If you have a Medicare Part B plan, you should be familiar with your plan’s annual rate changes. Your coverage hasn’t changed, so why are you paying differently? Besides the standard premium for Medicare Part B, there are several factors that influence your bill.

Social Security Cost-of-Living-Adjustment

A major influence on your Part B premiums is the annual Social Security Cost-of-Living-Adjustment (COLA). The COLA for the upcoming year, which is usually announced in October, accounts for rising, or falling, costs of daily living. Depending on the COLA, Medicare may raise premiums to cover costs.

For many Part B enrollees (roughly 70 percent), Part B premiums get deducted from their Social Security checks. For these citizens, a premium increase cannot reduce how much they receive from Social Security each month. This is because the hold harmless provision says the increase of the Part B premiums for these individuals cannot be larger than the COLA.

For example, the Social Security Administration announced that the COLA for 2020 will be a 1.6 percent increase. As a result, the average retiree will receive roughly an extra $24 per month with their Social Security benefit. If the Part B premium increase is over that $24 and your premium gets deducted from your Social Security checks, you will be held harmless. You’re not considered held harmless if you’re newly enrolled in Medicare. If you’re enrolled in a Medicare Savings Plan or have Medicaid and Medicare, you also don’t qualify.

The 2020 standard Part B premium will be $144.60, the monthly premium paid by those who weren’t held harmless in 2019. Medicare can ask those who are held harmless to pay up to this amount in 2020 as long as their net Social Security benefit won’t be diminished.

Medicare Penalties

Another reason why your Part B plan cost can differ is that you’ve received a late penalty. You receive a penalty when you don’t sign up for Medicare during your Initial Enrollment Period and don’t have a qualified group health plan. The penalty increases your premium by 10 percent for each 12-month cycle you’re not enrolled.

Let’s say you just signed up for Part B, but you’ve been eligible for it for two years. You’ll receive a 20 percent penalty on your premium for as long as you have Part B. That would put your monthly premium for Part B at $160.80 ($134x1.2) if you pay the standard premium for Part B.

Income

Your income may also influence your Part B premiums. When judging your annual income, Social Security will review your last two years of tax returns. If you disagree with their decision about how your income affects your premiums, you may submit an appeal online. This is the quickest way to start the process. You can also request an appeal by filling out a Request for Reconsideration form or contacting your local Social Security office. Any disagreements with your reported income should be handled with the IRS.

Here’s how your annual income affects your Medicare Part B monthly premiums for 2020.*

File Individual Tax Return File Joint Tax Return Monthly Adjustment 2020 Part B Monthly Premium
$87,000 or Less $174,000 or Less $0.00 $144.60
$87,001 to $109,000 $174,001 to $218,000 $57.80 $202.40
$109,001 to $136,000 $218,001 to $272,000 $144.60 $289.20
$136,001 to $163,000 $272,001 to $326,000 $231.40 $376.00
$163,001 to $499,999 $326,001 to $749,999 $318.10 $462.70
$500,000 or More $750,000 or More $347.00 $491.60

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Whether it’s through penalties or income, your Medicare premiums may not match someone else’s. Additionally, the cost of Part B may change from year to year. It’s important you understand why the amount you’re paying could change.

*Numbers up to date as of 11/12/2019