Medicare out-of-pocket costs: where is your money going?

If you’re eligible to receive Medicare coverage, you may still be responsible for some Medicare out-of-pocket costs. Depending on the plan you choose and your yearly income, you will have more or less to pay in healthcare expenses. HealthMarkets can help break down those expenses for each Medicare part.

What Are Medicare Out-of-Pocket Expenses?

Premiums, deductibles, coinsurance, copays, and prescription drug costs account for all types of Medicare out-of-pocket costs. These are forms of payment made by you, the beneficiary, and each Medicare part includes different rates.

Part A: If you or your spouse paid taxes during employment for more than 10 years, you usually don’t have to pay a premium for Medicare Part A, also known as hospital insurance. If you have to buy into Part A, the monthly premium can go up to $506 as of 2023.

Each benefit period has a deductible of $1,600, and the coinsurance depends on the length of time you stay at a hospital. Part A coinsurance is as follows:

Days 1-60: $0 for each benefit period

Days 61-90: $400 per day of each benefit period

Days 91 and beyond: $800 per “lifetime reserve day” after the 90th day

After Lifetime Reserve Days: you pay all costs

Part B: If you’re already enrolled in Medicare Part B, also known as medical insurance, and your premium is automatically deducted from Social Security, your monthly premium will likely be $164.90 in 2023.

If you’re a new enrollee, you will pay the following premium based on your 2021 yearly income:

Yearly Income in 2021			2023 Monthly Part B Premium
Individually filed tax return	Joint filed tax return	Married and separate filed tax return
$97,000 or less	$194,000 or less	$97,000 or less	$164.90
$97,001 – $123,000	$194,001 – $246,000	N/A	$230.80
$123,001 – $153,000	$246,001 – $306,000	N/A	$329.70
$153,001 – $183,000	$306,001 – $366,000	N/A	$428.60
$183,001 – $499,999	$366,001 – $749,999	$97,001 – $402,999	$527.50
$500,000 or above	$750,000 or above	$403,000 or above	$560.50

After the $226 deductible is met, Part B beneficiaries will usually pay a coinsurance of 20% for most doctor’s services.

Part C: Outside of Original Medicare (Parts A and B) is Part C, also known as Medicare Advantage. Medicare Advantage combines the coverage of Parts A and B and can offer additional benefits like prescription drug, dental, vision, wellness, and hearing, depending on the plan.

Medicare Advantage premiums are $18.50 on average in 2024, with some  plan premiums as low as $0. The monthly premium is determined by the plan, its coverage, and the private insurance company selling the plan. You must still pay your Part B premium in addition to your Part C premium.

Deductibles, copayments, and coinsurance averages are hard to estimate for Medicare Advantage because each plan has its own schedule of benefits. For example, a Part C plan may have a lower monthly premium but a higher annual deductible or vice versa. Or a plan may have a variation of copayments costs depending on if you made a visit to the doctor’s office or the emergency room.

It’s best to speak with a licensed insurance agent for a comprehensive list of plans that fit your needs.

Part D: Out-of-pocket costs for Medicare Part D vary depending on the plan you purchase from a private insurance company. Similar to Medicare Advantage premiums, Part D’s premiums stay low and average at $55.50 a month in 2024.

Part D premiums are also affected by an “income-related monthly adjusted amount”, or IRMAA. This means that if your adjusted gross income is above a certain amount as reported on your 2020 IRS tax return, you must pay an extra amount to Medicare—not the insurance company. Here are the details:

Yearly Income in 2021			2023 Part D Premium and IRMAA total
Individually filed tax return	Joint filed tax return	Married and separate filed tax return
$97,000 or less	$194,000 or less	$97,000 or less	Plan’s monthly premium
$97,001 – $123,000	$194,001 – $246,000	N/A	Plan’s monthly premium + $12.20
$123,001 – $153,000	$246,001 – $306,000	N/A	Plan’s monthly premium + $31.50
$153,001 – $183,000	$306,001 – $366,000	N/A	Plan’s monthly premium + $50.70
$183,001 – $499,999	$366,001 – $749,999	$97,001 – $402,999	Plan’s monthly premium + $70.00
$500,000 or above	$750,000 or above	$403,000 or above	Plan’s monthly premium + $76.40

Part D deductibles also vary depending on the plan, but the standard deductible amount is no more than $505 in 2023. Most copayments and coinsurance costs for Part D come in “tiers” or different levels where the cost will vary. Some plans may have a set amount (copayment) to pay for prescription drugs, and some plans may have a percentage of the cost (coinsurance) that you must pay.

Maximum Out-of-Pocket Costs for Medicare

Parts A and B do not have a Medicare out-of-pocket maximum, so that means there is no annual limit on what you could pay. Medicare Advantage does have a maximum out-of-pocket limit. Once you reach the limit, your insurance company will cover any other healthcare costs that are included under your plan for the remainder of the year.

There are different Medicare Advantage out-of-pocket limits based on the plan. The most any Medicare Advantage plan can charge for an out-of-pocket limit is $8,850 in 2024.

Part D is more complex than the other parts of Medicare because out-of-pocket expenses for prescription drugs are handled differently. After you and your drug plan have spent $4,660 on covered prescription drugs in 2023, you’ll be in the coverage gap, also known as the Medicare donut hole.

When you hit the coverage gap, you’ll need to pay 25% of the costs until you reach your annual out-of-pocket limit of $8,000 in 2024. What happens after that? Well, after the out-of-pocket limit has been reached, you’ll start receiving catastrophic coverage. This ensures you’ll pay a small coinsurance or copayment for covered prescription drugs for the rest of the year.

HealthMarkets Can Help You Find the Right Plan

Medicare out-of-pocket costs are a lot of information to take in. And if you’re feeling overwhelmed, HealthMarkets can help. Start comparing plans online now to find one that’s right for your coverage needs. You can also speak to a licensed insurance agent by calling (800) 827-9990 today.