How Medicare Premiums Affect Social Security Payments

Retirees will see a 3.6 percent increase in their Social Security checks in 2012, with the typical retiree getting about $43 more each month. For most people, only a small portion of that boost will be deducted from Social Security checks to pay for higher Medicare Part B premiums. Some people will even get more than 3.6 percent added to their Social Security checks next year because their Part B premiums will decrease. Here's how Medicare Part B premiums will affect your Social Security checks in 2012.

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You signed up in 2009 or earlier. The standard Medicare Part B premium, which covers physician and outpatient hospital services, will be $99.90 in 2012, up $3.50 from 2011 for people who signed up for Medicare in 2009 or earlier. The Social Security cost-of-living adjustment should more than cover that amount. "Most retirees will see a more than $30 net increase in their take-home benefits," says Andrew Biggs, a resident scholar at the American Enterprise Institute and a former deputy commissioner of the Social Security Administration. "The fear was that when we did get a [Social Security] cost-of-living adjustment that Part B premiums would shoot up and eat most of the Social Security benefit increases that seniors will receive, but it looks like that's not the case."

Medicare Part B premiums are prohibited by law from increasing faster than Social Security payments for existing beneficiaries. Most people who claimed in 2009 or earlier haven't experienced a Medicare premium increase or a Social Security boost since 2009. However, new Medicare beneficiaries, Medicaid recipients, and high-income retirees weren't protected by the law and paid higher premiums than existing beneficiaries over the past two years.

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You signed up in 2010 or 2011. If you first signed up for Medicare Part B in 2010 or 2011, you were probably charged the standard premium for new enrollees of $110.50 or $115.40, respectively. Many retirees who claimed Medicare benefits during these two years will actually see their premiums decline to $99.90 in 2012. If your premiums are deducted from your Social Security checks, this will result in a slightly bigger monthly payment. "For those who were paying the standard premium of $115.40, their benefits checks will only increase," according to the Centers for Medicare and Medicaid Services.

You have a high income. High-income Medicare beneficiaries whose modified adjusted gross income is greater than $85,000 for individuals or $170,000 for couples must pay Part B premiums that are higher than the standard rate. The extra amount due ranges from $40 per month for those earning between $85,001 and $107,000 ($170,000 and $214,000 for couples) to an extra $219.80 per month for people earning more than $214,000 per year ($428,000 for couples) in retirement.

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However, high-income beneficiaries are likely to get slightly bigger Social Security checks next year because their Medicare premiums will fall. Individuals earning between $85,001 and $107,000 paid $161.50 monthly for Medicare Part B in 2011, which will fall to $139.90 in 2012. And even the highest earners bringing in more than $214,000 ($428,000 for couples) will see their Part B premiums decline from $369.10 per month in 2011 to $319.70 in 2012.

Medicare premiums aren't the only retiree medical insurance expense that will decline next near. The Part B deductible will be $140 in 2012, a decrease of $22 from 2011.

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