As most people are obligated to pay the Medicare monthly premium, it’s important to educate yourself on the cost of Medicare and the Medicare premiums you will be required to pay.
Because understanding Medicare can be a bit of a challenge, I have written this article on the costs of Medicare, including Medicare Part D.
Key Points on Medicare Part A Cost:
If you or your spouse have worked over 40 quarters in the US and paid Medicare payroll taxes, or you’re receiving retirement benefits (or you’re eligible to receive them), you will be eligible for premium free Part A. There will be no monthly premiums for Part A.
If you have worked at least 30 quarters, in 2023 you will need to pay a monthly premium of $278 in 2023.
Those who worked less than 30 quarters will pay $506 of a monthly premium in 2023.
The Part A deductible will amount to $1,600 per benefit period. This is not an annual deductible.
Key Points on Medicare Part B Cost:
The standard monthly Part B premium for 2023 is $164.90
You can expect to pay higher premiums, an IRMAA surcharge, if your modified adjusted grows income from 2021 was more than $97,000 per individual or $194,000 per couple if you file jointly.
How Much Does Medicare Cost at Age 65?
In our Medicare Explained – What Is Medicare? article, we talked about what Medicare is and for whom it was created. In a nutshell, this insurance is for people 65 and older and for those under 65 who have been on Social Security disability insurance income for at least 24 months.
The standard monthly rate for Medicare Part B is $164.90 in 2023. People earning more than $97,000 individually or $194,000 jointly may pay more. Medicare’s cost for Part B is over $650 per month. The higher a persons income, the less they are subsidized by Medicare.
You will find the breakdown of Medicare costs for specific parts below.
How Much Does Medicare Part A Cost?
Medicare Part A is that portion of your Medicare that covers inpatient hospital stays. Keep in mind, outpatient hospital services are covered under Medicare Part B. Many Medicare health care services performed at a hospital are outpatient services. The hospital outpatient department can include overnight stays under observation.
For most of us, Medicare Part A (Hospital insurance) is premium free. Part A is paid for by payroll tax deductions during your working years. If a Medicare beneficiary or their spouse has worked and paid Medicare taxes for at least 10-years, then Part A is fully paid for and thus premium free.
You must be a U.S. resident or legal immigrant to qualify for Medicare. If you or your spouse qualify, but have not paid Medicare taxes long enough, you may still be eligible to purchase this insurance.
If you must purchase Part A hospital insurance, the Medicare Part A costs will be $274 or $499 for each monthly premium. It depends on how long you or your spouse paid Medicare taxes. In 2023 these costs will amount to $278 or $506.
Medicare Part A Deductible
It’s also crucial to talk about your deductibles. In 2023 you will pay $1,600 for each inpatient hospital benefit period before the Original Medicare Part A pays a benefit. The hospital benefit period is counted from the day you are discharged to the day you haven’t received such services for 60 days for hospitals and 100 consecutive days for Skilled Nursing Care.
There are no limits to how many benefit periods you can have in a year. Once you’ve met your Part A deductible, the inpatient stay costs are:
Days 1-60: $0;
Days 61-90: $400 copayment each day in 2023;
Days 91-150: $800 copayment each day 2023 when you’re using your 60 lifetime reserve days;
Above 150 days, you are obligated to pay the total cost of hospitalization.
The costs for a skilled nursing facility stay look like this:
Days 1-20: $0 copayment;
Days 21-100: $200 copayment each day 2023;
Above 101 days, all the costs are paid by the patient.
Medicare pays for home health care treatments if you meet certain eligibility requirements. You might be obliged to pay for durable medical equipment, though. This often comes down to 20% of what Medicare pays for the service or an item.
The costs of hospice care look similar, meaning patients don’t pay for these services out of pocket. In this case, you may pay a 5% copayment for each prescription drug you’re taking as a part of your therapy, as well as 5% of the Medicare-approved amount (the costs Medicare covers) for inpatient respite care.
It’s important to mention that only US citizens and legal residents who have resided in the U.S. for more than 5-years are legally eligible to acquire Medicare.
How Much Does Medicare Part B Cost?
Medicare Part B is that portion of Medicare that covers outpatient and physician services. This includes most doctor services and preventive services. Part B includes the Medicare benefits or health insurance used more often than any other part of Medicare.
Medicare Part B premiums are calculated based on modified adjusted household gross income, and they have to be paid each month, even if you don’t benefit from any Part B insurance benefits.
These monthly premiums will be calculated by The Social Security office, which will consider your IRS tax return from the last two years. This includes Part D insurance as well since the premiums are calculated the same way.
Things that will be taken into account are any profits made through work, dividends from investments, interest, Social Security benefits, as well as a capital gain.
The costs of this medical insurance won’t be calculated based on distributions from Roth IRAs and Roth 401(k)s, life insurance costs, reverse mortgages, and health savings accounts. If you are married, the premiums will be calculated based on marital income.
The standard monthly Part B premium for 2023 is $164.90. Individuals or couples with higher annual income may be required to pay more than the standard premium. Please see our article on Income Related Monthly Adjustment Amounts (IRMAA) for details.
Important information to keep in mind is that there is a penalty for people who don’t sign up for Part B medical insurance once they are eligible for Medicare and do not have creditable coverage. Please see our guide to Creditable Coverage (in our Resources page) for details.
The penalty for not enrolling in Part B during your initial enrollment period without creditable coverage is 10% of the Part B premium for every 12-months without Medicare coverage.
The annual deductible for this Part is $226 in 2023.
Adding Medicare Supplement Insurance
Original Medicare Parts A and B have copays, deductibles and coinsurance that are the responsibility of the Medicare beneficiary. You can eliminate most or all of these additional expenditures with Medicare supplement insurance. Of course you must pay premiums for supplemental health insurance in addition to premiums paid for Part B and Part D.
Medicaid services are dedicated to people with limited income or who need financial aid in order to pay for insurance. If you are in that situation, contact your State Medical Assistance office to receive more information.
Hold Harmless Rule
If you are also receiving your Social Security Income, there is a Medicare Hold Harmless rule that protects you from experiencing a decline in income when your Part B premiums increase more than your income. See our article on the hold harmless provision for details.
How Much Does Medicare Part C Cost?
Medicare Part C (aka Medicare Advantage Plan) is provided by private insurance companies and is also known as Managed Medicare or Medicare Advantage. Medicare Advantage coverage is required to offer benefits from all the same categories of coverage that is offered under Part A and B Original Medicare. They do not offer all the same benefits as Original Medicare, just benefits from the same categories of coverage. It is critical to understand that Medicare Advantage plans replace Original Medicare.
It is important to know, if you want to purchase a Medicare Advantage Plan, you still must be enrolled in Part B and pay monthly Part B premium.. Some Medicare Advantage plans offer help in this regard, so you might be able to lower your insurance costs overall. But doing so comes at a cost. A Medicare Advantage plan that has a Part B premium give back typically has more restrictions on your care, including a much more restrictive network.
Another aspect worth discussing is that Part C Medicare Advantage plans are not Medicare supplementary medical insurance, and it shouldn’t be viewed that way. Part C replaces Parts A & B Original Medicare. Medicare Part C is also referred to as Medicare Advantage or Medicare replacement polices. It is a privatized version of Medicare coverage without a supplement.
The costs of Medicare Advantage plans will differ depending on the insurance provider, the coverage and the state you’re living in. Keep in mind, you still pay a monthly premium for Original Medicare. You pay the same Part B premium even if you trade it in for Part C Medicare Advantage.
One of the advantages of Medicare Part C is that it adds a maximum out of pocket limit on your healthcare. The maximum out of pocket limit for 2023 is $8,300 if you stay in-network and over $12,000 if you go out of network. Medicare Advantage plans can set their own maximum out of pocket. Medicare Advantage plans maximum out of pocket can be less than or equal to the maximum set by Medicare, but it cannot be more.
What Does Medicare Part D Cost?
Medicare Part D is your prescription drug coverage. Part D covers prescription drugs that the Medicare beneficiary would normally pick up from a pharmacy or mail order and self administer.
Although Part D is considered your Medicare drug plan, Medicare Part B medical insurance covers prescription drugs that are typically administered by a medical professional in a medical setting. Medicare Part A will cover all prescription drugs administered while a hospital inpatient or inpatient in any medical facility. These three major pillars of the Medicare program work together to provide total Medicare drug coverage.
Similar to the late enrollment penalty for Part B, you can face a late-enrollment penalty for not enrolling in Part D drug coverage during your Initial Enrollment Period without creditable coverage.
Part D plans can be purchased as a stand-alone plan if you have Original Medicare, or bundled with your Advantage Plan. Stand-alone Part D prescription drug plans have a small monthly premium in addition to copays or coinsurance that will impact your drug costs. You may also pay a monthly premium for your bundled Part D within an Advantage Plan. You must add the cost of Part D prescription drug plan to your Medicare premiums and total Medicare costs.
Your drug costs will also be impacted by the specific plan you choose. Prescription drug coverage is regulated by Medicare, but not standardized.
If you pay an Income Related Monthly Adjustment Amount (IRMAA) for Part B, you will also have a surcharge for Part D. In 2023 the IRMAA surcharge for Part D starts at $12.20 and increases to $76.40 depending on your income.
How Much for Supplemental Insurance (Medigap)?
Medigap plans are private health plans with benefits standardized by the U.S. Government. They are meant to complete Medicare Part A and B and set an annual maximum limit on your Medicare spending.
The premiums vary by plans and companies, and the state you live in. The Medicare supplement with the most coverage can cost under $100 a month in one state, or over $300 a month in the most expensive states.
Reach out to us and we will provide you with Medigap plan prices and recommendations for your area. Our services are free to the consumer.
If you want to learn more about these plans’ different benefits and potential disadvantages, head to our Do I Really Need Supplemental Insurance With Medicare? article, where you can find more information about this topic.
How much does Medicare cost each month?
With Medicare, you can expect to pay a monthly premium for Part B, Part D and your Medicare supplement insurance plan. Your total Medicare spending will be impacted by the Medicare plan you choose for your health insurance (Part C Medicare Advantage vs. a Medicare supplement) and rising health care costs.
The Part B Medicare premium and Part D Medicare premium vary as well, based on income.
Any late enrollment penalty that may be applied to your costs will be determined by Medicare and the Social Security Administration.
Does Medicare Have a Family Plan?
All Medicare plans are individual plans. There are no family plans or plans for couples.