Taxes & Medicare Part B

Medicare Part B received $209.8 million financing from federal general revenues in 2009.

Federal general revenues finance 75 percent of the cost of providing Medicare Part B benefits. Premiums paid by recipients cover only 25 percent. Congress enacted legislation in 2003 linking premiums to income so higher-income recipients would pay a greater share of their benefit costs.

MAGI

The Social Security Administration administers the Medicare Modernization Act provisions requiring higher-income beneficiaries to pay higher Part B premiums. SSA uses the adjusted gross income plus any tax-exempt interest reported on tax returns to create the modified adjusted gross income. The MAGI is the basis for assessing higher Part B premiums.

Source of MAGI

The Internal Revenue Service furnishes the tax return information to Social Security. The adjusted gross income is on Line 37 of the first page of the Internal Revenue Service Form 1040 form. The tax-exempt interest income is entered on Line 8b of Page 1 of the Form 1040 but is not added to any totals on the page. IRS provides the sum of these entries to SSA.

Tax Year

IRS provides Social Security information from tax returns two years prior to the premium year. For example, premium increases for 2010 would be based on the tax return for 2008. MAGI more than $85,000 for an individual, or $214,000 for a couple, trigger increases in premiums, which can rise to $353.60 for beneficiaries with the highest income.

References

• Social Security: Medicare Part B Premium
• Internal Revenue Service: Form 1040 Instructions
• Social Security: Status Report of Medicare Board of Trustees
• Centers for Medicare and Medicaid Services: Medicare Modernization Act

Resources

• Department of Health and Human Services: Medicare Appeals Council ruling