Jane Dotson
Medicare is a federal government health insurance program for people aged 65 and over, and younger people living with certain illnesses or disabilities. The costs for Medicare vary depending on factors such as income, where you live, and the type of coverage and services you require. There are four parts to Medicare: Part A, Part B, Part C, and Part D. Part A covers inpatient hospital care, skilled nursing facilities, hospice care, and some home health care services. Part B covers outpatient care, medical equipment, and preventative services. Part C, also known as Medicare Advantage, is offered by private health insurers and covers the same benefits as Parts A and B. Part D is an optional prescription drug coverage plan. The costs for each part of Medicare include premiums, deductibles, coinsurance, and copayments. The specific amounts for these costs are determined annually and released by the Centers for Medicare & Medicaid Services (CMS) in the fall.
| Characteristics | Values |
|---|---|
| Cost of Medicare | Varies based on coverage, services, and providers |
| Medicare Supplement Insurance (Medigap) | Optional add-on to Original Medicare |
| Medicare Advantage Plan | Alternative to traditional Medicare offered by private health insurers |
| Monthly Premium | Varies based on policy, location, and other factors; standard monthly premium for Medicare Part B enrollees in 2025 is $185 |
| Deductible | Varies; standard immunosuppressive drug premium for 2025 is $110.40 |
| Out-of-Pocket Costs | No yearly limit unless supplemental coverage or Medicare Advantage Plan |
| Medicare Part D | Drug coverage with varying costs and payment options |
| Medicaid | Federal and state program for those with limited income and resources |
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What You'll Learn
Medicare Part A and Part B
Medicare is a federal health insurance program for individuals aged 65 and older and some individuals under 65 with certain disabilities or conditions. It is comprised of several parts, including Part A and Part B, also known as Original Medicare.
Medicare Part A is hospital insurance that helps cover inpatient care in hospitals, skilled nursing facility care, hospice care, and home health care. Most people get Part A for free if they have worked and paid Medicare taxes for at least 10 years or are eligible based on a spouse's work. However, some individuals have to pay a premium for this coverage. To be eligible for premium-free Part A, an individual must have a specified number of quarters of coverage and file an application for Social Security or Railroad Retirement Board (RRB) benefits.
For those who are not eligible for premium-free Part A, they must file an application to enroll and also enroll in or already have Part B. To keep premium Part A, individuals must continue to pay all monthly premiums and stay enrolled in Part B.
Medicare Part B is medical insurance. Most people pay a monthly premium for Part B, and the amount depends on their income level. Part B helps lower your share of costs for Part A and Part B services in Original Medicare.
Medicare Advantage, also known as Part C, is an alternative to Original Medicare offered by private companies that combines Part A, Part B, and usually Part D (drug coverage). These plans often have different out-of-pocket costs than Original Medicare and may offer additional benefits.
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Medicare Supplement Insurance (Medigap)
The cost of Medicare varies based on factors such as the coverage and services you require, and the providers you visit. There is no yearly limit on out-of-pocket expenses unless you have supplemental coverage, like a Medicare Supplement Insurance (Medigap) policy, or join a Medicare Advantage Plan.
Medicare Supplement Insurance, or Medigap, is extra insurance you can purchase from a private health insurance company to help cover out-of-pocket costs in Original Medicare (Part A and Part B). Medigap policies are designed to assist with costs such as deductibles, copays, and coinsurance that are not covered by Parts A and B. These plans are available across the United States and Washington, D.C., with some variation in premiums and enrolment eligibility across different locations.
To be eligible for a Medigap policy, you generally must be enrolled in Original Medicare, which includes Part A (Hospital Insurance) and Part B (Medical Insurance). It is important to note that you need to continue paying your Part B premium to maintain your Medigap supplement insurance. The amount you pay for your Medigap coverage will vary depending on the specific policy you choose, where you live, and other factors, and this amount may change annually.
Medigap plans are standardized, but not all standardized plans may be available in your area. Some Medigap plans also offer coverage for foreign travel emergency services. Once you are enrolled in a Medigap plan, it will automatically renew each year as long as you continue to pay your premium and the plan remains available.
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Medicare Advantage Plan
The costs associated with Medicare Advantage Plans vary. Generally, you pay a monthly premium for Medicare coverage and a portion of the costs each time you use a covered service. However, there is no annual restriction on out-of-pocket spending unless you have additional coverage, such as a Medicare Supplement Insurance (Medigap) policy or enrolment in a Medicare Advantage Plan.
Before enrolling in a Medicare Advantage Plan, it is advisable to consult your employer, union, or benefits administrator about their policies. Enrolling in a Medicare Advantage Plan may result in the loss of employer or union coverage, which could also affect the coverage of your spouse and dependents. It is also important to be aware that plans may change their participation in Medicare, which could require you to switch to another Medicare health plan or return to Original Medicare.
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Medicare Part D
Part D benefits are provided through private plans approved by the federal government, with the number of plans offered varying by location. Enrollees typically pay premiums directly to the plans, although they can opt to have them deducted from their Social Security checks. The amount paid depends on the retail cost of the drug, the rules of their plan, and their eligibility for Federal income-based subsidies.
In 2019, about 75% of Medicare enrollees obtained drug coverage through Part D, with program expenditures of $102 billion, accounting for 12% of total Medicare spending. That year, 47 million beneficiaries were enrolled in Part D, which was three-quarters of all Medicare beneficiaries.
The average monthly Part D premium across all plans was $27 in 2020, although this can vary depending on the plan and location. For example, in 2022, the monthly costs for stand-alone Part D plans in the 10 major U.S. markets ranged from $6.90 (Dallas and Houston) to $160.20 (San Francisco).
The Extra Help program assists those with limited income and resources in lowering or eliminating Part D costs. The level of assistance provided depends on the individual's income and resources, and beneficiaries with income below 150% of the poverty line are eligible for the low-income subsidy.
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Medicare Advantage
A deductible is the amount you must pay for covered healthcare services before your insurance plan starts to pay. For example, with a $500 deductible, you pay the first $500 of covered services yourself. After meeting the deductible, you typically pay only a copayment or coinsurance for covered services. A copayment, or copay, is a set amount you pay to a healthcare provider or pharmacy at the time of service. Copayments vary depending on your plan and the services you receive, such as a $40 copayment for a doctor's office visit. Coinsurance is the portion of costs you pay for covered drugs or services, usually a percentage of the total cost. For instance, with 25% coinsurance, you are responsible for 25% of the total cost, while the plan covers the remaining 75%.
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