Illinois Estate Planning and 2011 Medicare Premium, Deductible and Co-Pay Charges

The basic premium for Medicare Part B will be $115.40 a month in 2011, up from $110.50 in 2010 (a 4.4 % increase). But because there will be no cost of living benefit increase for Social Security recipients for 2011, most beneficiaries will be exempted from paying this increase and will instead pay the same $96.40 premium amount they have paid since 2008.

A “hold-harmless” provision in the Medicare law prohibits Part B premiums from rising more than that year’s cost of living increase in Social Security benefits. Since there is no Social Security increase, most beneficiaries – about 73 percent – will not have to pay any increased Part B premiums because of the hold-harmless provision. Those covered by the provision will continue to pay Part B premiums of $96.40 per month in 2011.

But this hold-harmless protection does not apply to the other 27 percent of beneficiaries – about 12 million in all – who either: do not have their Part B premiums withheld from their Social Security checks; or pay a higher Part B premium surcharge based on high income; or are newly enrolled in Part B.

The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary’s premiums. So the income reported on a beneficiary’s 2009 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2011. Income is calculated by taking a beneficiary’s adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest, U.S. savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary’s MAGI decreases significantly in the past two years, he may request that information from more recent years be used to calculate the premium.

Contact an estate planning law firm for further information.

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