Part B costs, deductibles and IRMAA surcharges will increase about 5.9% next year.
By David Enna, Tipswatch.com
Just a month ago, Social Security beneficiaries learned their benefits would rise by 2.5% starting in 2025, the lowest increase in four years. But the good news was that the increase slightly outpaced U.S. inflation up to that point, 2.4%.
And now, the bad news: The Centers for Medicare & Medicaid Services just announced that monthly costs for Medicare Part B premiums, annual deductible and IRMAA surcharges will rise by a much higher amount, about 5.9%, for 2025.
Any day now, if you are on Medicare, you will get a letter from CMS informing you of these new premium and deductible costs for 2025. If you planned poorly, you may be meeting up with IRMAA, the Income-Related Monthly Adjustment Amount. These surcharges can be lofty, so it’s smart to plan ahead to limit these costs.
Here is a summary of the price changes:
- The Part B deductible is rising 7.1% to $257.
- The Part B base monthly premium is rising 5.9% to $185.
- The IRMAA surcharge levels (for both Part B and Part D) are rising 5.9%.
- The IRMAA income tiers that trigger the surcharges are increasing at a lower rate, generally around 3%.
Let’s dive into the key Medicare changes for 2025.
Part A premium and deductible
Most people who reach age 65 go on Medicare Part A, even if they are still working. Medicare Part A covers inpatient hospital, skilled nursing facility and some home health care services. About 99% of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment.
Although coverage is generally free, Part A has some sizable deductibles and coinsurance costs, and those will be rising about 2.7% in 2025.
Keep in mind that most people on Medicare have a Medigap or Medicare Advantage plan that will cover all or most of the Part A deductible and coinsurance amounts. For example, all standardized Medicare Supplement (Medigap) plans, A through N, provide coverage for Part A coinsurance, and most also cover all or most of the Part A deductible costs.
Part B: Medical insurance
Medicare Part B can be described as covering “outpatient services,” things like doctor visits, some lab tests, an annual wellness exam, diabetes screenings, etc. Medicare Part B generally pays 80% of approved costs of covered services, and you pay the other 20%. Some services, like flu shots, Covid vaccines and a wellness visit, may cost you nothing.
Part B deductible. Before Medicare pays anything, you have to meet your Part B deductible each year. The annual deductible for all Medicare Part B beneficiaries will be $257 in 2025, an increase of 7.1% over the annual deductible of $240 in 2024. As of January 2020, Medigap plans sold to new enrollees were not allowed to cover the Part B deductible. But once the deductible is met, Medicare and Medigap plans will cover some or all of your Part B costs.
Part B premium. The standard monthly premium for Medicare Part B enrollees will be $185.00 for 2025, an increase of $10.10 from $174.90 in 2024. This Part B premium is paid by all people on original Medicare and is incorporated into Medicare Advantage pricing, which may or may not result in a baseline monthly cost.
So, for most people on original Medicare, Medicare Part B is going to cost $185 a month for the premium, plus the cost of the $257 deductible. That’s a total cost of $2,477 a year, up about 6% from this year’s costs.
And then … IRMAA
Since 2007, a beneficiary’s Part B monthly premium is based on reported income, known as MAGI, or modified adjusted gross income. According to the Social Security Administration handbook, for Medicare’s purposes MAGI is adjusted gross income (line 11 of your 2023 federal income tax form) plus tax-exempt interest.
Note that I mentioned your 2023 income tax return. That’s the one you filed earlier this year and now, in November, CMS announced the IRMAA surcharge brackets applied to that 2023 return. In other words, you could not know the surcharge levels until after the fact. And this is a rather brutal surcharge, because going just $1 over any limit can trigger thousands of dollars of one-year costs.
CMS says about 8% of people on Medicare pay these surcharges, up from 7% a year ago. It’s important to note that people on Medicare Advantage plans continue to pay the Part B premium, and are also subject to the IRMAA surcharges. And keep in mind that for a couple, the costs are doubled because each person pays the surcharge.
Part B. Here are the 2025 Part B total premiums and surcharges for high-income beneficiaries, which apply to income reported on your 2023 tax return:
Annual income of $212,000+ for a couple may sound like a lot, but the lower IRMAA levels can easily be reached through Roth conversions, stock sales to fund a major purchase, a new pension starting up, etc. Be aware of the potential to trigger the IRMAA surcharges and plan around that possibility.
Part D. Medicare income-related surcharges also apply to Part D, the drug program which is offered by private insurers working with Medicare. Part D premiums vary by plan, but the Part D surcharges are deducted from Social Security benefit checks or paid directly to Medicare.
People in Medicare Advantage plans don’t pay a separate Part D premium, since those plans include Medicare Advantage Prescription Drug (MAPD) coverage. But Part D is built into Medicare Advantage, and the IRMAA surcharge still applies.
Be aware of IRMAA
If you are just a couple years away from going on Medicare, it’s a great idea to plan your total income for this year to avoid triggering IRMAA surcharges two years later. The surcharges last only one year and then get reset the next year. The costs can be substantial for people hitting the top IRMAA tiers.
And I repeat: When you filed your federal tax return in early 2024 for the 2023 tax year you could not know what these IRMAA brackets or surcharges would be. They were just announced on Nov. 8. They are called the “2025 IRMAA levels” but apply to your 2023 tax return.
When you file your 2024 return next year, realize that you won’t know the relevant IRMAA levels until October or November 2025, many months after you have filed. Your only option is to use the 2024 numbers as a guideline. It’s a crazy system.
You can appeal an IRMAA ruling
The Social Security Administration has very specific rules that will allow you to get a waiver of the IRMAA surcharge, if you meet certain criteria for a “life-changing event,” which include:
- Work stoppage
- Work reduction
- Employer settlement payment
- Death of spouse
- Divorce
- Loss of pension income
You’ll need to fill out IRS Form SSA-44 to request the waiver.
Final thoughts
It isn’t unusual, unfortunately, for Medicare costs to be rising at a faster pace than the Social Security COLA. From a recent USA Today report:
2025 isn’t an outlier. Medicare Part B premiums have been rising faster than COLA for years, data show, which is part of the reason many seniors have been struggling. From 2005 to 2024, Part B premiums increased on average by 5.5% per year, while COLAs averaged less than half that rate at just 2.6%.
In 2025, the typical Social Security recipient will receive about $588 more because of the increase in the COLA. For a typical person on Medicare, avoiding IRMAA, costs of the Part B premium and deductible will increase about $140 next year. So for the average person nearly a quarter of the COLA increase will be snatched back by higher Medicare costs.
Also, other Medicare costs are likely to rise. The cost of our Part G supplemental plan increased 13% earlier this year, and some increase is likely again in 2025.
However …
Sometimes I feel the need to remind younger people: “Medicare is not free.” There are expenses and I am fortunate to say that — so far — my payments into Medicare have been higher than the services I have received. That means I am healthy. I’ll take that trade any day.
Original Medicare with a good supplement is very good insurance and worth the cost. But … don’t pay more than you need to. Keep an eye on IRMAA.
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Treasury Inflation-Protected Securities 
Is I-bond tax-deferred interest income included in MAGI for Medicare purposes?
The short answer is YES. Found this listed as one of the add backs to your AGI. Take your AGI and add certain deductions back. “Exclusion for income from U.S. savings bonds.”
Clarification on this: Savings bond interest is not counted in MAGI until the savings bond is redeemed and the interest becomes taxable. (Or … each year if the investor opts out of tax-deferral and pays taxes on interest each year.)
The add-back mentioned by Doug (I assume) applies to cases where the savings bond interest wasn’t taxed, such as when it is used to pay qualified educational expenses.
I need to use a bond portfolio spreadsheet to manage my growing boond portfolio.. Can someone please tell me where to find a Google Sheets for this. I did lookup the web as well as asked Gemini. No luck yet…thanks!!!!
I have a pretty simple spreadsheet for tracking TIPS. The columns are:
CUSIP – Maturity date – Coupon rate – Par Amount – Inflation Index – Adjusted principal (par x index) – Original cost.
Off to the side I note the real yield at purchase for each issue. Plus I put yearly totals off to the right.
This is very helpful…thanks
I choose supplement plan HD G based on family history, my past medical history and a medical workup to determine state of my health before choosing HD G. I’ve been in and out of the hospital six months from signing up for HD G and it’s been one thing after the other. I’d encourage anyone close to Medicare age to think seriously about trying to save on supplement premiums even if their health is currently very good. My suggestion: before you commit to a supplement plan, have your primary care physician refer you for scans to determine your calcium score and health of your cardiovascular health. One might think because they jog regularly, eat healthy, live a low stress life, have good BP and cholesterol numbers, that a HD supplement plan makes sense to save money. It may make sense, but please do your due diligence before choosing your supplement plan (if going with regular Medicare).
I didn’t want to go the high-deductible route because after years in corporate insurance with high deductibles, I didn’t want any cost barrier in the way of seeing a doctor. The plans are probably fine, though, if you look at potential premium costs vs. deductible costs. One question: Can the Plan G “high” deductible continue rising in the future, or will it stay the same?
I have high deductible G supplemental plan (G+) and pay $60/month. I look at it as a catastrophic plan.
Last year, I had a surprise heart stent “installed”. Despite never having a cholesterol problem, exercising regularly, a decent diet, no diabetes, no family issues, etc, I had a major artery that was 99% blocked (what they call the “widow maker”). Lots of tests, follow ups, ER visits.
A number of more “regular” type stuff also occurred. In all of 2023, out of pocket I paid about $2k on a street value of nearly $50k (what the providers charged, but Medicare cut that down and paid about $8k).
With all that transpired, I never got to the (approx) $2770 maximum deductible I had to pay before the G+ plan would kick in and pay 100%.
In 2024 the max is $2800 and in 2025 $2870. If you can handle paying that maximum amount it is a great plan. With original Medicare, you can access any doctor that takes Medicare (ie, no network).
Trying to compare health care plan options (private, ACA, Medicare Advantage, Part D plans) is virtually impossible (at least for me and I am fairly comfortable with numbers). Not only would you need to know what your health needs are going to be in the coming year, the bean counters have done an admirable (purposeful) job of mixing parameters preventing an easy comparison on an equal footing. Higher/lower premiums, copays/no copays, hearing and vision?, different deductibles, varying degrees of hospital coverage, etc.
The advantage goes to the “house”/bean counters who have figured it all out.
An interesting observation with Part D plans in my state — past years, there have been very low cost options (which I have taken). The following year, that same plan jacks up their pricing. I believe they are using their client list as an access point to converting them to the company’s Medicare Advantage program (having been solicited by them).
Unlikely, but if Trump carries thru with making Social Security income tax exempt (highly inadvisable), assuming SSI is a substantial part of your taxable income, run, don’t walk to do a whole or partial Roth conversion.
The current Medicare system was designed by the Reagan Administration and was supposed to control costs. In theory Medicare reimbursements are supposed to cover costs plus a small margin.
Slight correction to previous post:
Cumulative increases since 2014:
Medicare Part B standard: 76.4%
SS COLA (CPI-W Q3/Q3): 31.8%
Suggested alternative indices for the COLA
Any way you slice it, Medicare premiums eat into SS more and more each year, there are alternatives that would improve things, and there are those who would make matters even worse.
The inflation in the IRMAA bracket boundaries need not come as a complete surprise.
The brackets increase according to the year-over-year increase in the Sep-Aug average of non-seasonally adjusted CPI-U. All the required values are known by mid-September each year.
This can be useful in planning, especially if you are close to a bracket boundary, in the usual tax-planning fashion (moving income forward or back, etc.).
You can do the same for the SS COLA using CPI-W Q3/Q3, with the values known mid-October.
Since 2014 the COLA has increased a cumulative 35.2% while the Part B standard premium has increased 76.4%. You can even predict the marginal income tax brackets, but that requires the Chained CPI-U, which is a pain to use for technical reasons.
Excellent information. Most people get caught by surprise. Many people are sold on the benefits of a Roth conversion, but they are surprised when two years later their social security goes down by $100 or so if the conversion is large enough.
Agree – Roth conversion is “pay now” (tax on Roth) AND “pay later” (IRMMA tax); this avoids what’s known as “pay much later” (taxes on very high RMDs in your 80s/90s).
The best spreadsheet will still underestimate show much of your work/investments our USG will take into the future.
It’s painful but moving money into a Roth appears very smart … at some point, that’ll get taxed (or be part of means-testing like muni-bond interest) too.
Your statement that “Medicare is not free.”, is very true; however, the young see it rightly as a massive transfer from young/healthy/self-sufficient to older/poor/infirm.
RFK Jr. now leading $3,000,000,000,000 HHS (incl medicare) … will anything change?
One bright spot: according to CMS, the average premium for Part D plans will decrease by 4%. This is plan specific and it might pay to shop around. Also the $2000 cap on all covered Rx expenses -goodbye “Donut Hole”-will help although I believe it will only affect about 10% of recipients.
A lot of movement in Part D plan premiums and coverages this year. Shop your carrier and make sure you are getting the optimal deal with your current mix of drugs. Drug cost + premium is the appropriate measurement for comparison. I will be changing my Part D plan as the $2000 cap is a BIG deal.
One small additional thought. If you are covered by an employer or spouses health plan, you can delay signing up for any part of medicare without penalties. Why? Because you can still contribute to an HSA. For those who have the means, a high-deducible health plan plus fully funded HSA is a no-brainer in my opinion. This approach is not an option if you have already started taking social security.
Excellent presentation of the things to be aware of as you are coming up on retirement and the system you have paid into over all your working years. Thank you. Being surprised by IRMMA is not a pleasant thing…as you say 2 years later.
This is such a well written article, with all the relevant information laid out logically. Thank you.