Why Is My Medicare Bill Bigger Than My Neighbor’s? A Friendly Guide to Premiums and IRMAA

You turn 65, sign up for Medicare, and figure the premium is the premium. Everybody pays the same, right? Then a letter shows up from Social Security with a word that sounds like a tropical storm: IRMAA. Suddenly your Medicare bill is double what your golf buddy pays. Let’s talk about where these premiums come from, why some people pay more, and what you can do about it.

First, where do Medicare premiums come from?

Medicare is really a few programs stacked together, and each one gets its money from a different place.

Part A (hospital). This one is funded mostly by the payroll taxes you paid while you were working. Every paycheck, 1.45% went to Medicare and your employer matched it, for 2.9% total, with an extra 0.9% on wages above $200,000 for singles or $250,000 for couples.¹ That is why most people pay no monthly premium for Part A. You already paid for it, one paycheck at a time.

Part B (doctors and outpatient care). Here is the part that surprises people. Your premium does not come close to covering the bill. In 2023, about 71% of Part B was paid by general tax revenue from the federal budget and about 27% came from beneficiary premiums.² By law, the standard Part B premium is set to cover roughly 25% of the projected cost per enrollee, and taxpayers pick up the other 75%.³

Part D (prescription drugs). Same idea. The base premium is designed to cover about 25.5% of the cost of the standard drug benefit, with general revenue covering most of the rest.³

So if you have ever grumbled that Medicare is expensive, the good news is that for most people it is a pretty good deal. You are paying about a quarter of the tab. The rest of the table is chipping in.

The 2026 numbers

For 2026, the standard Part B premium is $202.90 a month, up $17.90 from 2025, and the annual Part B deductible is $283.⁴ CMS says the increase reflects rising prices and more use of medical services, which is government speak for “health care costs more and we are all using more of it.” For most retirees, that premium comes straight out of the Social Security check before it ever hits the bank account.

Enter IRMAA

IRMAA stands for Income Related Monthly Adjustment Amount, which is a very polite way of saying “surcharge.” Congress created it for Part B in the Medicare Modernization Act of 2003, starting in 2007, and the Affordable Care Act added one for Part D starting in 2011.³ The idea is simple: higher income retirees get less of that 75% taxpayer subsidy. Based on the 2026 tables, the Part B premium climbs from 25% of the cost all the way to 85% at the top tier.⁴

Here is what 2026 looks like per person, per month:

Single MAGI	Joint MAGI	Part B premium	Part D surcharge
$109,000 or less	$218,000 or less	$202.90	$0.00
Up to $137,000	Up to $274,000	$284.10	$14.50
Up to $171,000	Up to $342,000	$405.80	$37.50
Up to $205,000	Up to $410,000	$527.50	$60.40
Under $500,000	Under $750,000	$649.20	$83.30
$500,000 or more	$750,000 or more	$689.90	$91.00

The Part D surcharge is added on top of whatever your drug plan normally charges.⁴

The two year rearview mirror

Here is the sneaky part. Medicare does not look at what you earn this year. For 2026 premiums, Social Security generally uses your 2024 tax return.⁵ And the income it uses, modified adjusted gross income, is your adjusted gross income plus any tax exempt interest.⁵ Yes, that municipal bond interest you were told was “tax free” still counts here. Surprise!

That lookback means a big income year at 63 can quietly raise your Medicare bill at 65. Common culprits include a large Roth conversion, selling a rental property or a business, a big capital gain, a severance payout, or simply your last full year of salary before retiring.

It is a cliff, not a ramp

IRMAA does not phase in gently. Go one dollar over a threshold and you pay the full surcharge for that tier. A married couple with $218,001 of MAGI pays an extra $95.70 each per month for Parts B and D combined compared to a couple at $218,000. That is about $2,297 a year for one extra dollar of income.⁴ At the very top tier, the surcharges alone add up to $13,872 a year for a couple. That is a lot of green fees.

How to keep IRMAA from crashing the party

Report a life changing event. If your income dropped because you retired, cut back your hours, got married or divorced, lost a spouse, or lost a pension, you can ask Social Security to use a more recent year instead. This is done on Form SSA 44, and stopping work is exactly the kind of event it was built for.⁵ If the income Social Security used is just plain wrong, you can also request a reconsideration.⁵

Plan income around the brackets. Roth conversions and capital gains can still make a lot of sense. The trick is sizing them so you land just under a threshold instead of just over it. Spreading a conversion across several years often beats doing it all at once.

Give from your IRA. Once you reach 70½, qualified charitable distributions go straight from your IRA to charity and stay out of your adjusted gross income. The 2026 limit is $111,000 per person, and they can count toward your required minimum distributions.⁶ If you are charitable anyway, this is one of the cleanest ways to shrink MAGI.

Remember IRMAA resets every year. A surcharge is not a life sentence. It is recalculated annually, so one big income year means one expensive Medicare year, not forever.

What is coming next

The 2026 Medicare Trustees Report projects the standard Part B premium will rise to about $209.50 in 2027.⁷ The same report projects the Part A hospital trust fund will be depleted in 2033,⁸ which means Congress will have some decisions to make in the next few years. Official 2027 premiums and IRMAA brackets are typically announced in the fall, so keep an eye out.

The bottom line

Medicare premiums are one of the few retirement costs you can actually influence, and the planning often has to start two years before the bill arrives. At Swan Wealth we take all factors into consideration including Roth conversions, withdrawals, and Medicare brackets so it is planned together instead of separate silos. If you are within a few years of Medicare, or you just opened an IRMAA letter and said a word we cannot print here, give us a call.

This is general education, not personalized tax, legal, or Medicare enrollment advice. IRMAA brackets and premiums change every year, and the right strategy depends on your full income picture, so let’s look at your numbers before the Social Security letter does it for you.

Sources

1. KFF, “What to Know about Medicare Spending and Financing”: Part A financed primarily by the 2.9% payroll tax, plus the additional 0.9% tax on earnings above $200,000 (individual) and $250,000 (couple). kff.org/medicare/what-to-know-about-medicare-spending-and-financing
2. KFF, “FAQs on Medicare Financing and Trust Fund Solvency”: in 2023, Part B was financed by general revenues (71%) and beneficiary premiums (27%), and Part D by general revenues (73%), premiums (14%), and state payments (12%). kff.org/medicare/faqs-on-medicare-financing-and-trust-fund-solvency
3. KFF, “Raising Medicare Premiums for Higher Income Beneficiaries: Assessing the Implications”: the standard Part B premium is set at 25% of projected Part B spending per enrollee, the Part D base premium at 25.5% of the standard benefit, and income related premiums were created by the Medicare Modernization Act of 2003 (effective 2007) and the Affordable Care Act (effective 2011). kff.org/medicare/income-relating-medicare-part-b-and-part
4. Centers for Medicare & Medicaid Services, “2026 Medicare Parts A & B Premiums and Deductibles” fact sheet: 2026 standard Part B premium of $202.90, $283 deductible, reasons for the increase, and the full 2026 Part B and Part D IRMAA tables. Percentages of program cost and annual surcharge examples are calculated from these tables. cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
5. Social Security Administration, “Medicare Premiums: Rules for Higher Income Beneficiaries”: use of the tax return from two years prior, the definition of MAGI, qualifying life changing events, Form SSA 44, and how to request a reconsideration. ssa.gov/benefits/medicare/medicare-premiums.html
6. Fidelity, “Qualified Charitable Distributions”: 2026 QCD limit of $111,000 per individual, age 70½ eligibility, exclusion from income, and counting toward RMDs. fidelity.com/retirement-ira/required-minimum-distributions-qcds
7. Military Officers Association of America, “Medicare Report Estimates Future Part B Premiums. What Will You Pay in 2027 and Beyond?”: 2026 Trustees Report projection of a $209.50 Part B premium for 2027. moaa.org
8. KFF, “Key Facts About Medicare Spending Trends and Projections from the 2026 Medicare Trustees Report”: report released June 9, 2026, projecting Part A trust fund depletion in 2033. kff.org/medicare/key-facts-about-medicare-spending-trends-and-projections-from-the-2026-medicare-trustees-report