Medicare's moving parts — and the income surcharge

Medicare is not a single plan. Part A covers hospital care, Part B covers outpatient and physician services, Part D covers prescriptions, and the remaining gaps are addressed either by a supplemental policy or by an all-in-one alternative plan.

Premiums for Parts B and D are income-related. Higher reported income produces a surcharge, and the income examined is generally from two years earlier — so a one-time event such as a large conversion or a property sale can raise premiums in a later year, after the money is long spent.

The surcharge operates in steps rather than gradually. Crossing a threshold by a small amount produces the same increase as crossing it by a large one, which is why the thresholds are watched closely in years with unusual income.

Enrollment timing carries its own penalties for late sign-up. The mechanics are worth understanding before the year they apply, not during it.