Medicare Part B Premium History

The 1965 Social Security Amendments created Medicare. Part A (hospital insurance) was funded by payroll taxes, but Part B (outpatient and physician coverage) was voluntary and funded partly by a monthly premium. The original premium was $3.00 a month, set to cover half of Part B costs, with general federal revenue covering the other half. Enrollment was optional then and remains so today, though most people enroll because delaying triggers a permanent late-enrollment penalty.

A 1972 amendment limited how fast the premium could rise, tying its growth to the Social Security COLA rather than to actual Part B cost growth. By the early 1980s the premium had fallen to around 25% of program cost, with general revenue covering the remaining 75%. The 1982 and 1983 budget acts formalized the 25% rule: the standard premium is set each year to cover roughly a quarter of expected Part B spending per enrollee. That 75% general-revenue subsidy is why Part B is a better deal than its sticker price suggests.

The 2003 Medicare Modernization Act introduced the Income-Related Monthly Adjustment Amount, or IRMAA, effective 2007. For the first time, higher-income enrollees paid a surcharge on top of the standard premium, scaled so the highest earners covered closer to 80% of their own Part B cost rather than 25%. The surcharge applied in tiers based on modified adjusted gross income, using the income reported two years earlier. A 2007 retiree paid IRMAA based on their 2005 tax return.

The Affordable Care Act extended IRMAA to Medicare Part D (prescription drug coverage) starting in 2011. High earners now pay two separate income surcharges: one added to the Part B premium and a second added to whatever Part D plan premium they choose. The Part D surcharge is paid to Medicare directly, not to the drug plan, which surprises enrollees who assume their plan premium is the whole bill.

The 2015 Medicare Access and CHIP Reauthorization Act (MACRA) added a fifth IRMAA tier effective 2018, hitting the highest incomes (above $500,000 single and $750,000 married in current figures) with the steepest surcharge. Before 2018 the top tier started lower and was less steep. This change specifically targeted very high earners and is the tier most likely to catch retirees in a one-time income spike from a business sale or large Roth conversion.

From 2007 through 2019 the IRMAA income thresholds were frozen in nominal dollars, with one exception. That freeze pulled a growing share of middle-income retirees into surcharge territory each year as ordinary inflation lifted their incomes past static thresholds. The 2018 Bipartisan Budget Act indexed the brackets to inflation starting in 2020, so the thresholds now rise each year with the CPI. The top tier remains unindexed by design.

In 2022 CMS set an unusually large premium increase, to $170.10, partly to build a reserve for Aduhelm, a newly approved Alzheimer's drug expected to cost Medicare billions. When Aduhelm's price was cut and coverage was restricted, the reserve proved unnecessary. CMS responded by lowering the 2023 premium to $164.90, one of the only year-over-year decreases in Part B history. It is a useful reminder that the premium reflects projected program cost, not a one-way ratchet.

The standard 2026 Part B premium is approximately $206.50 a month, per the CMS projection in the 2025 Trustees Report, up from $185.00 in 2025. Part B premium growth has averaged roughly 5 to 6% a year over the past two decades, faster than general inflation, driven by rising outpatient and physician spending. A high earner in the top IRMAA tier pays several multiples of the standard premium once both the Part B and Part D surcharges are counted.