Will Earnings Affect Medicare Benefits?

Medicare is a public benefit for American citizens who are 65 years old or who have a disability that qualifies them to receive Social Security disability benefits. Although some recipients of Medicare have low income, the government did not create this program exclusively for people with low income. For this reason, income does not affect eligibility, but it might affect how much you pay in premiums.

The Effect of Earnings on Benefits

• Medicare is a Social Security program funded primarily by the Medicare tax that is withheld from the earnings of all employed U.S. citizens. Citizens who have paid Medicare tax receive Medicare Part A coverage at no additional charge. Other optional parts of Medicare require payments of monthly premiums associated with the coverage being provided or the plans you pick. When you work and pay Medicare tax, your income does not affect whether you qualify to receive benefits or not. People with higher incomes qualify to receive the same Medicare benefits as people with lower incomes. However, the premiums you pay for optional parts of Medicare coverage vary according to the plans you choose. If you are still working when you turn 65, you may -- and should -- enroll in Medicare at that time.

The Effect of Earnings on Premiums

• Although, how much you earned during your work life before retirement might not affect your benefits, but it does affect your Medicare premiums. Retirement benefits and wages earned after you have reached the age of 65 both affect the amount of money you pay in premiums. Medicare Part A is free if you paid the Medicare tax during your career. Part B, which is medical insurance; Part C, which are Advantage Plans; and Part D, or prescription drug plans, are not free, and individuals pay premiums to receive these optional benefits. If you join a Part C plan, your income during your lifetime does not have any effect on the premiums. However, how much you earned does affect Part B and Part D premiums. People who have higher incomes are required to pay higher premiums for both Part B and Part D. How much more you pay depends upon your filing status and the standard premium for each plan.

Part B Premiums

• The Social Security Administration determines your annual income by looking at your adjusted gross income on your tax return from two years ago. As of 2011, your income does not have any effect on the Part B standard premium, which remains at $115.40 per month, if your annual income was lower than $170,000 and if you file married jointly, or if your income is lower than $85,000 for other filing types. Most people qualify for and pay the standard premium. Depending on your income bracket above this standard income level and filing status, premiums increase from an additional $46.10 per month to an additional $253.70 per month

Part D Premiums

• Part D premiums also increase based on your income. Your Part D premiums increase according to the same income brackets as for Part B. If your income is lower than $170,000 for a married filing or $85,000 for other filings, you pay only your plan premium, which varies. Above this standard income level, additional monthly premiums from $12 to $69.10 apply.