Medicare premium payments may increase or decrease depending on an individual\’s income. In order to determine the income and the resulting premium payments an individual may conduct a \”means test\”. This article will provide Medicare premium computations as of 2011 for Part B and Part D. This will be in compliance with The Medicare Prescription Drug, Improvement and Modernization Act (MPDIMA) of 2003.

The purpose of the means test is to increase health benefits for lower income earners and increase Medicare premiums for higher income earners, at least as to Part B and Part D benefits.

Premium Update for 2011:

1. Level one Income Earners the 2011 Standard Part B premium is $115.40 per person each month:

a. Single filers whose with MAGI is below $85,000

b. Married Filers whose with MAGI is below $170,000

c. The 2011 Standard Part D premium depends on the standard premium for the drug program chosen.

2. Level two income earners the 2011 standard Part B rate is $46.10 and part D premium is $12 for:

a. Singles with MAGI above $85,000 to $107,000

b. Married with MAGI above $170,000 to $214,000

3. Level three income earners will be charged $115.30 for Part B and $31.10 for part D:

a. Singles above 107,000 to$160,000

b. Married above 214,000 to $320,000

4. Level four income earners will be charged $184.50 for Part B and $50.10 for part D:

a. Singles with MAGI above $160,000 to 214,000

b. Married with MAGI above $320,000 to $428,000

5. Level five income earners will be charged $253.70 for Part B and $69.10 for part D:

a. Singles with MAGI above 214,000

b. Married with MAGI above $428,000

Adjusted Gross income (AGI) vs. Modified Gross Income (MAGI)

Gross income is the sum of all income earned without any exemptions and/or deductions applied. AGI is the sum arrived at when subtracting deductions (adjustments) such as IRA, moving expenses deductions, as well as unreimbursed business expenses from Gross Income. While MAGI is arrived at by using AGI and then bringing back items usually considered deductible or exempt such as:

a. Foreign income or housing costs

b. Traditional IRA contributions.

c. Savings bond interest excluded (Form 8815)

d. Foreign housing deduction taken (Form 2555)

In Case of Disagreement

The easiest and simplest way to resolve disputes is to call the Internal Revenue Service (IRS). You can also call Medicare if the IRS explanation is insufficient for you. Just make sure to have a pen and paper handy and pay attention to the explanation.

Out of Pocket Medicare Expenses

More often than not Medicare part A and Part b does not cover the entire cost. If this is the case the individual has to pay the excess from his or her pocket. Best to refer to the Medicare fee schedule regarding this. This fact is especially important to individuals who are qualified for other Health plans such as privately run HMO\’s or Medicaid

MediGap

Medigap is designed to fill the gap left by Medicare. Hence the name MediGap. Basically it provides supplemental coverage for Medicare Part A and Part B. remember these are CMS standardized insurance policies but administered and sold by private entities.

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