When you turn 65, you are eligible to enroll in Medicare. If you’ve had a job, you’ve had Medicare taxes deducted from your paycheck. Learning that you still must pay for Medicare leaves many surprised.
So, how much does Medicare cost?
Medicare Monthly Premiums
The first thing to know is Medicare is split into a few different “parts”: Parts A, B, and D.
Medicare Part A is colloquially known as “Hospital Insurance.” It covers inpatient hospital care and qualified care at a skilled nursing facility.
If you’ve paid Medicare taxes long enough (generally at least 10 years), you will not pay a monthly premium for Part A. That’s right—for most people Part A costs $0. Part A has a deductible ($1,600 in 2023 each time you are admitted to a hospital), as well as a co-pay that starts after 60 days in the hospital.
Part B covers services from doctors, outpatient care, and some preventative services. Part B can be thought of similarly to health insurance that you are familiar with. Part B has a monthly premium that is dependent upon your income. Specifically, it looks at your income from two years ago.
The standard monthly premium for Part B in 2023 will be $164.90. This increases for high-earning individuals. Single tax filers with income above $97,000 and married tax filers with income above $194,000 will pay a higher amount starting at $230.80 all the way up to $560.50.
Part B has a $226 annual deductible in 2023. After you’ve paid the deductible, you’ll usually pay 20% for each Medicare-covered service.
Part D covers prescription drugs. Your monthly premium depends on the plan you join in your area. Just like Part B, an income-related adjustment occurs for those with higher incomes. The “average” premium cost for Part D in 2023 is projected to be $31.50.
You will pay a cost dependent on the medicine you take. Each Part D plan has a list of covered drugs (called a formulary) with certain tiers of medications. The cost is lower for generic and higher for specialty medications.
Costs for Additional Plans
Medicare Advantage Plans
Part A and Part B are known as “original Medicare”. You can also choose to get your coverage through a health plan offered by a private insurance company that contracts with Medicare. This is called a “Medicare Advantage Plan” or Part C. Think of Medicare Advantage as a “bundled” plan that includes Parts A, B, and usually D. It can offer additional benefits that Original Medicare doesn’t and offers annual out-of-pocket maximums that help control your costs.
If you are enrolled in a Medicare Advantage Plan, you will still pay your Part B premium. Depending on the plans in your area, you might have a monthly premium for the plan, while some offer $0 premiums.
Medicare Supplement Insurance (Medigap)
A Medicare Supplement plan (aka Medigap) is offered by private insurance companies to fill in the “gaps” of Medicare. Supplement plans help lower your share of costs for Part A and Part B services.
The cost for Medicare Supplement Plans depends on what is available in your area. In addition to paying your Part B and Part D premiums, you will have a monthly premium for your Medicare Supplement Plan.
Work with a Medicare advisor for wise advice
Medicare can provide you great benefits and more certain out-of-pocket healthcare costs in retirement, but it’s not straightforward. Working with a wise Medicare advisor is crucial to making the most of your Medicare plan and dollars.
In addition to the myriad of options, Medicare enrollment comes with deadlines. Missing your deadline can mean even higher premiums—for life—and the inability to get the coverage you want.
To speak with our Medicare advisor, click here.