While income doesn’t directly play a part in Medicare Advantage premiums, it can be a factor in the total amount owed for Medicare. As Medicare Part B premiums are income-driven, any Medicare Advantage plan that doesn’t cover Part B premiums in full will have payments that relate in some part to the amount of money seniors earn.
Understanding the ins and outs of Medicare premiums can be complex for seniors new to the Medicare system, including how income plays a role. Here’s the basics: Original Medicare is made up of two parts: Medicare Part A, or preventative care coverage, and Medicare Part B, or hospital coverage.
Under traditional Medicare, most people do not pay a Part A premium. However, there is no way to avoid a Part B premium, which starts at $144.60 per month as of 2020. Generally, this amount increases annually with inflation. This premium is based on income; anyone with an individual yearly Modified Adjusted Gross Income up to $87,000 or a joint income of up to $174,000 will pay the base rate. Pricing for Plan B premiums scales up from there based on income, topping out at $491.60 per month for single taxpayers making over $500,000 and joint taxpayers making over $750,000.
Even Medicare Advantage users must pay Part B premiums, based on their annual income. However, some Medicare Advantage plans may pay a portion of this amount on the user’s behalf, which reduces the total amount of Part B premiums owed.
Medicare Advantage premiums are primarily based on the services offered within a plan, not a policyholder’s income. Not all Medicare Advantage plans have premiums; these plans are usually the same price as Original Medicare. Pricing can be even less than Original Medicare if a Medicare Advantage plan pays part of the standard Plan B premium amount but does not require its own premium.
However, many Medicare Advantage plans will come with an individual premium, in addition to standard Part B premiums. This amount must be paid to the insurance provider on top of any Plan B premiums owed. Medicare Advantage premiums will vary from one plan to another, as well as from one insurance provider to another. There is no standard pricing for Part C premiums.
Unlike Original Medicare Plan B, Medicare Advantage premiums are not based on income but rather the options offered within a particular plan. Plans that limit coverage to standard Plan A and Plan B offerings may have little to no additional premium. However, plans with more expansive coverage, such as those that cover hearing, vision, dental or prescription drugs, will likely have a higher premium.
Overall, how much seniors pay in Medicare premiums has two components: the income-based Plan B premium and any additional premium a Medicare Advantage provider charges. Medicare Plan B premiums are based on income, and thus the total amount owed is income-driven, but Medicare Advantage premiums are based on services.