You may have noticed an increase in your Medicare-B premium for 2007.
That is only the beginning, since a premium increase is being phased-in over
a three-year period (2007 through 2009). The Federal Government has been supplementing the Medicare-B insurance premiums for some years, as the costs have exceeded the funds generated from the premiums. Thus, begin-ning with 2007, the premiums are being increased for higher-income individuals based upon their modified adjusted gross income (AGI) for the
year two years prior. For example, in 2007, the modified AGI for 2005 was used.

The adjustment only applies to married taxpayers with an AGI above the threshold amount of $160,000 and others with an AGI above $80,000. The amount of the increase varies from 13.33% to 73.33%, depending how far above the threshold the taxpayer’s AGI (income) is. The maximum, 73.33%, applies to married taxpayers with incomes in excess of $400,000, and $200,000 for all others, except married separate individuals living together during the year who pay the maximum once their income exceeds $120,000. The $80,000, $120,000 and $160,000 thresholds will be adjusted annually,
in $1,000 increments, based on the Consumer Price Index.

Think the 2007 increase is bad? The government’s subsidy of the Medicare-B premium for the affected higher-income taxpayers is being phased out over a three-year period. Thus, based on the same AGI, in 2008, the monthly adjustments will double the 2007 increase based on the 2006 AGI, and the 2009 increase will be triple based on the 2007 AGI.