Here’s what You Need to Know for 2021
The Centers for Medicare & Medicaid Services (CMS) posted a “Fact Sheet” in November detailing the changes we can expect in the New Year. As anticipated, Medicare premiums are going up next year. Unfortunately if you pay Part B premiums through Social Security and experienced a significant drop in income this year, you might be surprised by an increase in 2021. This is because the calculations for 2021 are actually based on your income from last year (2019) rather than your 2020 income.
In general, most people’s income tends to increase from one year to the next. COVID-19 reversed that trend for millions of people this year, and for those collecting Social Security, it may work against you in 2021.
For example:
- Mary is single.
- She made $103K in 2019, but only $62K in 2020.
- The first-tier threshold for a single filer to see an increase in 2021 is $88,000.
- Even though Mary was well below the threshold in 2020, her premiums will go up in 2021 because she was above it in 2019.
The chart below shows how to calculate the upcoming premium increases for Part B taxpayers.
| Beneficiaries who file individual tax returns with income: | Beneficiaries who file joint tax returns with income: | Income-related monthly adjustment amount | Total monthly premium amount |
|---|---|---|---|
| Less than or equal to $88,000 | Less than or equal to $176,000 | $0.00 | $148.50 |
| Greater than $88,000 and less than or equal to $111,000 | Greater than $176,000 and less than or equal to $222,000 | 59.40 | 207.90 |
| Greater than $111,000 and less than or equal to $138,000 | Greater than $222,000 and less than or equal to $276,000 | 148.50 | 297.00 |
| Greater than $138,000 and less than or equal to $165,000 | Greater than $276,000 and less than or equal to $330,000 | 237.60 | 386.10 |
| Greater than $165,000 and less than $500,000 | Greater than $330,000 and less than $750,000 | 326.70 | 475.20 |
| Greater than or equal to $500,000 | Greater than or equal to $750,000 | 356.40 | 504.90 |
According to CMS, the income-related monthly adjustments will affect roughly 7% of taxpayers with Medicare Part B. And while 7% may not sound like a lot, it is still a significant number of people,amny of whom are still trying to recover from this year’s loss of income.
If you are interested in learning more, you can access the CMS Fact Sheet on their official site here.
