While Medicare can cover a good portion of your health care expenses, you remain responsible for paying for a share of the costs. As such, expect to have out-of-pocket costs as a Medicare beneficiary. These costs come in a variety of forms and can be impacted by a variety of factors. This article should help you understand what you can expect to pay based on your individual circumstances.
Basic terms for Medicare costs
Let’s begin by defining the different forms of Medicare costs that you may experience.
Premium: The amount you pay each month to be covered by Medicare, Medicare plan, or other insurance.
Deductible: The amount you pay out of your own pocket for Medicare-covered health-care services and supplies before Original Medicare, your Medicare plan, or other insurance begins to cover expenses.
Copayment: A flat dollar amount (for example, $20) that you must pay for a service after you’ve reached any deductibles that apply and after Original Medicare or your Medicare plan begins to cover your health-care expenses. This is one form of “cost sharing” you may be responsible for after Medicare has paid its share of costs. Some examples of situations when you may need to pay a copayment include doctor appointments or when you fill a prescription.
Coinsurance: Another form of cost sharing, this is a percentage of the total cost of the Medicare-covered equipment or service you may need to pay after you have reached any deductibles that apply for Original Medicare or your Medicare plan. For example, you might pay 20%, while Medicare pays 80% of the cost.
Annual out-of-pocket maximum: The maximum amount you must pay out of your own pocket each year before your Medicare plan pays 100% of your covered health-care expenses. Original Medicare doesn’t have an out-of-pocket annual maximum limit. Medicare Advantage plans (and some Medicare Supplement insurance plans) have out-of-pocket maximum limits.
Let’s explore how those Medicare costs apply to each different type of Medicare coverage.
What are some of the costs for Medicare Part A?
Medicare Part A is hospital insurance. Most people do not pay a premium for Medicare Part A if they have worked enough time under Medicare-covered employment and paid Medicare taxes. Once you have accumulated 40 Social Security credits (meaning you have paid Social Security employment taxes for 40 or more quarters), you do not have to pay a Medicare Part A premium. Those who did not accumulate 40 Social Security credits will pay up to $471 per month in 2021, with the amount varying depending on how long they worked. If you don’t qualify for premium-free Part A, but your spouse does, you may be able to get Part A without a premium, based on his or her employment history. Your monthly Part A premium may be higher if you owe a late-enrollment penalty.
Medicare expenses for Part A in 2021 include:
- Inpatient hospital deductible: $1,484 for each benefit period
- Inpatient hospital coinsurance: After you have paid your deductible, Medicare pays 100% of costs for your first 60 days in the hospital. After that, your out-of-pocket costs for each benefit period are $371 per day for days 61 through 90, and $742 per day for days 91 and beyond for each “lifetime reserve day” after day 90. You get up to 60 days of inpatient hospital coverage that can be used over your lifetime. There is no coverage under Part A after you’ve used up your lifetime reserve days, and you’ll be responsible for all costs.
- Skilled nursing facility (SNF) coinsurance: Medicare covers all costs for the first 20 days of SNF care (per benefit period). You pay $185.50 per day for days 21 through 100. You pay all costs if your stay is beyond 101 days.
- Inpatient mental health costs: The costs for inpatient mental health coverage are the same as inpatient hospital costs (see above). If you get physician services as part of your mental health care while you’re a hospital inpatient, you’ll pay 20% of the Medicare-approved amount.
- Medical equipment and supplies: You pay 20% of the Medicare-approved amount for durable medical equipment and supplies. Medicare usually pays all other costs.
- Hospice care: You generally pay nothing for hospice care under Medicare Part A. You pay up to a $5 copayment for each prescription drug needed for symptom control or pain relief while you’re at home, and 5% of the Medicare-approved amount for inpatient respite care.
What are the costs for Medicare Part B?
The standard Part B premium is $148.50 in 2021. If you worked for a railroad, contact the Railroad Retirement Board for more information on your Part B premium. You can reach the RRB at 1-877-772-5772 , Monday through Friday, from 9AM to 3:30PM, all time zones. TTY users may call 1-312-751-4701.
Other factors may affect how much you pay for your Part B premium. For example, there are state Medicaid programs (such as Medicare Savings Programs) that may cover certain Medicare costs, including Part B premiums, for eligible low-income beneficiaries. In addition, some beneficiaries may pay a higher premium for Part B if they owe a late-enrollment penalty or make above a certain income threshold. For more information on how your income may affect the amount you pay for your Part B premium, visit Medicare.gov.
Cost sharing under Medicare Part B in 2021:
- Annual deductible: You pay $203 per year before Medicare Part B benefits begin.
- Physician coinsurance: You pay 20% of the Medicare-approved amount for most doctor services after you have reached your yearly deductible. You may pay more if your doctor does not accept Medicare.
- Preventive care services: Certain preventive care is covered 100% by Medicare if your doctor or health-care professional accepts assignment (meaning they agree to accept the amount set by Medicare as full payment for providing the service). Otherwise, you generally pay 20% of the Medicare-approved amount after your deductible, although your costs may vary depending on the type of service. For more information on Medicare’s coverage of preventive services and the costs you may pay, visit Medicare.gov.
- Clinical lab tests: You pay nothing. Medicare covers all Medicare-approved clinical lab expenses.
- Durable medical equipment and supplies: Medicare pays up to 80% of the approved amount after you’ve reached your deductible. You pay the rest, or 20% of the Medicare-approved cost.
- Outpatient mental health services: Certain preventive services, such as the yearly depression screening, are free if your doctor accepts assignment. You pay 20% of the Medicare-approved amount for physician services and office visits to diagnose or treat your mental health condition (after reaching the deductible). If you receive outpatient mental health services in a hospital setting (such as a hospital outpatient clinic), you may also owe a copayment or coinsurance amount that is paid directly to the hospital.
- Partial hospitalization for mental health services: After you’ve reached the yearly deductible, you pay a daily coinsurance for partial hospitalization services you get in a hospital outpatient setting or community health center. You also pay a percentage of the Medicare-approved amount for each service you receive from a physician if the provider accepts assignment.
What are the costs for Medicare Part C (Medicare Advantage)?
Medicare Part C (also called Medicare Advantage) is an alternative way to get your Original Medicare coverage. Instead of getting your Part A and Part B benefits through the federal program, you’ll have your Medicare coverage provided through a Medicare Advantage plan, offered through Medicare-approved private insurance companies. Because of this, coverage details and pricing (such as premiums and other cost-sharing expenses) can vary by Medicare Advantage plan. This is why it is recommended that you compare all plan options in your area before enrolling in a Medicare Advantage plan. Our plan comparison tool can help you view a list of Medicare Advantage plan options in your area; you can enter your zip code into the tool to start browsing and see specific costs for individual plans.
You may also study the plan documents (which you can get from the specific insurance company offering the plan) and compare them with what is covered and how much you would pay out of pocket in Medicare Part A, Part B, and/or Part D for the typical health-care expenses that you expect to experience in a given year. This may help you have a better idea of what your costs might be under Original Medicare compared to a Medicare Advantage plan and which option may be a better fit for your budget.
Some Medicare Advantage plans may have premiums as low as $0 per month, although this does not necessarily make them the cheapest option. There could be higher copayment or coinsurance amounts to balance out the $0 premium. Also, even if you choose to enroll in a Medicare Advantage plan with a $0 premium, you must continue paying your Part B premium.
Some Medicare Advantage plans (such as HMOs) may have network restrictions that require you to go to doctors and hospitals that participate in the plan’s health-care provider network in order to be covered. Other plans allow you the freedom to go anywhere for services to be covered. Still others might cover services at different levels depending on whether you went to a network doctor or if you went outside the network. All Medicare costs and rules are outlined in the documentation you will get from the insurance company, and it’s a good idea to familiarize yourself with your Medicare plan’s coverage rules to minimize out-of-pocket expenses.
What are the costs for Medicare Part D?
Medicare Part D refers to prescription drug coverage that can be obtained in one of two ways: As a stand-alone Medicare Prescription Drug Plan (PDP) that works alongside Original Medicare, Part A and Part B, coverage, or as coverage included within a Medicare Advantage plan (also known as Medicare Advantage Prescription Drug plan). In either case, Part D coverage is offered by private insurance companies with Medicare’s approval. Your costs generally include a separate monthly premium, and may also include deductibles, copayments, and/or coinsurance. Low-income beneficiaries can apply for Extra Help, which can help pay for some of these out-of-pocket costs, such as the monthly premium for the plan (contact your state Medicaid department for more information on eligibility).
Medicare costs under Part D usually include a coverage gap, also called the “donut hole,” which is a temporary limit on what your Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan will pay for covered prescription drugs. You enter the coverage gap after you and the Medicare plan have spent a certain amount on Medicare-covered prescription drugs. This initial coverage limit may vary from year to year.
While you’re in the coverage gap, you’ll pay no more than 25% of the cost of each covered generic and brand-name medication until you reach the out-of-pocket limit for the year (which may also vary from year to year). Once this happens, you’re out of the coverage gap and have catastrophic coverage; for the rest of the year, you’ll only be responsible for a small copayment or coinsurance amount for covered prescription drugs. If you’d like to learn more, take a look at this article for more information on the specific costs you may pay while in Medicare coverage gap.
This coverage gap doesn’t apply to those who qualify for Extra Help, but it can mean rather large out-of-pocket costs for those who take costly prescription drugs every day to control more serious health conditions. Federal legislation eliminated this coverage gap in 2020.
As you can see, your Medicare costs may vary quite a bit depending on the type of coverage you have, as well as the services or supplies you need, and how often you need them. Taking the time to compare costs across Medicare plan options in your area may help you save money. If you’d like help finding coverage that may suit your needs and budget, feel free to contact a licensed insurance agent by dialing the phone number on this page.