Medicare Part B (Medical Insurance): How It Works

Part B is the Medicare program that covers doctor bills and other outpatient costs. It's one of Medicare's four programs, each identified by a letter: Part A (hospital insurance), Part B (medical insurance), Part C (managed care plans), and Part D (prescription drug coverage).

Almost everyone age 65 and over is eligible for Medicare Part B. Although it will pay part of many participants' doctor bills and other outpatient costs, it leaves some services uncovered and pays only a portion of those services that it does cover. Participants may need to fill the gaps in coverage -- the costs Part B doesn't pay -- with Medigap supplemental insurance, a Part C managed care plan, Medicaid benefits, or other sources.

Who's eligible for Medicare Part B coverage -- and who pays?

Anyone who's a U.S. citizen or legal resident who's been in the country for five consecutive years is eligible. Participants aren't required to have Medicare Part A in order to enroll in Part B.

Every individual enrolled in Medicare Part B pays a monthly premium for it (except for people enrolled in Medicaid, which pays the Medicare Part B premium for them). The premium goes up each year on January 1. In 2012, most people pay $99.90 per person, per month. Single people (or a married person filing a separate tax return) with an adjusted gross income over $85,000 per year pay higher premiums, as do couples whose combined income exceeds $170,000, according to the following schedule:

• Those with up to $107,000/$214,000 (single/couple) in yearly income pay a monthly premium of $139.90 per person.
• Over those amounts and up to $160,000/$320,000 (single/couple), the monthly premium is $199.80 per person.
• Over those amounts and up to $214,000/$428,000 (single/couple), the monthly premium is $259.70 per person.
• Over $214,000/$428,000 (single/couple), the monthly premium is $319.70 per person.

Medicare bases these calculations on tax returns from two years before. If for any reason participants' actual income has dropped significantly in the past couple of years, they can contact Medicare with this information and request that their premiums be adjusted accordingly.

For those who don't enroll in Part B when first eligible for it at age 65 but do enroll later, the premiums will be 10 percent higher for every year of delay in enrollment.