Why Are You Paying More For Medicare D Than Your Friend?

Why are your Medicare D premiums increasing?  That is a good question.  When the Medicare D program to ensure prescription drug costs was first authorized in 2006, there was no income qualification element.

Everybody paid the same rate.  If an individual could not afford to pay premium, they could appeal to the Department of Health and Human Services for premium assistance.


On January 1, 2011 the old rule was changed.  Premiums are now tiered depending on a person’s income.

Anger towards the insurance companies is misdirected.  The ones who implemented the new premium structures were members of the current administration in Washington D.C.

The amount of your premium increase is linked, by the Department of Health and Human Services, to your income.  Last year the Social Security Act was amended to add the “Income-Related Monthly Adjustment Amount (IRMAA).  It bases Medicare D premiums on your Modified Adjusted Gross Income from the previous year.

For example, if you are married and filed jointly for  over $ 170,000, your Medicare D premiums can increase up to $ 69 more per month than someone who is not as fortunate as you.

$ 69  a month for those who make $ 170,000 a year does not really sound like a lot of money.  When you annualize it, however, it translates to $ 828 extra that they have to pay.  Now, that is more than pocket change.


In most cases, people who make that level of income can do math.  Between base premiums and Medicare D – IRMAA penalties, they realize that they have to pay over $ 1000 a year to ensure their prescriptions.

Many folk, are merely being treated for blood pressure, cholesterol or another routine issue when they start with Medicare.  If their conditions are controlled with generic drugs they do not have to lay out nearly as much money as if they paid for their prescriptions out of their pocket.

I have run the numbers.  If an individual has to pay less than $ 500 a year for his/her medications, why would they pay over $ 1000 a year for insurance?


Unfortunately, as a human ages, his/her body breaks down.  It needs more prescription drugs at age 75 to work like it did at 45.  A person who is spending less than $ 500 on drugs at age 65 could very well need $ 3000 in prescriptions by age 75.

Insurance that appears to be a waste of money at age 65 could be a necessity at age 75.

There is one problem in the program.  That problem is the penalty that CMS assesses for people who could have participated in the Medicare D program but elected not to.

If an individual does the math at age 65 and decides that he/she does not want to participate in Medicare D but elects to join the program at age 75, CMS charges a penalty of 1% of the national premium average for every month that individual could have participated in Medicare D but elected not to.


In this case, the individual’s premium would be calculated using the following variables.

  • Medicare D Base Premium
  • Non-participation Penalty (120 % of the national average premium)
  • IRMAA Charge ( up to $69)


One of the insurance companies that I represent has developed a Frequently Asked Question (FAQ) page explaining the new law.  To read it, click here.


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