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Ask Ms. Medicare

Who Pays the Part D Higher-Income Surcharge?

Drug coverage in a retiree plan may not exempt you

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En español | Q. I've been told I must pay the higher-income Part D surcharge. But I get my drugs through retiree benefits from my former employer, not through Medicare. If I'm not enrolled in Part D, can they make me pay this surcharge?

A. Maybe, maybe not. It depends on the kind of prescription drug coverage you receive from your former employer.

See also: Select the best Part D prescription plan for you.

Pharmacist holds pill bottle, Medicare Part D Surcharge for Higher-Incomes

Does the Part D surcharge apply to your retiree plan? — Comstock Images/Getty Images

Medicare beneficiaries with higher incomes are now required to pay more for Part D prescription drug coverage as well as pay higher premiums for Part B.

The Part D surcharge started Jan. 1, 2011, as a cost-saving provision of the new health care law, whereas the Part B surcharge has been in effect since the beginning of 2007. In both cases, the surcharges affect only people whose modified adjusted gross income (MAGI) on their latest tax returns is higher than $85,000 for a single person or $170,000 for a married couple filing joint returns. (For information on how this system works, see the Social Security document "Medicare Premiums: Rules for Higher-Income Beneficiaries.")

If you're enrolled in a regular Part D drug plan or a Medicare Advantage health plan that includes drug coverage — in other words, a plan that you've chosen from Medicare's menu of plans, that you pay for yourself and that has nothing to do with retiree benefits — the issue is quite clear. If your income makes you liable for the surcharge, you pay the required amount on top of your plan's premium. In 2013, the surcharge ranges from $11.60 to $66.40 a month, depending on your adjusted income level.

But what if you get prescription drug coverage from a former employer, as you do? It's an issue that will come up time and again relating to the new Part D surcharge, because millions of Medicare beneficiaries receive prescription drug coverage through retiree plans.

According to Medicare officials, "a lot of people think they have [purely] retiree drug coverage, but the employer actually contracts with a Part D plan." That means people are not always aware that they are in a Medicare employer group plan where the Part D surcharge would apply.

Next: Does the surcharge apply in your retiree plan? »

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