Medicare is a federal program that mandates standardization of services nationwide, so many people may assume the premiums would be the same for everyone. In reality, there are variations in the premiums people pay, if they pay any at all.

Medicare qualifications

The formula for determining a person’s qualification for Social Security and Medicare is the same. It is based on income earned and taxes paid for the duration of working life. The annual W-2 Form that U.S. employees receive includes not only year-to-date earnings but also taxes paid toward Social Security and Medicare. Forty credits are required to be eligible for benefits. The requirements may be modified for young people claiming disability or survivor benefits. Four is the maximum number of credits a person can earn per year, so it takes at least 10 years or 40 quarters of employment to be eligible for Medicare. The Social Security statement available to registered users on ssa.gov reveals if you have earned enough credits to qualify for Medicare when you reach age of 65.

Medicare Part A premium

Part A and Medicare Part B premiums are calculated differently. For Part A, most Medicare recipients are not charged any premium at all.

Seniors at age 65 are eligible for premium-free Part A if they meet the following criteria:

  • Currently collect retirement benefits from Social Security or the Railroad Retirement Board.
  • Qualify for Social Security or Railroad benefits not yet claimed.
  • Employment with a Medicare-covered government agency.

People under age 65 may receive Part A with no liability for premiums under the following circumstances:

  • Have received Social Security or Railroad Retirement Board disability benefits for two years.
  • Suffer from End-Stage Renal Disease and satisfy particular requirements.

For those who do not meet the criteria and have to pay a premium, the rates for 2020 is as follows:

  • $458 per month for those who paid Medicare taxes for less than 30 quarters.
  • $252 per month for those who paid Medicare taxes for 30-39 quarters.

Medicare Part B premium

While zero-premium liability is typical for Part A, the standard for Medicare Part B is a premium that changes annually, determined by modified adjusted gross income and tax filing status. For 2020, the standard monthly rate is $144.60. However, it will be more if you reported above a certain level of modified adjusted gross income on your federal tax return two years ago. Any additional amount charged to you is known as IRMAA, which stands for income-related monthly adjustment amount. Visit Medicare.gov, point to “Your Medicare Costs,” and then click “Part B costs” to see a matrix of premiums corresponding to income ranges across different tax filing statuses.

Related articles:

Do Social Security Benefits Start the Month of Your Birthday?(Opens in a new browser tab)

Retiring at 65? Understanding Your Medicare Benefits(Opens in a new browser tab)