Medicare Part B is the component of Medicare that provides medical insurance coverage (as opposed to hospital insurance or prescription drug coverage). Enrollees are required to pay insurance premiums (which are normally deducted from Social Security benefit checks) set each year at a level designed to cover about 25% of the projected cost of Part B.

For 2010, the basic premium is $110.50. (Most enrollees continue to pay the lower amount that applied for 2009 because Social Security benefit payments remained unchanged after a year without inflation.) You have to pay a higher premium, though, if your modified adjusted gross income for 2008 was above $85,000 on an individual income tax return or $170,000 on a joint return. Adjusted gross income is your income before taking into account personal exemptions, itemized deductions or the standard deduction, and it is modified to take into account tax-exempt interest.

They look back to 2008 because your 2009 income tax return isn’t filed until 2010, too late to determine your premium for that year.

There are five different premium levels. With income of $85,000 you pay at the first level, but with one more dollar of income your premium goes from $110.50 to $154.70, a 40% increase. You pay at that level for 12 months, incurring a total of $530.40 in additional premiums as a result of that $1 increase in income.

This premium applies to all people with income from $85,001 to $107,000. With income of $107,001 it goes to $221.00, which is 200% of the base amount. At $160,001 the premium is $287.30 (260% of the base amount), and above $214,000 it is $353.60 (320% of the base amount).

Couples filing jointly can earn twice the income of an individual filer before moving to the next higher premium level. They reach the highest premium level when joint income is above $428,000.