The Part B premium is the monthly amount paid by individuals for health coverage in Medicare Part B – a voluntary program that covers physician services, hospital outpatient care, durable medical equipment and other services including some home health care. The vast majority (about 92 percent) of Medicare beneficiaries are enrolled in Part B. Most individuals have the premium for their Part B coverage deducted from their Social Security, Railroad Retirement, or Federal government retirement checks.
How much is the Medicare Part B premium?
The 2021 standard premium for Medicare Part B health coverage is $148.50 an increase of $3.90 from $144.60 in 2020. For most retirees, the cost increase will claim a significant portion of their 1.3 percent Social Security cost-of-living adjustment, or COLA. It amounts to nearly 20 percent of the average retired worker’s COLA increase of $20 a month next year. The increase could have been higher because actions the government took in response to the coronavirus pandemic could have triggered large premium increases. However, to avoid a large increase Congress passed bipartisan legislation that limited the increase for 2021. Beneficiaries will pay a surcharge averaging $3 on the monthly premium until the Supplemental Medical Insurance (SMI) Trust Fund is repaid. Higher-income beneficiaries are required to pay more, as shown in the following chart, based on their 2019 yearly income.
|Beneficiaries who file an individual tax return with income
||Beneficiaries who file a joint tax return with income
||Total monthly premium amount
|$88,000 or less
||$176,000 or less
|above $88,000 up to $111,000
||above $176,000 up to $222,000
|above $111,000 up to $138,000
||above $222,000 up to $276,000
|above $138,000 up to $165,000
||above $276,000 up to $330,000
|above $165,000 and less than $500,000
||above $330,000 and less than $750,000
|$500,000 or above
||$750,000 and above
What determines the amount of the Part B premium?
The standard Medicare Part B premium is determined by a formula contained in the 1997 Balanced Budget Act (BBA 97), which set the premium at 25 percent of total program costs. The remaining 75 percent of program costs are financed through general revenues. The Medicare Modernization Act of 2003 (MMA) required higher-income beneficiaries to pay a higher percentage of program costs, resulting in multiple tiers of premiums based on income.
Does the Medicare Part B premium increase every year?
Over the 50-year history of the Medicare program, Part B premiums have changed nearly every year, reflecting the changes in health care costs. From 2012 until 2015, premiums either decreased or remained the same because the growth in health care costs stabilized. The 2021 increase reflects growth in health care spending. A “hold harmless” provision in the Social Security Act mandates that the Part B premium increase cannot exceed the cost-of-living adjustment (COLA) in a beneficiary’s Social Security check.
However, about 30 percent of beneficiaries are not protected by the hold harmless provision including:
- Medicare Part B beneficiaries new to Medicare
- Current enrollees who do not have the Part B premium withheld from their Social Security benefit, and
- Higher-income beneficiaries
In years with no or a low COLA increase and a Part B premium increase, most beneficiaries will be held harmless. Because of the BBA 97 provision, the approximately 30 percent of individuals not held harmless have to shoulder the burden of the 25 percent of program costs that beneficiaries are required to pay through the Part B premium. This could lead to significant price spikes if Congress doesn’t intervene to moderate premium increases for those not held harmless, as it did for 2021 Part B premiums.