There are many ways you can reduce your Medicare premiums. Almost everyone pays a premium for Part B, Part D, Medigap, vision, dental, and hearing. All those premiums can add up, but there are ways to save money, whether you’re already on Medicare or signing up for the first time. Below, we’ll share five ways you can reduce your Medicare premiums.
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How to Reduce Your Medicare Premiums
How Do I Get Medicare Surcharges Reassessed?
Most people pay a standard rate for Medicare. If you’re a high-income taxpayer, you pay more, by way of an Income Related Monthly Adjustment Amount (IRMAA).In assessing IRMAA, Medicare doesn’t look at your current income; it looks back two years.
That means your premium is based on your modified adjusted gross income from two years prior. You can ask the Social Security Administration to re-evaluate your premium if your income lowers because of a life-changing event. Examples of life-changing events include retirement, divorce, and the death of your spouse.
How Can I Lower My Medicare Part B Premium?
Everyone must pay a premium for Medicare Part B. Some Medicare Advantage plans have a built-in premium reduction. Your policy pays a portion of the Part B premium, and you pay the rest. Having a Medicare Advantage plan with this option will reduce your overall Medicare premium costs.
How Do I Get a Medicare Low-Income Subsidy?
Many people don’t realize there’s a subsidy available to reduce Part D premiums and out-of-pocket costs for medications. People with Medicaid automatically qualify for the Extra Help subsidy.
However, you can obtain Extra Help, even if you don’t qualify for Medicaid. When your income is low, a subsidy can help reduce Medicare premiums and other costs.
Can I Deduct Medicare Premiums from My Taxes?
You can deduct certain medical expenses from your tax return. Deductible medical expenses include premiums you paid for Parts B, D, and Medicare Advantage. However, there are limits to this deduction.
First, you must have enough total deductions to itemize your deductions rather than taking the standard deduction. Second, you cannot deduct all your medical charges. You can only deduct medical expenses that exceed 10% of your adjusted gross income.
Can I Use My HSA Funds to Pay My Medicare Premiums?
If you have money in a health savings account, you can use it to pay your Part B, Part D, or Medicare Advantage premiums. You cannot use an HSA to pay Medigap premiums.
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The money in your HSA is tax-free as long as you use it for medical charges. It’s always cheaper to pay for things with pre-tax funds than to use taxed money.
5 Ways to Avoid Higher Premiums Before Enrolling in Medicare
Avoid Late Penalties by Signing Up When First Eligible
While avoiding penalties doesn’t directly reduce Medicare premiums, it does prevent them from becoming higher. You can sign up for Medicare three months before your 65th birthday month. You then have a seven-month-long Initial Enrollment Period. There’s a financial motive to enroll during that time.
In general, if you wait and sign up for Part B later, you will pay a late enrollment penalty. You’ll continue to pay the penalty each month for the rest of your life. You also face a late enrollment penalty if you don’t enroll in a prescription plan when you are first eligible.
Understand what Creditable Coverage Is
You can sign up for Medicare and a prescription plan without a penalty after your Initial Enrollment Period if you have creditable health insurance coverage from another source.
Typically, this means you have insurance from your own or your spouse’s employer-sponsored plan. Some people delay enrolling in Medicare because they have other insurance that’s cheaper or has other advantages. Those advantages won’t matter if your plan doesn’t count as “creditable coverage” and you have to pay a late enrollment penalty.
Know the Different Enrollment Periods
You can manage your premium costs better if you know when you can enroll in Medicare and when you can change plans. Your Initial Enrollment Period is the best time to sign up for Parts B and D to avoid the late enrollment penalty.
As soon as your Part B coverage starts, you have a one-time opportunity to enroll in a Medigap plan without having to answer questions about your health. If you try to join a Medigap plan at another time, health issues can raise your premium. There are also yearly opportunities to change your advantage or Part D plans. These give you a chance to compare options and choose one with a lower cost.
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Contribute to Workplace Retirement Accounts
Workplace retirement accounts allow you to make contributions while working and then use them to pay for needs after retirement. Having money in a retirement account won’t lower your premiums. However, it will help you afford healthcare premiums along with all your other living expenses. It’ll feel like you reduce Medicare premiums when you have more money set aside for retirement plans.
Maximize Your Tax-Free Income
If you contribute money to a Roth IRA or 401K, you pay taxes on the money when you put it in. But the income you earn is tax-free. In some cases, you can convert a traditional IRA or 401K to a Roth. If you contribute to a health savings account, your contributions AND the income from them aren’t taxed as long as you use them for healthcare.
Using tax-free funds to pay premiums saves you money. It’s best to get advice from a professional about ways to grow your income tax-free. Medicare rules change from year to year, and so do the plans available in your area. It makes good financial sense to contact an agent every year to compare your options.
How to Get Help Reducing Your Medicare Premiums
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I am returning to work part time. They do offer a medical plan free for the employees. Do i need to take it?
Patricia, you do not have to take the plan offered by your employer. If you wish to continue your coverage through Medicare you can do so.
My income will reduce drastically when I retire at age 65, will my premiums still be based on 2 years prior income, and if so can it be reduced? Thanks…
Hi James. Typically, yes. Medicare will look at your income from 2 years prior. However, if you have a drastic decrease in income, you can submit an appeal to Medicare to review your current income and they will make a determination based on provided information.
I pay a high income surcharge for my medicare part B. It is higher that what I was paying before I went on medicare. Is their anyway to avoid the higher premiums?
I am not a Medicare expert, but the premium is based on your prior income level to determine what you will pay. You can request a reduction of the premium using the SSA-44 form found on the SSA.GOV website. Note that you have to provide a life changing event reason (such as a recent loss of income source) to qualify for the premium reduction.
Hi Lindsay, my father is paying over $711 / a month for his medicare part A ($518)and B ($193) because he has no work history and because he applied late. I read an article on Covered California that may be applicable to him to reduce his part A premium/monthly costs. You have a lot of experience when it comes to insurance and I would appreciate your help if you could look into this and see if there is any way that we may be able to replace medicare part A with a plan from covered CA according to the article below so that at least he is paying less than what he is paying every month. What are your thoughts?
Hi Reza! Yes, your father does have other options. A similar rule applies to Obamacare coverage and Medicare. If your father is not eligible for premium-free Part A due to not working enough quarters, then he is allowed to enroll in Covered California instead of Part A. However, he will still be penalized for delaying Part B. What I would recommend is getting in contact with your local Social Security or Medicaid office (Since MSPs are handled by your states Medicaid) and explain that your father does not get Part A premium-free which is why he needs to enroll in EITHER Covered California with a Medicare Savings Program if he is eligible OR keep his Part A & Part B and enroll in an MSP. If his income is low enough to qualify for a Medicare Savings Program, he may be able to keep Part A since the MSP will pay for it, as well as pay the premium for Part B. Essentially, if he keeps Part A & Part B, and enrolls in an MSP such as the Qualified Medicare Beneficiary program, he would be paying zero out of pocket for his coverage. Any penalties he has incurred will also be covered. If he does not qualify for an MSP due to not meeting the income requirements, then I would go with Covered California but still keep Part B to avoid the penalty increasing. I hope this helps!
Hi,
My husband and I are separating from aug 1. I get $1009/m from SS as retirement benefit. My hasband gets $1977/m. Will law allow me to save money by not paying $144/mo. the medicare premium?
Hi Meena! The only way to get help paying your Part B premium would be if you met the income limits for a Medicare Savings Program. If you qualify for one of these programs, you can get help paying the premium. If your income is not low enough, you could look into an Advantage plan that offers a give-back benefit. This is only available in certain areas. The give-back benefit reduced the amount you pay for Part B. Just keep in mind, there’s a lot of cost-sharing with Medicare Advantage plans. You may find yourself spending more money when you use the benefits than you thought you would.