How Much Does Medicare Cost?

The Right Coverage at the Lowest Price

Your search for affordable Health, Medicare and Life insurance starts here.

Call us 24/7 at (800) 439-6916 or Find an Agent near you.


You’ve spent decades paying Medicare taxes in addition to your own health insurance costs. But now that you’re eligible for Medicare, you’re in the clear, right?

Not so fast. While most people can obtain Part A of Medicare for a zero-dollar premium, that doesn’t mean Medicare comes free of any costs. These costs can be broken down into the same categories of out-of-pocket expenses as regular health insurance, including premiums, deductibles and coinsurance. 

There are four different parts of Medicare — labeled A and B (Original Medicare), C (Medicare Advantage) and D (prescription drug coverage) — and each comes with its own set of expenses. Let’s take a closer look with a detailed breakdown of the costs associated with Medicare. 

Part A 

What it is: Medicare Part A provides coverage for hospital services and care. This includes expenses for care received during stays in hospitals, skilled nursing facilities, hospice or home health care facilities. 

What it costs: Part A of Medicare usually doesn’t require a monthly premium payment if you or your spouse paid Medicare taxes while working. But this doesn’t mean there aren’t some expenses to take on in the form of deductibles and coinsurance. 

Premiums

Most people with Medicare Part A do not have to pay a premium. This is appropriately called “premium-free Part A” and there are two ways to get it:

You’re at least 65 years old and at least one of the following is true:

  1. You receive retirement benefits from either Social Security or the Railroad Retirement Board. 
  2. You’re eligible for either Social Security or Railroad Retirement benefits but have not filed for them. 
  3. Either you or your spouse had a government job that was Medicare-covered.

** or ** 

You’re under 65 years old and at least one of the following is true:

  1. You have received benefits from either Social Security or the Railroad Retirement Board for at least 24 months. 
  2. You have End-Stage Renal Disease and meet certain requirements. 
  3. You have ALS (Amyotrophic Lateral Sclerosis, also known as Lou Gehrig’s disease).

If you do not meet one of the above requirements, you’ll have to pay a premium for Medicare Part A. In 2015, that premium was as much as $407 per month. In 2016, you’ll pay up to $411 per month.

Deductibles

The 2015 Medicare Part A deductible was $1,260 for each benefit period and rose to $1,288 in 2016. This is the amount you will have to pay out of your own pocket before Medicare begins contributing to your healthcare expenses. 

Coinsurance

The amount of coinsurance you will pay under Medicare Part A depends on the benefit period. 

For the first 60 days you are in the hospital, you will pay no coinsurance. 

Beginning on day 61, you will pay $322 in 2016 for each day of the benefit period. 

If you are still in the hospital by Day 91, you will then begin paying $644 in 2016. This is the beginning of your “lifetime reserve days,” which is a total of 60 days to be used over the course of your lifetime. 

Once you have exhausted all of your lifetime reserve days, you will pay the full cost of the hospital stay for each day. 

Part B

What it is: While Part A is known as hospital insurance, Medicare Part B is known as medical insurance. This includes doctor’s visits, physical therapy and medical equipment. When Part A is combined with Part B, it is known as “Original Medicare.” 

What it costs: Unlike Part A, there is no way to get Part B of Medicare for a free premium. You’ll pay a premium for Part B and then incur expenses for your deductible and coinsurance. 

Premium

People who are currently enrolled in Medicare Part B will not receive a premium increase and will continue to pay $104.90. But new enrollees in 2016 will pay a standard premium of $121.80 for Medicare Part B. However, the cost of your premium can be affected by your income level. The higher your income, the more you’ll be asked to pay in premiums. See the table below.

2014 Income 

(Individual)

2014 Income 

(Married, filing jointly)

2014 Income 

(Married, filing separately)

2016 Medicare Part B Premium

Less than $85,000

Less than $170,000

$85,000 or less

$121.80

$85,001 to $107,000

$170,000 to $214,000

N/A

$170.50

$107,001 to $160,000

$214,001 to $320,000

N/A

$243.60

$160,001 to $214,000

$320,001 to $428,000

$85,000 to $129,000

$316.70

More than $214,000

More than $428,000

Above $129,000

$389.80

Deductible

The annual deductible for Part B coverage was $147 in 2015 and $166 in 2016. Again, this is the amount you’ll have to pay on your own first before Medicare begins paying its share of your medical bills. 

Coinsurance


Once you meet your Part B deductible, you can expect to pay a 20 percent coinsurance. This means you will pay 20 percent of any medical bill while Medicare takes care of the remaining 80 percent. 

The 20 percent is taken not from the total amount of the bill, but rather from the “Medicare-approved amount.” The Medicare-approved amount is the total amount that a doctor or healthcare provider is allowed to charge for Medicare patients. This is often less than what that doctor or facility charges for non-Medicare patients.

Part C

What it is: Part C, also called “Medicare Advantage,” is Medicare Part A and Part B combined and is offered by private insurance. By law, the coverage afforded by these plans must be at least equivalent to that of Original Medicare. 

In addition to the basic coverage of Original Medicare, these Part C plans typically offer additional benefits not covered by parts A and B, such as vision, dental or hearing coverage.

What it costs: Just like parts A and B, Medicare Part C also comes with premiums, deductibles and coinsurance. But unlike parts A and B, the amount of these expenses can vary a bit more greatly. Ultimately, the costs for Part C depend on which plan you choose. 

Premiums

In 2015, the average premium for a Medicare Advantage plan was $41. Some plans will not require a premium while others might cost more than $200.

This is where things can get tricky. Because you have to carry Medicare Part A and Part B in order to enroll in a Part C plan, you will have to pay a Part B premium in addition to any Part C premium. 

Deductibles

Not all Part C plans require a deductible. Part C deductibles for prescription drugs will be in addition to your Part A or B deductible. 

Coinsurance/Copayments

Once again, coinsurance or copayments can vary greatly. Factors include the plan selected, type of service received, whether that service takes place inside or outside of a network and more.  

Part D 

What it is: Similar to Part C, Part D is also a collection of plans provided by private insurance companies and approved by Medicare. These plans focus on providing comprehensive coverage for prescription drug costs.

Medicare recipients can choose to add a Part D Prescription Drug Plan (PDP) to Original Medicare. If a Medicare Advantage plan does not include drug coverage, you may not add a Part D plan to it. In fact, enrolling in a PDP disenrolls you from your Medicare Advantage plan. However, if your Private Fee-for-Service plan does not have drug coverage, you can add coverage without losing your Medicare Advantage plan.

What it costs: Each Part D plan will come with its own set of premiums, deductibles and coinsurance or copayments. So just like Part C, any costs will depend largely on the plan selected. 

Premiums

The average national monthly premium for Medicare Part D plans is $33.13 ($34.10 in 2016), but the cost of a Part D premium doesn’t end there. 

Medicare Part D charges higher premiums for people with higher reported income. This means you’ll pay any premium that is mandated by your selected plan in addition to a flat fee based on your reported income. The income used to determine your “extra” premium payment is based on the income you reported on your IRS tax return from two years prior. So for example, a 2016 Part D enrollee would pay this extra premium fee based on their 2014 tax return. 

The table below breaks down what a 2016 Medicare Part D enrollee would have pay for a premium.

2014 Income 

(Individual)

2014 Income 

(Married, filing jointly)

2014 Income 

(Married, filing separately)

2016 Medicare Part D Premium 

$85,000 or less

$170,000 or less

$85,000 or less

Plan premium only

$85,001 to $107,000

$170,001 to $214,000

N/A

Plan premium + $12.70

$107,001 to $160,000

$214,001 to $320,000

N/A

Plan premium + $32.80

$160,001 to $214,000

$320,001 to $428,000

$85,001 to $129,000

Plan premium + $52.80

Above $214,000

Above $428,000

Above $129,000

Plan premium + $72.90

Extra Help Costs

Extra Help is a Medicare program to help people with limited income pay for prescription drug costs, including premiums, deductibles and coinsurance.

Deductibles

Deductibles for Part D plans will vary from one plan to the next. However, Part D annual deductibles cannot exceed $320 ($360 in 2016) if you do not have Extra Help. If you have Full Extra Help, there is no deductible. With Partial Extra Help, you’ll have a deductible of either $66 or the plan’s standard deductible (whichever is the cheaper of the two).

Copayments/Coinsurance

Once again, copayments and coinsurance amounts will depend on the plan selected as well as the service rendered. But coinsurance and copayments for Part D plans can get complicated. 

In order to fully understand Part D copayments and coinsurance, you’ll first have to understand the coverage gap and catastrophic coverage. The coverage gap comes into play when you and your Part D plan have combined to pay a certain amount for your prescription drugs during a given year. This predetermined amount is $2,960 ($3,310 in 2016).

Once this number has been reached, you are now in the coverage gap and will have to pay 45 percent (no change in 2016) of the cost of any brand name prescription drugs and 65 percent (58 percent in 2016) of any generic drugs. The coverage gap is also called the “donut hole.”

But there is an end to the coverage gap. Once you have spent $4,850 in 2016 out of your own pocket for prescription drugs, you are out of the coverage gap and qualify for catastrophic coverage. During catastrophic coverage, you will pay only a small copayment or coinsurance for any more drugs for the rest of the year. This amount will be the greatest of either 5 percent of the cost of the drug or a flat fee of $2.95 for generic drugs and $7.40 for brand name drugs. 

If you have Full Extra Help, you’ll make copayments of $2.65 for generic drugs and $6.60 ($2.95 and $7.40 in 2016, respectively) for prescription drugs during the coverage gap. Should you reach $6,680 in total drug costs, you’ll escape the coverage gap and pay nothing for drugs for the rest of the year. 

With Partial Extra Help, you’ll pay the lesser of either 15 percent coinsurance for the prescription or your plan’s standard coinsurance. Upon reaching $6,680 in total drug costs, you’ll be out of the coverage gap and pay $2.65 for generic drugs and $6.60 for prescription drugs (again, $2.95 and $7.40 in 2016).

Late Enrollment Penalties 

More Medicare costs can accrue if you are late to enroll. Late enrollment penalties are in place for Part A, Part B, and Part D. 

Part A Late Enrollment Penalty

If you are not eligible for premium-free Part A and do not purchase it when you first become eligible, your monthly premium can increase by 10 percent. This penalty will last for twice the number of years that you were eligible for Part A but were not enrolled.

Part B Late Enrollment Penalty

If you do not sign up for Medicare Part B when you first become eligible but later decide to enroll, you may have to pay a late enrollment penalty for as long as you remain enrolled in Part B. 

The late enrollment penalty for Part B can be a premium increase of up to 10 percent for each 12-month period that you were eligible for Part B but not enrolled. So for example, if three years lapsed between the time you became eligible for Part B and the time you decided to enroll, you would face a late enrollment penalty of 30 percent of the premium. 

Part D Late Enrollment Period

A Part D late enrollment penalty will be applied if you went 63 days or more without having Part D or another approved prescription drug plan following the close of your initial enrollment period. The amount of the penalty depends on the number of days you were without prescription drug coverage. 

The penalty is calculated by taking 1 percent of the “national base beneficiary premium” (which was $33.13 in 2015 and $34.10 in 2016) and multiplying that by the number of months you were not enrolled. This figure is then added to your Part D premium and may be enforced for as long as you have Part D. 

Saving Money on Medicare 

Despite some of the costs of Medicare, there are ways to save money and maximize your coverage. 

  1. Know what you need. For example, if you wear glasses or hearing aids, a Medicare Advantage plan will provide the coverage you need. If you require the use of medical equipment such as oxygen, you’ll need Part B. Are you on a lot of medication? A Part D plan will help with prescription drugs costs.. Pay for what you need, and use what you pay for. 
  2. Enroll when you’re eligible. Late enrollment penalties can be taxing on your premium costs. Enroll when you first become eligible, unless you are still working, so you can minimize your monthly payments.
  3. Be proactive. Take advantage of any preventive care that you can receive through Medicare. Not only can preventive care measures keep you healthy, it can also steer you away from more serious — and expensive — issues down the road.
  4. Call on the professionals. The best way to get the most out of your Medicare benefits is to let the professionals at HealthMarkets help you find options that work for you. With over 3,000 licensed agents on hand, we have the resources to get you the right set of Medicare benefits.

Call us at (800) 360-1402 today to learn more about the cost of Medicare and how you can maximize your coverage.

HMIA002279

----------
Sources:
“How much does Part A cost?” Medicare.gov. 2015.
“Medicare 2015 & 2016 costs at a glance | Medicare.gov." 2012.
"Part B costs - Medicare.gov." 2015.
"Medicare 2015 & 2016 costs at a glance | Medicare.gov." 2012.
"Medicare Part C Cost | My Medicare Matters." 2015.
“How to get drug coverage.” Medicare.gov. 2015.
"Medicare Interactive - Medicare drug benefit (Part D) costs." 2009.
"Monthly premium for drug plans." 2015.
"Yearly deductible for drug plans.” Medicare.gov. 2015.
“Extra Help Program — Income and Asset Limits 2015.” Medicare Rights Center. 2015.
"Medicare Interactive - Medicare drug benefit (Part D) costs." 2009.
“Costs in the coverage gap.” Medicare.gov. 2015.
“Save on drug costs.” Medicare.gov. 2015.
“Catastrophic coverage.” Medicare.gov. 2015.
“Part A late enrollment penalty.” Medicare.gov. 2015.
"Part D late enrollment penalty | Medicare.gov." 2012.
 

The Right Coverage at the Lowest Price

Your search for affordable Health, Medicare and Life insurance starts here.

Call us 24/7 at (800) 827-9990 or Find an Agent near you.

Related Information