Find The Best Insurance
We make it easy to compare and buy insurance.LEARN MORE
It’s difficult to say exactly how much Medicare costs because of how the program works. Here is a deeper dive into Medicare’s major expenses.
Medicare is a federal health insurance program for elderly and disabled Americans. It’s considered an entitlement program, but that verbiage is misleading, because Medicare is not free. While subsidized by government revenue, it’s also funded by taxpayer dollars. Plus, Medicare beneficiaries pay premiums, deductibles and coinsurance or copays once they enroll. The exact cost of Medicare varies widely, but the chart below outlines the standard prices of each part of Medicare. We’ll explain the numbers in detail in the sections below.
|Medicare Part A||$0, $232 or $422||$1,340 per benefit period||$0 to $670 or more|
|Medicare Part B||$134 or higher||$183 per year||20%|
|Medicare Part C||Varies by plan*||Varies by plan||Varies by plan|
|Medicare Part D||$33.50 on average||Can’t exceed $405 a year||Varies by plan|
*Medicare Part C plan costs are collectively capped at $6,700 a year.
It’s difficult to put a price tag on Medicare because of how the program works. Medicare has four parts. Original Medicare includes Part A (inpatient or hospital insurance) and Part B (outpatient or doctor insurance). Medicare Part C, also known as Medicare Advantage, is a private alternative to Original Medicare. Medicare Part D is prescription drug coverage.
You can utilize these parts in a myriad of ways, and you don't have to apply for each part of Medicare, so what you pay depends on your choices. Plus, prices are affected by state and income. Beneficiaries face the same three major expenses associated with any health insurance plan:
Our partner Via Benefits can help you compare and buy Medicare plans. Here is a deeper dive into Medicare’s major expenses.
Premiums: Medicare Part A has a $0 monthly premium payment if you’re getting or are eligible for federal retirement benefits. It’s also premium-free if you’re under 65 and on federal disability for 24 months or diagnosed with end-stage kidney disease. If you’re eligible for Medicare, but not other federal benefits, you’ll pay a Part A premium of $232 or $422 each month, depending on how long you’ve paid Medicare taxes.
Deductible: Medicare Part A comes with a $1,340 deductible per benefit period. A benefit period begins the day you’re admitted to a hospital and ends once you haven’t received in-hospital care for 60 days.
Coinsurance: The amount varies, depending on how long you’re in the hospital. Here’s the basic breakdown:
Learn more about Medicare Part A.
Premium: The standard Medicare Part B premium in 2018 is $134 per month. You may pay less (around $130) if you’re getting Social Security. You also may pay more — between $187.50 and $428.60 — depending on your income. The higher your income, the higher your premium.
Deductible: Medicare Part B beneficiaries have a deductible of $183 per year.
Coinsurance: You’ll pay 20% coinsurance for covered supplies and services.
Learn more about Medicare Part B.
Premium: You have to enroll in Original Medicare to buy a Medicare Advantage Plan, so you’ll pay its premium (see above), plus whatever your plan charges.
Deductibles & Copays: Both expenses vary by plan. However, out-of-pocket costs associated with Medicare Part C Plans are limited. In 2018, out of pocket expenses for inpatient and outpatient services can’t exceed $6,700 a year. In 2017, the average out-of-pocket limit for Medicare Part C enrollees was $5,219, according to the Kaiser Family Foundation. Just over half (52%) of them were in plans with out-of-pocket limits exceeding $5,000.
Learn more about Medicare Part C.
Premium: Costs vary by plan, state and income, but the average basic monthly premium for a 2018 Part D plan in 2018 is $33.50. High-income beneficiaries are subject to an income-related monthly adjustment amount (IRMAA), meaning if you make more, you pay more. You have to enroll in Original Medicare to buy Medicare Part D, so you’ll pay its premium, too.
Deductible: They vary, but no Medicare Part D plan can have a deductible higher than $405 in 2018.
Copays/coinsurance: They vary by plan, tier (some drugs cost more than others) and whether you’ve hit the Medicare Part D coverage gap.
Medicare Part D coverage gap: More commonly known as the Medicare Part D “donut hole”, beneficiaries enter the coverage gap once the insurer has spent $3,750 on prescriptions (copays included). At that point, there’s a temporary limit on how much your plan will pay for prescriptions. You exit the coverage gap after you’ve spent $5,000 out-of-pocket on prescription drugs.
Late enrollment penalty: Medicare beneficiaries pay a late enrollment penalty if they go 63 days or more without prescription drug coverage after their initial enrollment period. The penalty is 1% of the national base premium ($35.02 in 2018) times the number of months you went without drug coverage. You can skip the fee if you have Medicare Part D, another Medicare health plan with drug coverage or creditable coverage for medication.
Learn more about Medicare Part D.
Medicare supplement insurance, also known as Medigap, is sold by federally approved private insurers. Medigap plans are designed to help Original Medicare beneficiaries pay the out-of-pocket costs, like copays and deductibles, associated with Medicare Part A and Medicare Part B. They might cover some additional expenses Original Medicare does not; they don't work with Medicare Part C or cover prescription drugs.
There are ten standard Medigap plans on the market. What each plan covers — and subsequently which each one cost — varies. However, average Medigap premiums are between $140 and $380, per the American Association for Supplement Medicare Insurance. Deductibles range from $183 (the deductible you pay for Medicare Part B) to $5,240, if you opt for a high-deductible health care plan.
Learn more about Medicare supplement insurance (Medigap).
Medicare is formally financed through two trust funds held by the U.S. Treasury. Those funds come from federal revenue, payroll taxes, income taxes and premiums paid by Medicare beneficiaries.
The Hospital Insurance (HI) Trust Fund, which supports Medicare Part A, is largely funded by the 2.9% Medicare tax on wages. Employers and employees split this tax, so it shows up as 1.45% levy on your paychecks. The Supplemental Medical Insurance (SMI) Trust Fund, which pays for Medicare Part B, Part D and administrative costs, is largely funded by federal revenue. Both funds are bolstered by interest earned on the trust fund investments and the premiums paid by Medicare beneficiaries.
Learn more about how Medicare is funded.
If you’re on federal retirement benefits, your Medicare Part B premiums get deducted from for your Social Security checks. If you’re not on federal retirement benefits, you’ll get a Medicare Premium Bill for the other parts you’re paying for each month. You can pay this bill via your bank’s online service or by mailing back a credit card, debit card, check or money order payment.
However, Medicare Easy Pay is probably the simplest way to pay your Medicare Premium Bill. It automatically deducts your payment from a linked bank account around the 20th of each month. Deductibles and copays are generally paid directly to health care providers.
Some Medicare beneficiaries are also eligible for Medicaid, the federal-and-state-funded health insurance program for needy Americans. Eligibility varies by state. You can find the Medicaid requirements in your state here.
Low-income beneficiaries receive assistance from the state (aka Medicaid) through the Medicare Savings Program, which helps pay Original Medicare premiums, copays and deductible. The Medicare Extra Help program assists needy beneficiaries with prescription drug coverage.
Learn more about Medicare vs. Medicaid.
Beyond that, cost-saving comes down to finding the best plan and program structure for you. These elections vary, depending on what’s offered by your state and your income level.
Policygenius’ editorial content is not written by a certified financial planner or advisor. It’s intended for informational purposes only and should not be considered legal, financial, or investment advice. Consult a professional to learn what financial products are right for you.
This post contains references to products or services from one or more of Policygenius' advertisers or partners. While these codes earn us a small fee at no additional cost to you, they do not influence editorial content and we only refer products we love.
Security you can trust
Yes, we have to include some legalese down here. Read it larger on our legal page. Policygenius Inc. (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best efforts to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application. Savings are estimated by comparing the highest and lowest price for a shopper in a given health class. For example: for a 30-year old non-smoker male in South Carolina with excellent health and a preferred plus health class, comparing quotes for a $500,000, 20-year term life policy, the price difference between the lowest and highest quotes is 60%. For that same shopper in New York, the price difference is 40%. Rates are subject to change and are valid as of 2/17/17.
Copyright Policygenius © 2014-2019