The main costs of Medicare are its monthly premiums, which can vary based on the type of Medicare plan you have. Your income, total Medicare taxes paid, and when you enroll can also impact how much you pay for Medicare. Beyond the monthly premium, Medicare beneficiaries should also understand their plan’s deductibles, copays, coinsurance, and out-of-pocket maximums where applicable.
Medicare is a federal health insurance program that provides coverage to those who are 65 years of age or older, as well as those with certain disabilities or end-stage renal disease. It helps beneficiaries pay for doctor visits, hospital stays, and more. Those enrolled in a Medicare Advantage plan often have additional benefits not covered by Original Medicare.
Having a clear understanding of your coverage could help you make some educated estimates and budget accordingly. The following guide explains the basics you need to know about the average cost of Medicare.
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Understanding Medicare Cost Components
There are several different components of Medicare costs to keep in mind when reviewing your Medicare plan options, whether you have Original Medicare or Medicare Advantage. These include:
- Premiums: Medicare premiums are the fixed monthly fee beneficiaries pay to enroll in the program. This amount is typically paid directly to Medicare, to a private insurance company offering a Medicare-approved policy like Medicare Advantage or Medigap, or both. Premiums are due each month, regardless of whether you actually need medical care.
- Deductibles: A Medicare deductible is a set amount that you pay out of pocket for your healthcare costs before your Medicare plan begins to pay. Each part of Medicare has its own deductible amount. For example, Medicare Part A (hospital coverage) and Part B (medical coverage) both have their own deductibles beneficiaries must meet before Medicare’s cost-sharing begins.
- Copays: A Medicare copay is a fixed amount paid at the time you receive your covered service or benefit. Copays typically apply to doctor visits, specialist visits, and prescription drugs. For example, your copay may require you to pay $25 each time you visit the doctor or $10 when you fill a covered prescription.
- Coinsurance: While copays are a fixed dollar amount, Medicare coinsurance is a percentage that designates how much Medicare would pay for your overall health bill and how much you would pay. For example, your Medicare plan may pay for 80% of the final bill while you pay for the remaining 20% of the cost.
- Out-of-network Coverage Fees: Some Medicare plans charge additional costs for receiving treatment or services outside of the plan’s network. These plans provide a list of approved doctors, specialists, hospitals, and pharmacies. If you choose to go to an out-of-network provider, you may have to pay significantly higher costs, and/or your coverage may be limited until your deductible is met.
- Out-of-pocket Maximums: An out-of-pocket maximum is the highest amount a Medicare beneficiary will pay each coverage year for covered healthcare expenses. Once this maximum is reached, their Medicare plan would cover 100% of the remaining costs until the next coverage cycle. Copays and deductibles generally do not count towards an out-of-pocket maximum.
Types of Medicare Coverage and Costs
Medicare’s costs can be a significant consideration when you are deciding which Medicare plan to enroll in. Understanding the various costs associated with Medicare can help you make an informed decision about your healthcare coverage.
Medicare Part A Costs for 2024
Feature | Medicare Part A Costs: What You Pay |
|---|---|
Premium | $0 for many Americans; $278 or $505 if you do not receive premium-free Part A in 2024 |
Deductible | $1,632 in 2024 |
Copay | None |
Coinsurance | $408 per day for days 61-90 of hospital stay; $816 per day for lifetime reserve days; $204 per day for days 21-100 of extended care services in a skilled nursing facility |
Out-of-network Coverage Fees | None |
Out-of-pocket Maximums | None |
Medicare Part A is part of Original Medicare. It covers hospital stays and procedures, including major surgeries and stays at a Skilled Nursing Facility. Most Medicare beneficiaries do not have to pay premiums for their Medicare Part A coverage because they meet the requirement of working at least 40 quarters of Medicare-covered employment.
How Paid Part A Premiums Work
If you do not meet the requirement and have to purchase Medicare Part A, the current premium is either $278 or $505, depending on how long you or your spouse worked and paid Medicare taxes. Note that in many cases, if you choose to buy Part A, you must also enroll in Part B and pay monthly premiums for both Part A and Part B. However, you may enroll in Part B without Part A.
Medicare Part B Costs for 2024
Feature | Medicare Part B Costs: What You Pay |
|---|---|
Premium | $174.70 for many Americans in 2024; scaled premiums for those with higher incomes |
Deductible | $240 in 2024 |
Copay | None |
Coinsurance | 20% |
Out-of-network Coverage Fees | None |
Out-of-pocket Maximums | None |
Medicare Part B is part of Original Medicare and covers medical costs, such as doctor’s appointments, outpatient services, and durable medical equipment. The majority of Medicare Part B beneficiaries pay the standard premium.
How Non-standard Part B Premiums Work
Approximately 8% of people with Medicare Part B are subject to an income-related monthly adjustment amount (IRMAA). This is a sliding scale used to adjust both Medicare Part B and Part D coverage premiums, based on the beneficiary’s modified adjusted gross income (MAGI).
In 2024, married couples filing jointly with a MAGI of less than or equal to $206,000 pay the standard premium amount. Couples with higher MAGIs are subject to higher monthly premiums as follows:
- $206,001 – $258,000 = $244.60
- $258,001 – $322,000 = $349.40
- $322,001 – $386,000 = $454.20
- $386,001 – $750,000 = $559.00
- Greater than $750,001 = $594.00
For married couples who file separate tax returns, the threshold for the standard premium is $103,000.
Medicare Part C (Medicare Advantage) Costs for 2024
Feature | Medicare Part C Costs: What You Pay |
|---|---|
Premium | Varies by plan and insurer; $0 premium plans available |
Deductible | Varies by plan and insurer |
Copay | Varies by plan and insurer |
Coinsurance | Varies by plan and insurer |
Out-of-network Coverage Fees | Varies by plan and insurer |
Out-of-pocket Maximums | $8,850 for 2024, but may be lower based on plan and insurer |
Unlike Original Medicare, which is provided by the U.S. government, Medicare Part C is offered by private insurance companies. All Medicare Advantage plans cover the same benefits as Original Medicare at minimum, and many offer additional benefits, such as vision and dental coverages. Many Medicare Advantage plans also bundle in Part D prescription drug coverage.
Since each company can create its own plan, the premiums, deductibles, and other costs vary. However, many companies offer a $0 premium premium premium premium plan, though it should be noted that some $0 still require beneficiaries to pay the standard Medicare Part B premium.
How Medicare Advantage Networks Impact Your Potential Costs
Original Medicare has the widest network because it is accepted nationwide as long as the healthcare provider accepts Medicare in general. Medicare Advantage, on the other hand, has its own smaller network of contracted healthcare providers that tends to be more localized.
Some Medicare Advantage plan types such as health maintenance organizations (HMOs) require you to use in-network doctors, hospitals, and other clinicians for your medical care. While there are certain exceptions for urgent treatment and emergency care, generally if you use a provider outside your HMO network, your plan may not cover it.
However, if your Medicare Advantage plan type allows out-of-network care — such as preferred provider organization (PPO) plans — there is typically a higher copay, separate and higher deductible, and higher coinsurance rate for out-of-network care.
How Medicare Advantage Out-of-pocket Maximums Work
One of the advantages of having a Medicare Advantage plan is that they limit the amount you have to pay out of pocket for your healthcare expenses each year. For 2024, this amount is $8,850, though types of Medicare Advantage plans may a have lower maximum. Original Medicare, on the other hand, does not have an out-of-pocket maximum.
The Centers for Medicare & Medicaid Services (CMS) sets the out-of-pocket maximum for Medicare Advantage plans each year. Once the maximum is reached, the Medicare Advantage plan will pay 100% of all covered costs for the remainder of the policy term. Deductibles and copays do not count towards the maximum.
Medicare Part D Costs for 2024
Feature | Medicare Part D Costs: What You Pay |
|---|---|
Premium | $34.70 is national base for 2024, but varies by plan and insurer |
Deductible | $545 for 2024, but may be lower based on plan and insurer |
Copay | Varies by plan and insurer |
Coinsurance | Varies by plan and insurer |
Out-of-network Coverage Fees | Varies by plan and insurer |
Out-of-pocket Maximums | $8,000 average for 2024, but varies by plan and insurer |
Medicare Part D is offered by private insurance companies and provides prescription drug coverage for beneficiaries. It is often bundled with Medicare Advantage plans, but those with Original Medicare and specific types of Medicare Advantage plans that exclude drug coverage may purchase Part D as a stand-alone plan.
The majority of people enrolled in Medicare Part D only pay the plan’s standard premium, but if your annual Modified Adjusted Gross Income (MAGI) is above a certain limit, you may be subject to an income-related monthly adjustment amount (IRMAA).
How Non-standard Part D Premiums Work
The Medicare Part D premium adjustments for 2024 are based on your 2022 tax return. For individuals earning a MAGI of $103,000 or less and married couples filing jointly earning a MAGI of $206,000 or less, there is no adjustment. Above this amount, you may need to pay your plan’s premium plus an adjustment, depending on your joint income level:
- $206,001 – $258,000 = $12.90 + plan premium
- $258,001 – $322,000 = $33.30 + plan premium
- $322,001 – $386,000 = $53.80 + plan premium
- $386,001 – $750,000 = $74.20 + plan premium
- Greater than $750,001 = $81.00 + plan premium
For individuals and married couples who file separate tax returns, the threshold for the standard premium is $103,000.
Any extra amount you have to pay is not part of your plan premium and is not paid into your plan. Instead, many people elect to have the extra amount taken from their Social Security check. You can also pay the extra amount directly to Medicare or the Railroad Retirement Board.
Medicare Supplement (Medigap) Costs for 2024
Feature | Medicare Supplement Costs: What You Pay |
|---|---|
Premium | Varies by plan and insurer |
Deductible | Varies by plan and insurer |
Copay | None |
Coinsurance | None |
Out-of-network Coverage Fees | None |
Out-of-pocket Maximums | $7,060 for Plan K and $3,530 for Plan L in 2024; none for other Medigap plans |
Medicare Supplement plans — also commonly called Medigap — are offered by private insurance companies and standardized by plan letters A, B, C, D, F, G, K, L, M, and N. These types of plans are unique in that they are designed to supplement Original Medicare, helping to pay for out-of-pocket costs associated with Original Medicare. For example, some Medigap plans will cover Original Medicare’s Part A coinsurance costs so you do not have to pay out of pocket.
As such, Medigap plans do not have copays or coinsurance rates of their own, or out-of-network fees because they pair with Original Medicare. Premiums, deductibles, and out-of-pocket maximums vary between insurers and plan letter.
How Medigap Plan Premiums Are Set
Another factor that impacts your Medicare supplement cost is the way the policy is priced or rated.
There are three options:
- Community-rated (no age-rated): The same monthly premium is charged to everyone who has the policy, regardless of their age.
- Issue-age-related (entry age-rated): Premium price is based on your age when you buy the Medigap policy (when it is issued).
- Attained-age-related: Based on your current age (the age you’ve attained), meaning your premium goes up as you get older.
Not only can the variables above impact the price of your Medigap policy, but there may also be significant differences in the premiums charged by different providers for the exact same coverage. In addition, each state can adjust its Medigap guidelines, so check with your state’s Department of Insurance for the best information about your options.
Late Enrollment Costs for Medicare
If you do not sign up for Medicare when you are first eligible, you may be subject to a late enrollment penalty. The penalty amount and duration depends on how long you waited to enroll after you were initially eligible.
- Part A: 10% increase for twice the number of years enrollment was delayed. For example, if you were eligible for three years and did not sign up, you may have to pay the higher premium for 6 years once you do sign up. This only applies if you are not eligible for premium-free Part A.
- Part B: Permanent 10% increase for each 12-month period enrollment was delayed. For example, if you waited 27 months after your initial enrollment period ended before you signed up, your premium would permanently increase by 20% to account for two 12-month periods of enrollment delay.
- Part C, or Medicare Advantage: There are no late enrollment costs for Medicare Advantage.
- Part D, or Prescription Drug Coverage: Permanent 1% increase for every full month without coverage based on the national base beneficiary premium the year you enroll. For example, if you were not covered for 29 months, the penalty would be 29% (1% for each of the 29 months). This late enrollment penalty typically kicks in if there is a period of 63 days or more when you do not have Medicare drug coverage either through a stand-alone Part D plan or bundled Medicare Advantage plan.
- Medicare Supplement, or Medigap: There is not a specific late enrollment cost for those who do not enroll in Medigap when first eligible, but enrolling outside of your Initial Enrollment Period for Medigap can cost more. During this period — which lasts for 6 months starting when you first have Part B and are at least 65 years old — you have access to every available Medigap plan in your state and pay the same as a healthy individual. Outside of this enrollment window, insurers can use medical underwriting to charge more or deny coverage based on your health status.
Keep in mind that enrollment for Original Medicare, Medicare Advantage, and Medicare Part D is not open year round. If you delay enrollment, you would need to wait until you experience a qualifying life event for a Special Enrollment Period, or the next Annual Enrollment Period or Medicare Advantage Open Enrollment Period. This could add to your late enrollment costs.
Ways to Manage Medicare Costs
While Medicare can help offset some healthcare expenses, you may still need to manage your out-of-pocket costs such as premiums, copayments, and coinsurance. Here’s a look at a few strategies that can help you keep these expenses in check.
Choose the Right Medicare Plan for You
Depending on your needs, you may choose Original Medicare, Original Medicare with a Medigap plan, or a Medicare Advantage plan. Each option has its own potential pros and cons, so it’s important to clearly understand the differences.
When deciding which type of plan may be appropriate for you, consider your current medical conditions and the prescription medications you’re taking. You may also consider whether being able to choose any Medicare-approved healthcare provider or facility is important to you or if you are willing to stay within a preselected network.
In addition, consider whether you may benefit from having an annual out-of-pocket maximum and if you want coverage for things like dental, vision, and hearing services. Deciding which features are important to you can help you choose the plan that is likely to meet your needs.
Take Advantage of Preventive Care
Unfortunately, fewer than 50% of adults aged 65 and older are up to date on essential preventive care services such as health screenings, vaccinations, and dental care. At the same time, 60% of U.S. adults have some type of chronic disease such as renal disease, diabetes, cancer, chronic lung disease, or cardiovascular disease.
Preventative healthcare can help you reduce your risk of diseases, disabilities, and death. When you proactively take care of your health, you can identify potential issues early, when they are most treatable. Getting treatment early may help minimize the overall impact a condition has on your body and lifestyle. Prevention and early detection can also potentially lower your healthcare costs.
Seek Financial Assistance
If you find that your healthcare expenses are too high, you may be able to seek financial assistance. Depending on your situation, there are several options that could help.
Medicare Savings Program
If you have limited income and savings, the Medicare Savings Programs (MSPs) can help you pay your Medicare costs. There are currently 4 different programs available:
- Qualified Medicare Beneficiary (QMB): This program covers your Medicare Part A and Part B premiums as well as your deductibles, copayments, and coinsurance.
- Specified Low-Income Medicare Beneficiary (SLMB): This program and the Qualifying Individual (QI) program both pay your Medicare Part B premium.
- Qualified Disabled Working Individual (QDWI): This program covers disabled individuals who have lost their Social Security disability benefits and Medicare premium-free Part A coverage because they returned to work. It pays your Medicare Part A premiums.
- Medicare Extra Help: Individuals enrolled in an MSP also automatically get access to the Extra Help program, which limits your cost for each drug covered by your Medicare drug plan.
Medicare Special Needs Plans
A Medicare Special Needs Plan (SNP) is a type of Medicare Advantage plan that is limited to individuals with specific diseases or medical conditions or who meet certain characteristics.
These plans are designed to meet the needs of the individuals they serve, typically offering specific provider choices and drug formularies based on the covered conditions. If you are enrolled in an SNP and need additional help paying for your prescription drugs, you may also apply for the Extra Help program.
Medicaid Dual Eligibility for D-SNPs
Dual Eligible Special Needs Plans (D-SNPs) are a type of Medicare Advantage plan for individuals who are eligible for both Medicare and assistance from a state Medicaid plan.
These plans combine the two coverages, making it easier for individuals to access their benefits. They typically provide comprehensive health benefits and create a streamlined experience. D-SNPs may also include added benefits such as eyeglasses, hearing aids, dental coverage, allowances for food and over-the-counter products, gym memberships, and more.
Putting It All Together
Medicare helps make healthcare affordable and accessible for older Americans. Understanding the different types of Medicare programs available can help you choose the option that is appropriate for your needs while also minimizing your out-of-pocket healthcare costs.
While Medicare coverage can reduce the cost of your healthcare needs, you may find that the out-of-pocket costs create a financial burden. In this case, you may benefit from applying for financial assistance.