How Income Changes What You Pay for Part B and Part D

Answer first: it is an addition, computed by Social Security, from an old tax return

The regulation defines the income-related monthly adjustment amount as "an amount that you will pay in addition to the Medicare Part B standard monthly premium plus any applicable increase in that premium" for late enrollment, when modified adjusted gross income is above the threshold. It is layered on top of the standard premium and on top of any late enrollment surcharge, not substituted for either.

The amount depends on two inputs and no others: "your applicable modified adjusted gross income" and "your tax filing status."

A parallel subpart does the same job for prescription drug coverage. It implements the statutory provisions establishing an income-related monthly adjustment to Medicare prescription drug coverage premiums, and it reaches people enrolled in prescription drug plans, Medicare Advantage plans with drug coverage, Programs of All-Inclusive Care for the Elderly, and cost plans offering drug coverage. Those with income over the threshold "will pay an income-related monthly adjustment amount in addition to their Medicare prescription drug coverage plan's monthly premium and any applicable premium increases."

The Part D regulations name the decider explicitly. SSA determines which Part D enrollees are subject to the adjustment and the amount each will pay, and an individual who disagrees "may file an appeal or request a new initial determination" under the SSA rules. The plan does not make this determination and cannot change it.

What the threshold is, and how it moves

The regulation defines the threshold as "a level of modified adjusted gross income above which the beneficiary will have to pay the income-related monthly adjustment amount."

It then gives a history and a method. From January 1, 2011 through December 31, 2019, the threshold was $170,000 for individuals filing married filing jointly and $85,000 for any other filing status. Starting January 1, 2020, the thresholds resumed adjustment for inflation: CMS sets all threshold amounts for the following year "by increasing the preceding year's threshold amounts by any percentage increase in the Consumer Price Index rounded to the nearest $1,000," publishes them in the Federal Register in September of each year, and those amounts are effective January 1 of the next calendar year for the full year.

The Part D subpart states the same structure with the same historical figures for 2011 through 2019, and provides that starting at the end of 2019 and each year after, CMS sets and annually publishes the threshold amounts in the Federal Register, effective January 1 and unchanged for the full calendar year.

Because the current amounts live in an annual Federal Register notice rather than in the regulation, a current-year threshold cannot be read out of the regulation text. This article does not state one.

The brackets are percentages of a subsidy, not flat surcharges

This is the mechanism most descriptions leave out, and it explains why the amount moves every year. The regulation's tables have three columns: an income range on the left, "the percentage of the unsubsidized Medicare Part B premium that will be paid by individuals" whose income falls in that range in the middle, and "the percentage of the Medicare Part B premium that will be subsidized by contributions from the Federal Government" on the right.

The baseline is stated in the same section: the Federal Government's Part B premium subsidy is 75 percent, and for people above the threshold that subsidy "is reduced to the percentage listed in the right column." So the adjustment is not a fee bolted onto a premium; it is a reduction in the share of the premium the government pays.

For the ranges effective beginning in 2019, under the general table for individuals filing single, head of household, qualifying widow or widower with dependent child, or married filing separately having lived apart from a spouse for the entire tax year, the regulation prints five bands: greater than $85,000 through $107,000 at a 35 percent beneficiary share; above $107,000 through $133,500 at 50 percent; above $133,500 through $160,000 at 65 percent; above $160,000 but less than $500,000 at 80 percent; and $500,000 or more at 85 percent. The federal subsidy percentages in the right column run 65, 50, 35, 20 and 15.

Those income figures are the ones printed in the regulation for the period it labels. The regulation itself provides that the ranges are adjusted annually after 2019 and that "for each year after 2019, CMS will annually publish in the Federal Register the dollar amounts for the income-related monthly adjustment amount." The percentages are in the regulation; the dollars are in the notice.

For Part D, the premium regulation states the computation in algebraic form: the adjustment equals the product of the standard base beneficiary premium and the ratio of the applicable premium percentage, reduced by 25.5 percent, divided by 25.5 percent.

The tax year used, and the events that can change it

The regulation permits a beneficiary to ask SSA to use a more recent tax year than the one it would ordinarily use, but only where four things are all true. The individual experienced a major life-changing event as the regulation defines it. That event "results in a significant reduction in your modified adjusted gross income" for the year requested and, if applicable, the next year — where significant means a reduction "that results in the decrease or elimination of your income-related monthly adjustment amount." The individual requests use of the more recent year. And the individual provides the evidence the regulations require.

The list of major life-changing events is closed and specific: a spouse dies; the individual marries; the marriage ends through divorce or annulment; the individual or their spouse stops working or reduces work hours; the individual or their spouse experiences a loss of income-producing property, provided the loss was not at their direction and is not a result of the ordinary risk of investment; the individual or their spouse experiences a scheduled cessation, termination or reorganization of an employer's pension plan; or the individual or their spouse receives a settlement from an employer or former employer because of the employer's closure, bankruptcy or reorganization.

The property loss item is written with unusual care. The regulation gives examples — loss of real property in a Presidentially or Gubernatorially declared disaster area, destruction of livestock or crops by natural disaster or disease, loss from real property due to arson, or loss of investment property as a result of fraud or theft due to a criminal act by a third party — and it excludes losses arising from a sale or transfer the individual chose and from the ordinary risk of investment.

Retirement appears on the list only through the "stop working or reduce the hours you work" item. A drop in income that is not caused by one of the listed events does not open this route, however large it is.

The Part D subpart contains a parallel section on when SSA will use a more recent tax year, and the Part D subpart's overview describes the same structure of rules — what income information is used, what standards must be met to request a more recent year, what evidence is required, when a determination based on that information is effective and how long it lasts, and how retroactive adjustments are made when updated information or Internal Revenue Service information later arrives.

Where the adjustment shows up, and where to argue about it

For Part B, the adjustment sits alongside the standard premium and any late enrollment increase. The defining regulation names all three components in a single sentence, which is why a bill can rise for two independent reasons at once.

For Part D, the adjustment is added to the plan's own monthly premium rather than collected by the plan. The Part D premium regulation lists the income-related monthly adjustment amount as one of the adjustments to the base beneficiary premium, applicable where the enrollee's modified adjusted gross income exceeds the threshold amounts specified in the SSA regulations.

The route to challenge it runs through Social Security, not through the plan or through Medicare's coverage appeals system. The Part D premium regulation states that SSA determines who is subject to the adjustment and how much, and that a person who disagrees with that determination or the amount "may file an appeal or request a new initial determination consistent with 20 CFR part 418."

Those are two different requests. An appeal contests the determination; a request for a new initial determination is the route used when a major life-changing event has occurred and a more recent tax year should be used instead. The Part B subpart's own overview describes the evidence requirements, effective dates, duration and retroactive adjustment rules that attach to the second route.

Nothing in these regulations promises any particular outcome. They state the conditions SSA applies and the evidence it requires; whether a given set of facts satisfies those conditions is a determination on that individual's record.