Key Takeaways

• Medicare Part B premiums are directly tied to your income, and rates are reassessed annually using tax returns from two years prior.

• Premiums are steadily increasing due to rising healthcare costs, expanded coverage, and broader use of services among the aging population.

The Structure of Medicare Part B Premiums in 2025

Medicare Part B is not free. Unlike Part A, which is premium-free for most people based on work history, Part B requires a monthly premium from every enrollee. In 2025, the standard monthly premium is $185. However, what you actually pay may vary depending on your income level, as Medicare uses a sliding scale to assign premium costs.

Your Part B premium is determined by your Modified Adjusted Gross Income (MAGI) from two years ago. So in 2025, Medicare looks at your 2023 tax return. If your income exceeds a certain threshold, you pay an Income-Related Monthly Adjustment Amount (IRMAA) in addition to the standard premium.

Income Thresholds and IRMAA Brackets

Medicare uses a tiered system to determine your monthly premium:

• Individuals earning $106,000 or less (or couples filing jointly earning $212,000 or less) pay the standard premium.

• Higher-income beneficiaries pay additional charges in increasing brackets.

There are five IRMAA brackets, and each step increases your monthly cost. The top bracket applies to individuals earning above $500,000 (or couples over $750,000), where premiums can be more than triple the standard rate.

This structure means that even modest changes in income can push you into a higher premium category.

Why Medicare Part B Premiums Keep Rising

You may wonder why your premiums seem to increase every year, even if your income doesn’t change. The answer lies in how Medicare is funded and the pressures on the healthcare system.

1. Medical Inflation

Healthcare costs continue to rise due to inflation, medical technology, drug pricing, and administrative expenses. Medicare adjusts its premiums each year to ensure it can cover projected expenses. For 2025, increases reflect higher physician payment rates, expanded services, and more use of outpatient care.

2. Aging Population

More people are joining Medicare every year as the population ages. Baby boomers entering retirement continue to shift demographics, increasing overall Medicare enrollment and usage. This growing pool of beneficiaries places additional financial demands on the Part B trust fund.

3. Expanded Coverage and Services

Part B now includes a broader range of preventive services, telehealth access, and mental health care. While these additions improve care, they also contribute to rising costs. When coverage expands, Medicare must increase premiums to fund the services.

4. Legislative Adjustments

Congress sometimes passes laws that affect Medicare spending. Some legislative changes, such as adjustments to physician payment formulas or Medicare Advantage benchmarks, influence Part B cost structures.

5. Reduced Subsidies and Reserve Concerns

Medicare Part B operates on a mix of beneficiary premiums and general tax revenue. As budget constraints rise, the federal government may choose to shift more of the cost burden to enrollees. This shift is reflected in annual premium increases.

How the Two-Year Look-Back Rule Affects You

Medicare uses your MAGI from two years prior to determine your IRMAA. That means there is often a mismatch between what you earn now and what you pay for Part B.

For example, if you retired in 2023 and your 2023 income was high, your 2025 premiums will still reflect that. The good news is that you can request a reconsideration if your income has dropped due to certain life-changing events, including:

• Retirement

• Divorce

• Death of a spouse

• Reduction in work hours

You will need to file Form SSA-44 with the Social Security Administration and provide proof of your income change. If approved, your premium can be adjusted to a lower IRMAA bracket.

What Happens If You Delay Enrollment

If you don’t enroll in Medicare Part B when first eligible and don’t qualify for a Special Enrollment Period, you may face a permanent penalty.

This late enrollment penalty adds 10% to your monthly premium for each full 12-month period you delayed enrollment. For example, a 2-year delay results in a 20% higher premium, which applies for life. The penalty is based on the standard premium, even if your income qualifies you for a higher IRMAA bracket.

This makes timely enrollment critical. Your Initial Enrollment Period (IEP) starts three months before your 65th birthday and lasts for seven months. Missing this window without other coverage could cost you significantly over time.

Premium Adjustments and COLA

The Social Security Cost-of-Living Adjustment (COLA) directly influences your Medicare premiums. In years where COLA increases are small or absent, Medicare may limit how much your premium can rise. This is known as the “hold harmless” provision.

However, not everyone is protected by it. You are not eligible for this protection if:

• You’re subject to IRMAA

• You don’t have your premium deducted from Social Security

In those cases, you pay the full increase regardless of COLA limits. In 2025, with a 2.5% COLA, most Social Security recipients will see enough increase to absorb premium hikes. But higher-income enrollees may still experience a net reduction in take-home benefits due to rising premiums.

Medicare Advantage and Medigap Do Not Replace Part B Premiums

Many people mistakenly believe that enrolling in a Medicare Advantage plan or purchasing a Medigap policy removes their responsibility to pay the Part B premium. That is not the case.

If you enroll in a Medicare Advantage plan (also called Part C), you must still pay your Part B premium. The same rule applies to Medigap policies. These plans only supplement or replace how you receive your Medicare benefits; they do not replace your financial obligations under Part B.

This is an important point when budgeting for healthcare in retirement. Always include your Part B premium in your financial planning, even if you opt for additional coverage.

Paying Your Part B Premium

Most Medicare beneficiaries have their Part B premium automatically deducted from their Social Security check. If you are not receiving Social Security benefits yet, you’ll receive a quarterly bill.

The billing schedule is as follows:

• January to March

• April to June

• July to September

• October to December

You can pay your premiums through:

• Medicare Easy Pay (automatic bank draft)

• Online bill pay via your bank

• Mailing a check or money order

• Using your Medicare account at Medicare.gov

Missing payments can result in cancellation of Part B coverage. If canceled, you must wait until the General Enrollment Period (January 1 to March 31) to re-enroll, with coverage starting July 1 and penalties applied.

Planning for the Future

Given how premiums are tied to income and reassessed annually, you may be able to manage future costs by proactively adjusting your financial strategy.

Some approaches to consider:

• Distributing retirement income across multiple sources to control MAGI

• Timing Roth IRA conversions or capital gains around Medicare thresholds

• Consulting a tax advisor to prevent triggering IRMAA

In addition, understanding that premiums are not fixed but subject to yearly changes helps you build a more flexible retirement budget. Expect a gradual upward trend in Part B premiums over the next decade.

Stay Proactive With Your Medicare Costs

Medicare Part B is an essential part of your healthcare coverage, but its costs are dynamic. Premiums reflect your income, federal policy, and the ongoing expansion of healthcare services. With income brackets and IRMAA in play, your costs can be very different from someone else’s, even if you’re the same age.

You don’t have to face these decisions alone. For personalized support, reach out to a licensed agent listed on this website to review your Medicare options and cost-saving strategies.