The higher cost on your first Medicare bill is because you pay in advance for Medicare coverage you receive over the initial three months. You are then billed for the next three months, and so on, paying in advance before you receive any care.
Here’s a look at how Medicare’s premium billing works, what you pay on average, and what you can do to lower your Medicare premiums.
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How Medicare’s Premium Billing Works
Depending on your age, income, and when you enrolled in Medicare, your premiums may differ.
If you are able to enroll in Medicare before you are 65, you will not pay a Part A premium. This is known as premium-free Part A. You also get premium-free Part A if you or your spouse has paid enough in Medicare taxes while working. On average, this takes ten years. Part B premiums, meanwhile, vary by income level. The more you earn, the higher your Part B premiums.
If you receive Social Security benefits, your Medicare premiums for Part A, Part B, and Part D will be deducted from your Social Security check, and you will not receive a bill. The premium payment cadences are:
- Part A: Every month
- Part B only: Every three months
- Part D: Every month
Your Medicare bill, also known as a CMS-500, arrives around the 10th of the month. It covers your first three months of care. This means that if you receive and pay your bill in June, you are paying for coverage in July, August, and September.
You can change to a monthly payment schedule if you prefer. Contact your Medicare provider to make the switch, or use the Medicare Easy Pay option.
How Medicare Advantage Premium Billing Differs
Medicare Advantage plans, also called Medicare Part C, are offered by Medicare-approved private insurance companies. These plans include Part A and Part B (Original Medicare) coverage and often include Part D prescription drug coverage. They may also include additional services not covered by Original Medicare, such as dental and vision services or wellness programs.
Because Medicare Advantage plans are run by private insurers, payment cadences may differ. Your plan may default to a monthly payment schedule or may use the three-month billing cycle of Original Medicare. Make sure to review premium cadences before you sign up for a Medicare Advantage plan. Your premium costs may also be higher depending on the type of services offered.
It’s also worth noting that, in addition to the monthly premium you pay Medicare Advantage for your coverage, you also pay the Part B premium. You are billed for this premium by Medicare, not your Medicare Advantage plan.
How Much Are Medicare Premiums?
Original Medicare premiums vary by Medicare part, as we’ll explore in each section below.
Suppose you receive Social Security benefits, signed up for Original Medicare before you turned 65, or paid Medicare taxes for 40 calendar quarters (10 years) of work. In that case, you are eligible for premium-free Part A. This means you do not pay a premium for your Part A coverage.
If you worked for 30 to 39 calendar quarters (7.5 to 10 years) and do not have Social Security benefits, you pay $278 each month for your Part A premium. If you worked fewer than 39 calendar quarters (less than 7.5 years) before enrolling in Medicare, you pay $505 per month.
Late Enrollment Penalty
You may also pay a late enrollment penalty if you do not enroll in Part A when you are first eligible. The penalty is a 10% increase of your monthly premium for twice the number of years you did not sign up.
For example, say you waited three years to enroll in Part A after you were eligible. This means your monthly premium payment is increased by 10% for six years. If your payment would have been $278, you instead pay $305 per month until the penalty period is over.
The Part B premium is $174.70 in 2024 if your joint yearly income is less than $206,000. The higher your income, the higher your premium payment.
If you make:
- More than $206,000 and up to $258,800 — you pay $244.60 per month.
- More than $258,000 and up to $322,000 — you pay $349.40 per month.
- More than $322,000 and up to $386,000 — you pay $454.20 per month.
- More than $386,000 and less than $750,000 — you pay $559.00 per month
- More than $750,000 — you pay $594.00 per month.
These income thresholds are cut in half for single filers.
Late Enrollment Penalty
You may be subject to an enrollment penalty if you do not enroll in Part B when you are eligible. This penalty is a permanent 10% premium increase for every year you did not sign up once you were eligible.
For example, say you waited two years to enroll in Part B after you were eligible. This means you pay 20% more for your premium every month. If your payment in 2024 would have been $174.70, it would become $209 per month.
The average estimated premium cost for a Medicare Advantage plan in 2024 is $18.50 (on top of your Part B premium). This number varies by provider and plan.
You may also be able to enroll in a zero-dollar Medicare Advantage plan. While you still have to pay deductibles, copayments, and coinsurance, along with the Part B premium, it is possible to enroll in a Medicare Advantage plan with no extra premium.
The predicted average premium cost for Part D in 2024 is $55.50, but this number varies by provider type and the plan you choose. You may also pay a higher premium for Part D coverage based on your income.
Late Enrollment Penalty
If you do not enroll in Part D when you first get Medicare or go more than 63 days without comparable drug coverage, you may be subject to a premium penalty of 1% per month for every month you did not enroll. You’ll pay this penalty as long as you have Part D coverage.
For example, say you do not enroll in Part D for ten months after getting Medicare. You pay a 10% penalty per month so long as you have drug coverage. If your initial premium was $55, your penalty premium is $60.
Common Reasons for Higher Premiums
In some cases, you may pay higher than average premiums for Medicare coverage. Some common reasons for higher costs include:
- You do not receive Social Security benefits: If you are not yet receiving Social Security benefits, you are responsible for paying your Part A (if applicable), Part B, and Part D premiums out of pocket. Once you are eligible and enroll in Social Security, these premiums are deducted from your checks before you receive them.
- You have a higher-than-average income: Part B premiums are assessed according to income. The higher your income, the higher your Part B premium. For example, if your family’s annual income was $206,000 or less in 2022, you pay $174.40 for your Part B premium in 2024. If your income in 2022 was above $206,000 and less than $258,000, you pay $244.60.
- You are subject to late enrollment penalties: Late enrollment penalties may also increase your premium costs. These penalties are applicable if you do not sign up for Part A, Part B, or Part D coverage when you are first eligible.
- Your payment goes up year over year: Your premium payments may also increase year over year. For example, the basic Part B premium was $164.90 each month in 2023 but is $174.70 in 2024. Your Medicare Advantage premiums may also increase. Before your plan renews, your provider will send you a letter outlining any premium changes. You can then choose to accept the changes, renew or cancel your coverage, and purchase a Medicare Advantage plan from another provider. You may also switch to Original Medicare.
Options for Lowering Medicare Premiums
If the costs of Medicare are a burden for you, there are options for lowering your Medicare premiums. These include:
- Medicare savings programs: These income-based programs can help individuals and families pay for Medicare costs. There are four assistance levels based on your income.
- D-SNPs: Dual-eligible special needs plans (D-SNPs) cover individuals who are eligible for Medicare and Medicaid based on their income. D-SNPs help coordinate benefits and payments between these two coverage types.
- The Medicare Part D Extra Help Program: The Medicare Part D Extra Help Program helps low-income individuals with Part D costs such as deductibles and copayments.
All In All
Your first Medicare bill pays for your first three months of coverage. The total amount of your bill depends on the type of Medicare you choose — Original Medicare or Medicare Advantage — along with your income and any penalties assessed for late enrollment.
To help keep costs down, it’s a good idea to enroll in Medicare when you are eligible, understand the role your income plays in Medicare costs, and seek out assistance programs where necessary to help keep costs down.