Are Medicare Advantage Premiums Based on Income?

Page Reviewed / Updated - August 21, 2020

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.

Medicare Part B Premiums Are Based on Income

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.

What Affects Medicare Advantage Premiums?

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.