Medicare Part B Premium

The Medicare Part B premium is the recurring monthly charge for enrolling in Part B, which covers physician services, outpatient care, durable medical equipment, and most preventive services. The government sets a standard premium each year, calibrated so that beneficiary premiums cover roughly 25% of Part B's per-person costs, with general revenue paying the rest. The great majority of enrollees pay the standard amount, which is withheld from their Social Security payment; higher earners pay a larger amount, and a smaller group who buy into the program pay differently. This page is about the premium itself; what Part B covers and the income surcharge that can raise it are separate topics.

The standard premium is announced by the Centers for Medicare and Medicaid Services each fall for the following year, alongside the Part B deductible. Both are year-indexed figures published at Medicare.gov, so a durable statement of the premium describes how it is set rather than a dollar amount that changes annually. The design target is that enrollee premiums fund about 25% of expected Part B spending per person; that share, not a fixed formula, is what drives the number up as health costs rise.

The hold-harmless provision, at Social Security Act section 1839(f), is the feature most worth understanding. It says the dollar increase in your Part B premium in a given year cannot exceed the dollar increase in your Social Security benefit from that year's cost-of-living adjustment. The point is to keep the rising premium from actually reducing the net Social Security check a retiree lives on. It does not apply to everyone. Left out are people new to Medicare that year, people who pay the IRMAA income surcharge, people not yet collecting Social Security or who do not have the premium deducted from it, and dual eligibles whose premium a state Medicaid program pays. Because the protected group is defined by having the premium deducted from an existing Social Security benefit, the people most exposed to a large premium jump in a low-COLA year are precisely those outside it.

Higher-income beneficiaries add the income-related monthly adjustment amount, IRMAA, on top of the standard premium, based on the income they reported two years earlier. IRMAA is a step surcharge with its own thresholds and is covered on its own page. The premium is also distinct from Part B cost sharing: after you pay the premium to hold the coverage, you still owe the annual deductible and generally 20% of the approved amount for most services, with no annual ceiling on that 20% unless you have supplemental coverage.

Most people never actively pay the Part B premium; it is withheld from the monthly Social Security benefit before the deposit lands. Each fall the standard premium and deductible for the next year are announced, the withholding adjusts automatically, and the hold-harmless rule is applied to protect the net check of those it covers.

A hypothetical illustration of hold-harmless. Suppose in a given year the standard Part B premium would rise by $30 a month, but a beneficiary's cost-of-living adjustment only adds $18 a month to their Social Security benefit. If they are held harmless, their Part B premium can rise by only $18 that year, so their net deposit stays flat rather than falling by $12. The unprotected portion of the true increase is shifted to beneficiaries who are not held harmless. These figures are hypothetical; the actual premium and deductible are set annually.

Features that work in the beneficiary's favor

• The premium is deducted automatically, so there is nothing to remember to pay.
• Hold-harmless protects most retirees from a Part B increase larger than their Social Security raise, keeping the net check from shrinking.
• General revenue covers roughly three-quarters of Part B's cost, so the premium is far below the program's true per-person expense.

Drawbacks and quirks

• Hold-harmless excludes new enrollees, IRMAA payers, and people not yet drawing Social Security, who can see the full increase in a low-COLA year.
• Higher earners pay substantially more through IRMAA, determined by income from two years earlier.
• Paying the premium only buys access; the deductible and the 20% coinsurance on most services are still owed, with no cap unless you add supplemental coverage.