Implementing the Part B Income-Related Premium:
Another Step Away From Medicare's Roots

Starting in January 2007, Medicare beneficiaries with higher incomes will be required to pay a greater portion of their Part B premium costs.  This will be accomplished through an income-related increase that will be added to the standard Medicare Part B monthly premium, plus any applicable increases to the premium for late enrollment or re-enrollment. 

The standard Part B Medicare premium is set to cover approximately 25% of the Medicare Part B program costs.  The other 75% comes from general revenues.  The higher premium amount will apply to beneficiaries with federal modified adjusted gross taxable income (as defined by the Internal Revenue Service) over $80,000 per individual or $160,000 for a couple.  See, 71 Fed. Reg. 10926 (March 3, 2006).

The new income-related premium is a requirement of the Medicare Modernization Act (MMA) of 2003, §811, Pub. L. 108-173 (December 8, 2003). The Deficit Reduction Act (DRA) of 2005, §5111, Pub. L. 109-171, further provided that the payment of the full amount of the premium increase be phased in starting in 2007, to be completed in 2009.

Medicare beneficiaries required to pay the increased premium will not have their payment limited by the annual cost-of-living adjustment as has been the case in the past, and will continue to be the case for lower income beneficiaries.  Individuals who enrolled in Medicare prior to January 1, 2007, who are required to pay the increased premium in 2007, will receive notice at the end of 2006 about the additional premium they owe, as well as about any related changes in their Social Security benefits or other payments to be withheld from their Social Security check. 

Those who enroll in Medicare after January 1, 2007, and who are determined to owe the premium increase, will be notified shortly after enrolling in Medicare Part B.  Beginning in 2007 the Social Security Administration (SSA) will notify beneficiaries prior to the start of each year if they are required to pay the increased Part B premium.

For purposes of the new premium, SSA will use your modified adjusted gross income provided by the Internal Revenue Service (IRS) for the tax year 2 years prior to the effective year of the premium adjustment.  Modified adjusted gross income is based on information you provide to the IRS when you file your Federal income tax return.  If the IRS does not provide the information for the year 2 years prior, but can provide modified adjusted income for the tax year 3 years prior to the adjustment year, SSA will temporarily use that information to determine your premium amount and make changes.  The changes will be effective as of the date of SSA’s initial determination for all affected months up to when information for the tax year 2 years prior to the effective year becomes available  All information will be verified with the IRS.

Life-Changing Event Exception

Modified adjusted gross income for a tax year more recent than the information ordinarily provided by IRS is to be used when:

Life-changing events include: marriage; divorce; death of a spouse; partial or full work stoppage; loss of income from income-producing property (when the loss is not at the beneficiary’s direction).  Life-changing events also include a reduction or loss of certain forms of pension income due to termination or reorganization of the pension plan, or a scheduled cessation of one’s pension benefits.

Reductions made based on a qualifying life-changing event will generally be effective on January 1 of the calendar year for which SSA makes the determination.  If the beneficiary enrolled in Medicare Part B after January 1 of the year for which SSA makes a determination due to a major life-changing event, the determination will be effective the month of the beneficiary’s Medicare part B enrollment.

The Sliding Scale Formula and How It Applies

Beginning in 2007, and every year thereafter, SSA will use a sliding scale formula to establish four income-related premium adjustment amounts.  The four amounts will equal the unsubsidized Part B premium multiplied by specific percentages which increase as income levels increase.  Range amounts will vary with IRS filing status.  The calculation will increase a beneficiary’s Medicare Part B premium using specified percentages.

The threshold amount ($80,000 in 2007) will change in subsequent years due to indexing.  For 2007, the two ranges for married people filing separately will be: (1) $80,000 to less than or equal to $120,000, and (2) more than 120,000.  By way of example, in 2007, a beneficiary with a modified adjusted gross income in the range of $80,000, but less than or equal to $100,000, will pay a 35% premium, versus the traditional 25%.  SSA will establish a table with the ranges and corresponding beneficiary percentage of the Part B premium cost, and the Federal premium subsidy percentage.

Phase-In and Inflation adjustment

The full income-related premium is to be phased in over a 3-year period beginning in 2007.  The effect is that from 2007 through 2009 the amount of the premium will increase annually.  Beginning in 2008, there will be an annual inflation adjustment for the threshold amount and the amounts used in the modified adjusted gross income ranges.  The adjustment will be based on the percentage increase in the Consumer Price Index for all urban consumers rounded to the nearest $1,000. SSA will publish these amounts annually.

Appealing an Increased Premium

SSA will send the beneficiary a notice if it determines the individual must pay an increased premium.  If the beneficiary disagrees, he or she may request that SSA reconsider it within 60 days after the date the beneficiary receives the notice. The beneficiary may request a new initial determination, rather than reconsideration, if he or she believes that, while the information SSA used in its initial determination was correct, the beneficiary wants SSA to use different information about his or her modified adjusted gross income.  While appeals will generally follow the initial and reconsideration processes used for appealing Medicare denials, the process will differ in that, as mentioned above, SSA proposes to allow beneficiaries to request a new initial determination under certain circumstances.

The "Life-Changing Event Form"

Beneficiaries who believe that more recent tax data should be used in determining his or her premium because of a “life-changing event” can contact SSA by mail and use form SSA-44, the Medicare Part B Income-Related Premium—Life-Changing Event form. It should be noted, however, that form SSA-44 is going through the Paperwork Reduction Act clearance process of the United States Office of Management and Budget (OMB).

OMB and SSA are receiving comments on the “Life-Changing Event Form,” which is listed as the “Medicare Part B Income-Related Premium – Life-Changing Event Form – 0960-NEW and published in the Federal Register at 71 Fed. Reg. 43271 (July 31, 2006).  (Note, the form number ‘0960-NEW’ is an OMB placeholder number).  Comments and recommendations regarding this information collection effort are due sixty (60) days from the date of the Federal Register notice and can be mailed or faxed to:  OMB, Attn: Desk Officer for SSA, Fax: 202-395-6974, Social Security Administration (SSA), DCFAM, Attn: Reports Clearance Officer, 1333 Annex Building, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410-965-6400.  Copies of the collection instrument can be obtained by contacting the SSA Reports Clearance Officer, Elizabeth A. Davidson at (410)-965-0454,, or at the above listed address.


With the advent of these increased premiums in 2007, Medicare will once again be moved away from its founding social insurance roots, where all those who qualify pay and benefit equally.  Beneficiaries should be certain that SSA uses correct data in making their Part B income-related premium calculation. Using the “Life-Changing Event” Exception will be important in successful appeals of income-related premium increases.  That the Secretary has authority to add to the list of “Life-Changing Event” Exceptions may prove useful.

© Center for Medicare Advocacy, Inc. 08/19/2013