Higher-income Medicare beneficiaries enrolled in Part D prescription drug plans are also required to pay higher Part D premiums as a result of changes made in the 2010 Affordable Care Act.
In the years after the Medicare Part D benefit was implemented in 2006, but prior to 2011, premiums varied by drug plan but all enrollees in the same plan within the same region paid the same premium.
The monthly premium paid by enrollees was set to cover 25.5 percent of the national average cost of the standard drug benefit, based on bids submitted by Part D plans for their expected benefit payments.
Medicare subsidized the remaining 74.5 percent of the Part D premium. The Affordable Care Act modified these features by establishing an income-related premium for Part D coverage, which took effect in 2011.
The Part D income-related monthly adjustment amount is calculated as a percent of the national average cost of the standard drug benefit, using the same surcharge percentages and income thresholds as for Part B.
Similar to the income thresholds for Part B premiums, the income thresholds for the Part D income-related premium are fixed until 2019; that is, they are not indexed to increase annually.
Unlike Part B, actual premium amounts paid by higher-income Part D enrollees depend on the particular plan they select and the premium charged for that plan.
The Part D income-related monthly adjustment amount is collected separately from the premium that higher-income enrollees pay to their Part D plan. The income-related adjustment amount is withheld from the enrollee’s Social Security or Railroad Retirement benefit payments in the same manner that the Part B premium is withheld.