Did You Know? Medicare Premiums Decreasing for 2023
For the past year or so, most news outlets have been posting headlines which has something related to inflation running hot and how we’re paying more for gasoline, electric, groceries, etc. It’s true – the majority of items we deal with on a daily basis have increased but one item which is trending down is Medicare Premiums for 2023. Inflation increasing and Medicare Premiums decreasing, how is this possible? How are premiums determined and what does this translate to for my existing Social Security benefits?
First, it’s important to understand that Medicare Premiums for Part B & D are determined by the individual or joint income for the particular calendar year and there’s a two year “look back”. If there was a spike in your income for calendar year 2021, then your Medicare premiums will be affected in 2023 (unless there is a qualifying event and you file for a re-determination). If you’re unsure what events are eligible, please reach out to your ACM Wealth Advisor.
When the Centers for Medicare & Medicaid Services (CMS) calculated the 2022 Medicare Part B premiums, a portion of the premiums were intended to cover projected spending on a new drug, Aduhelm, which treats Alzheimer’s disease. Lower-than-projected spending on Aduhelm and other Part B items/services resulted in excess reserves for the Part B account Trust Fund (officially known as the Supplementary Medical Insurance Trust Fund). This fund can be used to limit future Part B premium increases.
As a result, the standard monthly premium for Medicare Part B enrollees will be decreasing to $164.90 for 2023, which is $5.20 less than the base premium of $170.10 in 2022. Please see the below chart to review which bracket you may fall-in. You can compare the below to the adjusted gross income* on your 2021 income tax return to get an idea of your expected 2023 monthly premiums.
| Full Part B Coverage | |||
| Beneficiaries who file individual tax returns with modified adjusted gross income: | Beneficiaries who file joint tax returns with modified adjusted gross income: | Income-Related Monthly Adjustment Amount | Total Monthly
Premium Amount |
| Less than or equal to $97,000 | Less than or equal to $194,000 | $0.00 | $164.90 |
| Greater than $97,000 and less than or equal to $123,000 | Greater than $194,000 and less than or equal to $246,000 | $65.90 | $230.80 |
| Greater than $123,000 and less than or equal to $153,000 | Greater than $246,000 and less than or equal to $306,000 | $164.80 | $329.70 |
| Greater than $153,000 and less than or equal to $183,000 | Greater than $306,000 and less than or equal to $366,000 | $263.70 | $428.60 |
| Greater than $183,000 and less than $500,000 | Greater than $366,000 and less than $750,000 | $362.60 | $527.50 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | $395.60 | $560.50 |
Part D Income-Related Monthly Adjustment Amounts
| Beneficiaries who file individual tax returns with modified adjusted gross income: | Beneficiaries who file joint tax returns with modified adjusted gross income: | Income-Related Monthly Adjustment Amount |
| Less than or equal to $97,000 | Less than or equal to $194,000 | $0.00 |
| Greater than $97,000 and less than or equal to $123,000 | Greater than $194,000 and less than or equal to $246,000 | $12.20 |
| Greater than $123,000 and less than or equal to $153,000 | Greater than $246,000 and less than or equal to $306,000 | $31.50 |
| Greater than $153,000 and less than or equal to $183,000 | Greater than $306,000 and less than or equal to $366,000 | $50.70 |
| Greater than $183,000 and less than $500,000 | Greater than $366,000 and less than $750,000 | $70.00 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | $76.40 |
In addition to the lower Medicare Part B base premium and the premium surcharges for both Parts B & D, inflation also played another positive role in the above. Except for the top surcharge bracket ($500,000 single / $750,000 married), all of the lower income brackets above were adjusted upward as a result of inflation. In order to qualify for the base premium in 2022, your adjusted gross income had to be less than $91,000 single / $182,000 married. For 2023, it’s $97,000 and $194,000, respectively, which is an increase of about 6.5%. The next five brackets saw similar increases.
Keep in mind that the above Medicare brackets remain extremely rigid. If you are $1 over the next income threshold, you are liable to pay the entire increase in premiums for both Part B & Part D. For example, if your income happens to be $194,001 in lieu of $194,000, then you are on the hook to pay an additional $78.10/month or roughly $1,000/year extra. Yikes!
Comparing how the current IRS marginal income tax brackets are set up, you would pay the new percentage (22%, 24%, 32%) on only the specific dollar amount you’re over so marginal income tax brackets are much more forgiving.
Currently, most folks pay their Medicare premiums from their monthly Social Security benefits and while there has not been an official announcement for the COLA (cost of living adjustment), analysts are predicting anywhere around 8.5% – 8.7% based on current trends. The expected increase in Social Security benefits and decrease in Medicare Premiums translates to current beneficiaries receiving a NET INCREASE for their 2023 benefits.
Medicare Open Enrollment for 2023 will begin on October 15th, 2022 and ends on December 7th, 2022. During this time, folks who are eligible can compare 2023 coverage options between Original Medicare, Medicare Advantage, and Part D prescription drug plans. Medicare health and drug plan costs and benefits will vary each year so it extremely important that you review your current situation and confirm what you need to adjust or leave as is for the upcoming year.
With October upon us and the year end at our doorstep, it is a perfect time to review your realized income for 2022 and discuss what may be in store for the last 3 months (salary, bonuses, deferred comp, etc.) so we can facilitate tax reduction strategies or fair expectations so there are no surprises in 2023 and beyond. If you have any questions, please reach out to your ACM Wealth Advisor.
* IRMAA is based on “modified” adjusted gross income” (“MAGI”), which adds certain income, like the income received from tax-exempt municipal bonds, back to your adjusted gross income.
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