report R43479, Overview
of Health Care Changes in the FY2015 House Budget, by Patricia A. Davis, Alison Mitchell, and Bernadette
Fernandez.
118 Most premium support models combine Parts A and B benefits; the premium subsidy and beneficiary premiums
would apply to both of these parts of Medicare.
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Medicare: Part B Premiums
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.119
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.120 The income
thresholds used to determine eligibility for the high-income premium are to be adjusted each year
by the growth in the Consumer Price Index.121 The Patient Protection and Affordable Care Act
(ACA; P.L. 111-148, Section 3402), however, froze these thresholds for the period of 2011
119 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.
120 MMA increased the Part B premium percentage for high-income enrollees; DRA accelerated the phase-in period for
such premiums.
121 Social Security Act §1839(i)(5).
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Medicare: Part B Premiums
through 2019 at the 2010 levels. In 2020, the thresholds were to return to the levels they would
have been had they been adjusted for inflation each year during the freeze, and again indexed to
inflation each year. As this would have resulted in higher income thresholds, it would have had
the effect of reducing the number of beneficiaries who pay the high-income premiums in 2020.
Section 402 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-
10) maintains the freeze on the income thresholds for all income categories through 2017 and on
the lower two high-income premium tiers through 2019. Beginning in 2018, MACRA reduces the
threshold levels for the two highest income tiers so that more beneficiaries will fall into the higher
percentage categories. (See Table 4.) Additionally, starting in 2020, the income thresholds for all
income categories will be adjusted annually for inflation based on the 2019 income thresholds.
This will, in effect, maintain the proportion of beneficiaries who pay the high-income premium.
Table A-1. Monthly Part B Premiums, 1966-2015
Monthly
Effective
Year
Premium
Date
Governing Policy; Legislative Authority
1966
$3.00
7/66
Fixed dol ar amount; Social Security Amendments (SSA) of 1965
1967
$3.00
Fixed dol ar amount; SSA of 1965
1968
$4.00
4/68
Fixed dol ar amount through March; Medicare Enrol ment 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
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Monthly
Effective
Year
Premium
Date
Governing Policy; Legislative Authority
1989
$31.90
1/89
25% of costs, OBRA 87, plus $4 catastrophic coverage premium added
by Medicare Catastrophic Coverage Act of 1988
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 dol ar amount; OBRA 90
1992
$31.80
1/92
Fixed dol ar amount; OBRA 90
1993
$36.60
1/93
Fixed dol ar amount; OBRA 90
1994
$41.10
1/94
Fixed dol ar amount; OBRA 90
1995
$46.10
1/95
Fixed dol ar 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 enrol ees: 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 enrol ees: 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 enrol ees: 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 enrol ees, ful y phased-in; hold-harmless provision applied to
most enrol ees 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 enrol ees, ful y phased-in; ACA freezes income thresholds at
2010 levels from 2011 through 2019); hold-harmless provision applied to
most enrol ees 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 enrol ees, ful y 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 enrol ees, ful y phased-in; ACA freezes income thresholds at
2010 levels from 2011 through 2019)
2014
$104.90
1/14
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrol ees, ful y phased-in; ACA freezes income thresholds at
2010 levels from 2011 through 2019)
2015
$104.90
1/14
25% of costs; BBA 97 (MMA and DRA authorize higher premiums for
high-income enrol ees, ful y phased-in; ACA as modified by MACRA
freezes income thresholds at 2010 levels from 2011 through 2017)
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Source: Various Annual Medicare Trustees Reports, including the 2015 Annual Report of the Board of Trustees of
the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Fund, July 22, 2015; and Centers
for Medicare & Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate,
and Annual Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10, 2014.
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Appendix B. Standard and High-Income Part B
Premiums and Income Thresholds: 2007-2015
Table B-1. Income Levels for Determining Medicare Part B Premium Adjustment
and Per Person Premium Amounts
2007-2015 (in nominal dollars)
2007
2008
2009
2010
2011
2012
2013-2015
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 2014, and Centers for Medicare & Medicaid
Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning
January 1, 2015,” 79 Federal Register 61314, October 10, 2014.
Note: When both are enrol ed 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
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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 enrol ees 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
2007-2015 (in nominal dollars)
Income
Level
2007
2008
2009
2010
2011
2012
2013-2015
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 2014, and Centers for Medicare
& Medicaid Services, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual
Deductible Beginning January 1, 2015,” 79 Federal Register 61314, October 10, 2014.
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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)
2016a
$159.30
$223.00
$318.60
$414.20
$509.80
2017
120.70
168.90
241.30
313.70
386.10
2018
122.30
171.20
244.50
317.90
391.20
2019
132.20
185.00
264.30
343.60
422.90
2020
140.00
195.90
279.90
363.90
447.80
2021
147.60
206.60
295.20
383.80
472.30
2022
155.80
218.10
311.50
405.00
498.40
2023
164.50
230.20
328.90
427.60
526.20
2024
173.90
243.50
347.80
452.10
556.50
Source: 2015 Annual Report of the Board of Trustees of the Federal Hospital Insurance and Federal Supplementary
Medical Insurance Trust Fund, July 22, 2015, 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 wil be in effect.
a. In their 2015 report, the Medicare Trustees estimate that the hold-harmless provision wil go into effect for
most beneficiaries due to an expectation that there wil be a 0% cost-of-living increase (COLA) for Social
Security benefits. Should this occur, beneficiaries who have their premiums deducted from their Social
Security checks at the end of 2015 and the beginning of 2016 wil pay the same premium as they did in 2015,
$104.90. Those who pay the high-income premiums, who receive premium assistance through Medicaid,
who do not receive Social Security, or who are new to Medicare in 2016 are not protected by the hold-
harmless rule and are thus expected to pay the estimated premium amounts shown in this table for 2016. If
there is a Social Security COLA in 2017, then it is expected that the premiums of those not held harmless
in 2016 would drop in 2017, while the premiums of those held harmless in 2016 would increase.
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Medicare: Part B Premiums
Appendix D. Part A Premiums
The vast majority of persons turning the age of 65 are automatically entitled to Medicare Part A
based on their own or their spouse’s work in covered employment. However, individuals aged 65
and older 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.122 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
($407 per month in 2015). 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 ($224 per month in 2015). CMS estimates that in 2015, about 644,000 individuals will
voluntarily enroll in Part A by paying the full premium and about 58,000 will pay the reduced
premium.123
Similar to Part B, a penalty is imposed for persons who delay Part A enrollment beyond their
initial enrollment period (which is the same 7-month period applicable for enrollment in Part
B).124 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.125 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.126
122 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,” at http://www.socialsecurity.gov/pubs/10095.html.
123 “Medicare Program; CY 2015 Part A Premiums for the Uninsured Aged and for Certain Disabled Individuals Who
Have Exhausted Other Entitlement,” 79 Federal Register 61312, October 10, 2014, at http://www.gpo.gov/fdsys/pkg/
FR-2014-10-10/pdf/2014-24250.pdf.
124 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.
125 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.
126 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
Michele Malloy, Information Research Specialist, made significant contributions to this report.
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