- Health Care
- Answering Challenges to Advanced Economies
General revenue now funds about half of Medicare. This brief proposes replacing Medicare Part B’s five IRMAA (Income-Related Monthly Adjustment Amount) premium tiers with a linear ramp that ends the taxpayer subsidy at $250,000 of income for single seniors and $500,000 for couples. The reform raises up to $113 billion over 10 years, removes premium cliffs to smooth out marginal tax rates, and leaves premiums unchanged for roughly 90% of Part B enrollees.
Key Takeaways
- General tax revenue funds 48% of Medicare. Part B alone will draw $451 billion from taxpayers in 2026, growing to $944 billion by 2035—more than the Congressional Budget Office’s projected primary deficit (i.e., excluding interest on national debt) for that year.
- Every Part B enrollee is subsidized. A senior paying the standard premium receives $7,304 a year from taxpayers; even seniors making more than half a million dollars in income receive $1,460. Premiums for high-income seniors are set by five IRMAA tiers (Income-Related Monthly Adjustment Amount). These tiers create cliffs that carry marginal tax rates near 150% when seniors cross the threshold of one tier into another.
- The proposal replaces the five IRMAA tiers with a linear ramp. The percentage of the actual cost of coverage paid by seniors according to their income would rise from 35% at $111,000 to 100% at $250,000 for singles ($222,000 to $500,000 for couples), eliminating the premium cliffs.
- The linear phase-out of subsidies raises an estimated $113 billion over 10 years before behavioral responses (i.e., changes in financial behavior to lower premiums), or $89 to $106 billion after, plus $14.5 to $17 billion in federal interest savings.
- Only seniors who already pay IRMAA premiums would pay more. Premiums are unchanged for the roughly 90% of enrollees who do not. And 83% of the new revenue comes from the top 10% of seniors by income.
Cite this essay:
Tom Church, “Reducing Premiums Subsidies for High-Income Enrollees in Medicare Part B,” Healthcare Policy Working Group, Hoover Institution, October 2026.
