How Medicare Premiums Level the Playing Field

When discussing geographic advantages in retirement, we cannot ignore the great equalizer: healthcare costs. Specifically, Medicare premiums can act as an invisible tax on high earners living in high-benefit states.

Most retirees have their Medicare Part B premiums deducted directly from their Social Security checks. The standard premium is a flat rate nationwide, meaning the retiree in New Jersey and the retiree in Arkansas pay the exact same base amount. However, if your modified adjusted gross income (MAGI) from two years prior exceeds a certain threshold, you are subject to the Income-Related Monthly Adjustment Amount (IRMAA).

Because retirees in states like Connecticut, Maryland, and New Jersey often have robust pensions, large traditional IRA distributions, and high overall incomes, they are significantly more likely to trigger IRMAA surcharges. These surcharges can add hundreds of dollars a month to Medicare Part B and Part D premiums. In this scenario, a retiree’s exceptionally high Social Security check is quickly whittled down by federal means-testing, leveling the playing field with retirees in lower-income states who only pay the standard premium.