When you enroll in Medicare Part B, the federal government picks up the tab for most of your health care costs. Most, but not all.

Medicare Part B premiums can be a surprising and costly retirement expense for many people. The minimum monthly Medicare Part B premium in 2023 is $164.90 per person, and they only go higher, depending on your income.

Understanding Medicare Part B premiums is an important part of your retirement planning process. While you aren’t eligible for Medicare until age 65, your income at age 63 will determine your first year premium.

How Does Medicare Part B Work?

Before getting into the weeds of Medicare Part B premiums, let’s do a quick review of Medicare Part B and its role in federal retirement health insurance.

Once you turn 65, you become eligible to enroll in Medicare, with its maddening mix of different programs, including Part A, Part B, Part C and Part D. Some of these programs charge you premiums, and some don’t.

First the good news: Most Medicare enrollees aren’t required to pay a premium for Medicare Part A, which covers costs for inpatient hospital care, home nursing care and hospice care. That said, there are typically deductibles and copays for some Medicare Part A expenses.

Medicare Part B covers doctor appointments, outpatient tests and exams as well as medical equipment. Unless your income is very low, you’ll be charged a monthly premium for Medicare Part B, regardless of whether you are enrolled in Original Medicare or Medicare Advantage, the two options for receiving your Medicare benefits.

If you opt for Original Medicare, the government will cover 80% of your Part B expenses after you meet your deductible. You can purchase a separate supplemental Medigap policy from a private insurer to cover the additional 20% you’re on the hook for.

If you opt for Medicare Advantage, also known as Medicare Part C, your plan will cover the bulk of your Medicare Part B expenses, but you will typically need to cover copays and coinsurance costs out of pocket. And remember, Medicare Advantage enrollees are not allowed to also have a Medigap policy.

Medicare Part B Premiums

Medicare Part B premiums are calculated based on a person’s modified adjusted gross income (MAGI). For purposes of Part B premiums, your MAGI is the adjusted gross income you report on line 11 of your federal tax return, plus any tax-exempt interest income, such as municipal bonds (line 2a) earnings.

Current year Medicare Part B premiums are based on MAGI reported on your tax return from two years earlier. For example, 2021 Medicare Part B premiums are based on MAGI reported on 2019 federal tax returns.

2019 Income Individual Filing 2019 Income Joint Filing 2019 Income Married Filing Separately 2021 Premium
Less than $88,000 Less than $176,000 Less than $88,000 $148.50
>$88,000 to $111,000 >$176,000 to $222,000 N/A $207.90
>$111,000 to $138,000 >$222,000 to $276,000 N/A $297.00
>$138,000 to $165,000 >$276,000 to $330,000 N/A $386.10
>$165,000 to $500,000 >$330,000 to $750,000 >$88,000 to $412,000 $475.20
More than $500,000 More than $750,000 More than $412,000 $504.90

Beginning in 2007, Medicare began charging higher-income beneficiaries more for their Part B coverage. This charge is called the Income-Related Monthly Adjustment Amount (IRMAA). Medicare Part D, which provides insurance coverage for prescription drug costs, also charges a monthly premium that is based on an IRMAA.

Who Pays More for Medicare Part B?

Each year the government crunches the numbers to determine total costs for providing Medicare Part B coverage. For most enrollees, the government agrees to cover 75% of the cost and charges enrollees the Medicare Part B premium to cover the other 25%.

In 2021, a single taxpayer whose 2019 return reported MAGI of no more than $88,000 and married couples with MAGI up to $176,000 paid the lowest base Medicare Part B monthly premium of $148.50 per person.

If your income is above those levels, the government shifts more of the premium cost to your personal balance sheet. Instead of covering 75% of the premium cost, the government pays anywhere from 65% to as little as 15% of the premium, based on your IRMAA.

The annual Medicare report estimates that about 5 million beneficiaries currently pay a higher premium, and by 2029 more than 10 million enrollees will pay an IRMAA surcharge.

How to Apply for Medicare Part B

If you are already receiving Social Security benefits when you turn 65, you will automatically be signed up for Medicare Part A and Medicare Part B by the Social Security program. Your Part B premium will be deducted from your retirement benefit each month.

If you are not yet collecting Social Security at age 65, you can apply for Medicare coverage online at the Social Security website. You will be billed for your Medicare Part B premium quarterly. You can pay for this with a credit card, debit card or a bank transfer.

To avoid any potential missed payments, you might want to consider enrolling in Medicare Easy Pay, which will automatically deduct your premiums from a bank checking or savings accounts.

If you are still working at age 65 and continue to have coverage through your workplace plan, you may want to delay starting your Medicare Part B coverage. Joanne Giardini-Russell, whose insurance firm specializes in helping people navigate Medicare choices, notes that even if you automatically signed up at 65 because you were already receiving Social Security benefits, you could then opt out, if that made sense.

“I often see people who just accept enrollment and start paying the premium, even though they don’t need to just yet,” says Giardini-Russell.

Before making that choice, be sure to consult a Medicare insurance pro to make sure you are in fact eligible to delay, or you could be slapped with a permanent penalty premium when you do eventually sign up for Part B.

One important note: If you opt for Original Medicare, make sure you also add a Medigap policy when you enroll in Medicare Part B. When you initially enroll in Medicare Part B you have a window of a few months where you can purchase this supplemental insurance without being denied or quoted a hefty premium based on pre-existing conditions.

The Bottom Line

Once you turn 65, the government agrees to cover the majority of your health insurance costs. But Medicare is not free. The Medicare Part B premium alone—irrespective of other Medicare out-of-pocket costs—is an important line-item expense you will want to plan for in retirement.

You might want to work with a financial advisor to run the numbers on how much of your retirement income could be needed to cover Medicare costs years from now.

Hint: It’s only going to get more expensive. The official estimate from the Medicare Trustees report is that the lowest possible monthly premium for Medicare Part B—$164.90 in 2023—could rise to more than $230 per person in 2029. If your income falls into a higher IRMAA tier, Medicare estimates your monthly premium in 2029 could cost you an additional $90 to $500.