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How Much Does It Cost for Medicare?

Your costs associated with Medicare can vary based on your coverage options and personal healthcare needs.  Medicare is divided into parts, each covering different healthcare services and having its cost structure.

Medicare is segmented into Part A, Part B, Part D, and Medicare Advantage (Part C).  Part A mainly covers inpatient hospital services, skilled nursing facilities, and hospice care.  Typically, there is no premium if you or your spouse paid FICA taxes while working.  Meanwhile, Part B includes outpatient care, preventive services, and medical supplies.  It comes with a monthly premium that may vary based on your income.  Part D adds prescription drug coverage and is offered through private insurance companies approved by Medicare.  This means premiums and out-of-pocket costs can differ among plans.

Advantage plans, offered by private insurance companies approved by Medicare, combine the benefits of Part A and B, and often include Part D.  These plans come with their own set of premiums, deductibles, and cost-sharing.  They can also provide additional benefits, such as dental and vision coverage.  The costs associated with Medicare Advantage plans can vary based on the extent of coverage and the rules set by the insurance company.  You really need to review and compare these costs annually, as they can change from year to year.

What is the total cost of my Medicare, and how do I pay premiums for Medicare?

Medicare Part A ─ For most people, Part A doesn’t require a premium if you have worked and paid Medicare taxes for a specified period.  You can buy into it if you are not eligible for premium-free Part A, with premiums up to $505 per month in 2024.

Medicare Part B ─ In 2024, the standard Part B premium was $174.70, but this can increase based on your income.

Medicare Part D ─ This covers prescription drugs.  Premiums vary by plan, but the base beneficiary premium was $34.70 in 2024. Your actual premium could be higher depending on the coverage you choose.

Medicare Advantage (Part C) ─ These plans, offered by private companies, combine Part A and Part B and often Part D. Premiums vary widely by plan.  They can be as low as $0 beyond your Part B premium, though you may encounter additional costs.

Medigap (Medicare Supplement Insurance) ─ Medigap premiums vary by plan and provider.  You can have the premiums automatically deducted from your Social Security benefits, or you may receive a bill to pay directly.

Medicare Part A Costs

Here’s what you need to know about the premiums and out-of-pocket costs that may apply to your hospital coverage.

How does one qualify for premium-free Medicare Part A?

If you’ve worked for at least 40 quarters (10 years) while paying FICA taxes, you are typically eligible for premium-free Part A coverage.  This also applies if you haven’t worked but are either married or legally divorced, and your spouse has the required work history.  People who haven’t met the work requirement but have been a citizen or a legal resident of the U.S. for at least 5 years can purchase Part A, with premiums dependent on their work credits.

What are the expenses associated with Medicare Part A for hospital coverage?

When considering hospitalization costs, you must account for the deductible and coinsurance payments:

  • Deductible: You’re responsible for a deductible of $1,632 per benefit period (in 2024) before Medicare begins to cover hospital expenses.
  • Hospital Stay:
    • Days 1–60: $0 coinsurance cost for you.
    • Days 61–90: You pay a coinsurance of $408 per day (in 2024).
    • Days 91–150: You pay a coinsurance of $816 per day (in 2024) as part of your extended hospital coverage.
    • Beyond day 150: You are responsible for all costs.
  • Skilled Nursing Facility Stay:
    • Days 1–20: $0 coinsurance cost for you.
    • Days 21–100: You pay a coinsurance of $204 per day (in 2024)

These costs can increase annually, and Medicare Supplement plans can help cover these expenses.

Medicare Part B Expenses

Understanding Medicare Part B expenses is crucial when planning for healthcare costs in retirement.  Here, specific costs associated with Part B coverage are outlined, including monthly premiums and other cost-sharing requirements.

What are the Medicare Part B monthly premiums and costs ?

Medicare Part B has a standard monthly premium of $174.70 in 2024.  Your income may affect this premium ─ higher-income people might pay surcharges.  Specifically, if your modified adjusted gross income (MAGI) is above designated thresholds, you’ll incur an Income Related Monthly Adjustment Amount (IRMAA), increasing your monthly premium.

Besides the monthly Part B premium, the annual deductible for Medicare Part B is $240 (in 2024).  After meeting your deductible, Medicare covers 80% of outpatient services, while you’re responsible for the remaining 20%.  It’s extremely important to note that there’s no cap on the out-of-pocket expenses for the 20% you cover, highlighting the importance of a Medicare Supplement or an Advantage plan with a maximum out-of-pocket amount.

Costs Associated with Medigap Policies

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You’ll incur upfront costs when you opt for a Medigap policy to supplement your Original Medicare benefits.  These policies, sold by private insurance companies, help cover some of the healthcare costs not covered by Medicare Parts A and B, like copayments, coinsurance, and deductibles.

You’ll have a monthly premium for your Medigap policy, which is in addition to the Part B premium you pay to Medicare.  Premiums vary depending on the plan and provider.

Most plans have annual deductibles before coverage kicks in.

Medigap plans typically cover copayment and coinsurance costs, reducing your out-of-pocket expenses.  Coverage details will be plan-specific.

If your healthcare provider does not accept Medicare assignment, you might be charged an excess charge over the Medicare-approved amount for a service, up to a limit of 15%.  Plans F and G cover these excess charges, while others do not.

Medicare Part C Advantage Plans Costs

Medicare Part C, or Medicare Advantage, is an alternative to Original Medicare (Part A and Part B) and often includes additional benefits.  Costs will vary depending on the specific plan you choose, but here are the types of costs you can expect:

  • Monthly Premium ─ This can range from $0 to higher, depending on your plan.  This is in addition to your Medicare Part B premium.
  • Deductible ─ Some plans have annual deductibles before they start to cover costs.
  • Copayments/Coinsurance ─ You typically pay a set amount or percentage for covered services.

Not only do Advantage plans vary in their out-of-pocket costs, they also have their own rules for how you use services.  For example, they may require a referral to see a specialist or that you go to doctors, facilities, or suppliers that belong to the plan for non-emergency or non-urgent care.  They also require prior authorization for many services that healthcare providers render.

You should become familiar with the specifics of a plan before enrolling, as costs can vary significantly between plans.  Choose a plan with a comfortable balance between premiums, deductibles, and out-of-pocket costs based on your healthcare needs.

Medicare Part D and Prescription Coverage

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Medicare Part D provides essential prescription drug coverage, and your costs for this plan will vary due to several factors unique to each plan, including the plan’s premium, your income level, and the specific benefits offered.

What is the cost of Medicare Part D prescription drug coverage?

Medicare Part D premiums are determined by private insurance companies and can vary widely.  You can expect to choose from among several plans, each with different pricing structures.  The amount you’ll pay includes:

  • Monthly Base Premiums ─ These aren’t standardized and will differ for each plan, ranging from budget-friendly options to more premium ones.
  • Income-Related Monthly Adjustment Amount (IRMAA) ─ Higher earners may pay an additional charge on top of the base premium.

Make sure to weigh these costs annually during the Annual Election Period, which runs from OCTOBER 15th to DECEMBER 7th, to ensure the selected plan remains the most suitable for your medical and financial needs.

Why is Medicare Part D necessary if I do not take any medications?

While you may not currently require medications, enrollment in Medicare Part D when first eligible prevents incurring a late enrollment penalty should you need the coverage in the future.  It’s probably that your prescription needs will change over time, and having coverage in place provides financial protection against unforeseen medication costs.  Taking a proactive approach helps ensure you’re covered, regardless of your present need for prescriptions.

Example of Total Medicare Monthly Cost

To calculate your monthly Medicare expenses, begin by evaluating the costs of various components.  Medicare costs can differ from person to person as they are influenced by your income level, where you reside, and the specific supplemental coverages you choose.

Let’s look at some hypothetical premiums just to get a general idea of how they could add up:

  • Medicare Part B Premium ─ The standard monthly premium without IRMAA surcharges is just under $175 per month (in 2024).
  • Medigap Plan G Premium ─ Let’s say a Medicare Supplement could add about $150-225 monthly to your expenses (in 2024). This could be more or less, depending on many variables.
  • Part D Plan Premium ─ To cover prescription drugs, the premium on a Part D plan might be an estimated $50 each month (in 2024). Again, this varies by plan.

Taking these figures into account, your combined monthly premiums would total approximately $375 to $400.  It’s important to also consider the annual deductible associated with Medicare Part B, which is $240 (in 2024).  An annual budget under $5,000 should generally cover expenses for most people barring prescription medications and additional services such as dental and vision care.

With a Medigap Supplement like this, you would encounter no further deductibles, copayments, or coinsurance for Medicare-approved hospitalizations or outpatient procedures throughout the year.  Your monthly costs could be expected to remain steady, keeping financial surprises to a minimum.

If you choose the Medicare Advantage route instead, then beyond any monthly premiums, you’ll encounter additional expenses such as deductibles, coinsurance, and copays, all of which can affect your overall healthcare spending up to your maximum out-of-pocket limit.

Medicare Deductibles and Coinsurance

Medicare Part A usually comes without a premium if you or your spouse paid Medicare taxes while working.  However, it does have a deductible.  In 2024, the Part A deductible is $1,632 for each benefit period.  Coinsurance applies if you’re hospitalized for more than 60 days.

  • Days 61-90: $408 coinsurance per day (in 2024)
  • Days 91 and beyond: $816 (in 2024) per “lifetime reserve day” after day 90 (up to 60 days over your lifetime)

Medicare Part B helps cover outpatient services and it has a standard monthly premium that varies depending on your income.  In addition, there’s an annual deductible ─ $240 (in 2024).  After meeting the deductible, beneficiaries pay 20% coinsurance for covered services.

Medicare Part D is your prescription drug coverage and copayments will depend on the formulary tier structure and the medications you need.

Late Enrollment Penalties

If you enroll late in Medicare Part B, you may incur a late enrollment penalty in addition to your monthly premium.  This penalty could increase your premium by 10% for each 12-month period you were eligible but didn’t enroll, and you usually pay this higher premium for as long as you have Medicare Part B.

For Medicare Part D, the late enrollment penalty depends on how long you went without Part D or creditable prescription drug coverage after becoming eligible.  The cost of the penalty is calculated by multiplying 1% of the “national base beneficiary premium” ($34.70 in 2024) times the number of full, uncovered months you didn’t have Part D or creditable coverage.

Can you explain the deduction of Medicare costs from Social Security payments?

Yes.  If you receive Social Security benefits, Medicare will automatically deduct your Medicare Part B premium from your monthly payment.  Similarly, you have the option to have the Part D premium deducted from your Social Security benefits too.

If you’re not collecting Social Security, Medicare will send you a bill for your Part B and Part D premiums every three months.  It’s important to note that this could mean your first bill may include more than one month’s premium for Part B.

For direct payments, you can use Medicare’s Easy Pay or Health Savings Account (HSA) funds

Final Thoughts

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When it comes to Medicare, remember that the right choices for Medicare should hinge on both your healthcare needs and budget.  Navigating this terrain requires a clear understanding of the various options and costs involved.  Your costs can vary based on chosen plans and your personal circumstances, such as income levels and healthcare utilization.  Be sure to review the details of each plan.  Consider not just the premiums but also deductibles, copayments, and coinsurance.

Remember that Medicare doesn’t cover all expenses, and for additional coverage, supplemental insurance like Medigap, standalone Part D prescription drug coverage, or an Advantage plan might be an option, which also comes with its own costs.  Take time to assess the differing premiums and benefits it offers.

Like any insurance program, Medicare involves complexities regarding its coverage options and costs.  I’m here to help you make informed choices that are aligned with your healthcare needs and financial circumstances.

Rodney POWELL

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