Paying for health insurance is a large part of most people’s budgets, and it’s not a cost that goes away once you reach 65 and can get insurance through Medicare. Knowing how much you’ll pay for Medicare is key to making sure you have the funds to cover those expenses. But since there are several different parts of Medicare, which you can purchase individually, the total cost of Medicare can vary significantly.
How Much Does Medicare Cost?
The amount of money you’ll need to spend on Medicare depends on several factors, including the type of coverage you choose, when you enroll, your annual income, the amount of medical services you need, and whether you have other health insurance. Your costs include your premiums (monthly payments), deductible (the amount you pay before insurance kicks in), and coinsurance or copayments (the amount you owe a medical provider or prescription drug seller after Medicare has paid its portion).
What You Need to Know
How much you spend out of pocket while on Medicare depends on several factors, including the coverage you choose, when you sign up, and how much you earn.
Signing up late for Medicare Parts A, B and D can cost you extra. All three parts have late enrollment penalties.
Premiums for Medicare Parts B and D can rise depending on how much you earn.
How Much Does Medicare Part A Cost?
Medicare Part A, hospital insurance, is part of Original Medicare and covers in-patient hospital stays, hospice care, skilled nursing facility stays, and home health services. There are three out-of-pocket costs you can expect to pay (and another if you’re late in enrolling):
- Late-enrollment penalty.
What Is the Part A Premium?
If you or your spouse paid Medicare taxes while working for 40 quarters or more, you are eligible for “Premium-free Part A,” which means you don’t owe any monthly premiums for coverage. (Most people don’t have to pay Medicare Part A premiums.) If you paid Medicare taxes for 30-39 quarters, you’ll pay $252 per month; those who’ve paid less than 30 quarters in Medicare taxes will pay $458 a month in premiums.1
What Is the Part A Deductible?
If you’re admitted to the hospital in 2020, you’ll need to pay $1,408 for the first 60 days of care. That’s a $44 increase over 2019’s deductible.2
What Is Part A Coinsurance?
Medicare refers to the payments that you make when you see a doctor, stay in a skilled nursing facility, or have an extended hospital stay as “coinsurance,” although they’re fixed amounts rather than a percentage of costs. For the 61st to 90th day of inpatient hospital treatment with Medicare, you must pay coinsurance of $352 per day. The next 60 days are part of your “lifetime reserve” benefit, and you’ll owe $704 per day, up to 60 days over your lifetime.3
You’ll also have to pay coinsurance for skilled nursing care for days 21 through 100 at a rate of $176 per day.4
What Is the Part A Late Payment Penalty?
If you have to pay Medicare Part A premiums but don’t enroll at age 65, your monthly premiums may cost 10% more. And you may be required to pay those higher premiums for twice the number of years you didn’t sign up.5
A Word of Advice
While calculating the costs of Medicare can feel overwhelming, figuring out the cost of each part can help you devise a good estimate of your total Medicare costs.
How Much Does Medicare Part B Cost?
Medicare Part B, medical insurance, is the second part of Original Medicare. It covers doctor’s visits, outpatient services, preventive services, and some medical equipment. You can expect to pay three out-of-pocket costs (and another if you’re late in enrolling):
- Late-enrollment penalty.
What Are Part B Premiums?
Most people pay the standard premiums ($144.60) for Medicare Part B, high earners may have to pay an extra fee each month.
What Is IRMAA for Part B?
Anyone who earns $87,000 as a single filer or $174,000 for joint filers or more per year pays the standard premium, plus the adjustments. Here’s how much you may owe, along with the income-related monthly adjustment amount (IRMAA).
Part B Costs
|File individual tax returns with income:||File joint tax returns with income:||IRMAA||Total monthly premium|
|Less than or equal to $87,000||Less than or equal to $174,000||$0.00||$144.60|
|Greater than $87,000 and less than or equal to $109,000||Greater than $174,000 and less than or equal to $218,000||$57.80||$202.40|
|Greater than $109,000 and less than or equal to $136,000||Greater than $218,000 and less than or equal to $272,000||$144.60||$289.20|
|Greater than $136,000 and less than or equal to $163,000||Greater than $272,000 and less than or equal to $326,000||$231.40||$376.00|
|Greater than $163,000 and less than $500,000||Greater than $326,000 and less than $750,000||$318.10||$462.70|
|Greater than or equal to $500,000||Greater than or equal to $750,000||$347.00||$491.60|
What Is the Part B Deductible?
The deductible for Medicare Part B is $198 this year, up from $185 in 2019.6
What Is Part B Coinsurance?
Once you’ve paid the deductible, Medicare will typically pay for 80% of covered costs, and you’ll pay the remaining 20%.7
What Is the Part B Late Enrollment Penalty?
How Much Does Medicare Advantage (Part C) Cost?
Medicare Advantage plans are private, Medicare-approved health insurance plans that provide Part A and Part B coverage, and may also include other types of coverage, such as vision or dental. The costs of these plans varies, depending on the benefits provided. Each plan offers different coverage and associated premiums, deductibles, and copay. Participants must also pay their Part B premium, along with the adjustment for high earners, if applicable.
Average premiums for 2021 are expected to drop to $21 a month.9
How Much Does Medicare Part D Cost?
Medicare Part D covers prescription drug benefits. You can either buy a standalone Part D plan or get prescription drug coverage as part of your Medicare Advantage plan. You can expect to pay four out-of-pocket costs (and one more if you’re late in enrolling):
- Late-enrollment penalty.
What Are Part D Premiums?
Your premiums for Medicare Part D can vary, but the “national base beneficiary premium” is $33.06 in 2021.10
What Is IRMAA for Part D?
High earners have to pay extra if you earned more than $87,000 of $174,000 for married couples filing jointly based on your tax return from two years ago. Here’s how much you may owe:
Part D Costs: If your filing status and yearly income in 2018 was
|File individual tax return||File joint tax return||Married, filing separately||You pay each month|
|$87,000 or less||$174,000 or less||$87,000 or less||your plan premium|
|above $87,000 up to $109,000||above $174,000 up to $218,000||not applicable||$12.20 + your plan premium|
|above $109,000 up to $136,000||above $218,000 up to $272,000||not applicable||$31.50 + your plan premium|
|above $136,000 up to $163,000||above $272,000 up to $326,000||not applicable||$50.70 + your plan premium|
|above $163,000 and less than $500,000||above $326,000 and less than $750,000||above $87,000 and less than $413,000||$70.00 + your plan premium|
|$500,000 or above||$750,000 and above||$413,000 and above||$76.40 + your plan premium|
What Is the Part D Deductible?
Your deductible varies by plan (some plans with high premiums don’t have a deductible at all), but cannot be more than $445.11
What Is the Part D Copayment?
The amount of copay for drugs varies by plan, and often also varies based on the type of drug (generic or specialty) that you need. Plans typically charge copay for Tier 1 and 2 drugs, which are less expensive. They charge copay for drugs Tier 3 or 4, which are typically more expensive.
What Is Part D Coinsurance?
There are four payment stages or Part D policyholders.
- Your annual deductible: For 2021, it can be up to $445 per year. You pay this entirely out of pocket.
- Initial coverage, where you’ll pay your share of copay or coinsurance until the total amount spent on drugs (by you and the plan) reaches $4,130.
- The coverage gap (also known as the donut hole), where you pay 25% of all costs until you’ve paid $6,550 out of pocket.
- Catastrophic coverage: For the rest of the year, you’ll owe 5% coinsurance or $3.70 for generic drugs and $9.20 for brand drugs, whichever is greater.
What Is the Part D Late Enrollment Penalty?
If you go without prescription drug coverage for 63 days or more after your enrollment period, you’ll have to pay a penalty of 1% of the Part D premium for each month you went without coverage.12
While calculating the costs of Medicare can feel overwhelming, figuring out the cost of each part can help you devise a good estimate of your total Medicare costs. Once you’ve got that nailed down, you can make sure that those costs fit into the rest of your financial plan.