How Much Does Medicare Cost?

Last Updated on September 30, 2024
Written by CPA Alec Pow | Content Reviewed by CFA Alexander Popinker

Medicare provides vital health insurance to tens of millions of senior citizens and younger Americans with disabilities. But Medicare comes with premiums, deductibles, copays, and other out-of-pocket costs that can get confusing.

This guide will explain everything you need to know about what Medicare covers, what it costs in 2024 across Parts A, B, C, and D, as well as strategies to minimize expenses. We’ll also look at how costs vary based on your income, supplemental Medigap options, and ways to accurately estimate total costs.

How Much Does Medicare Cost?

Medicare costs between $0 and $575 or more, depending on the plan you’re going for, your income, and other important factors. Here is an in-depth overview of current costs for each component of Medicare coverage:

Part A Hospital Insurance

• Premium: $0 per month for most beneficiaries; up to $506 per month for those who didn’t pay Medicare payroll taxes for 10+ years.
• Deductible: $1,556 per benefit period for hospital stays.
• Daily coinsurance: $0 for days 1-60, $389 per day for days 61-90, and $778 per day after 90 days for each benefit period.

Part B Medical Insurance

• Standard premium: $164.90 per month, though often higher based on income.
• Annual deductible: $233. Then 20% coinsurance applied for doctors’ services, scans, tests.

Part D Prescription Drug Plans

• Monthly premiums vary widely by specific plan, ranging from around $12 up to $76 per month nationally.
• Deductible up to $505 in 2024 depending on plan. Then typical copays of $10, $20, $35 increasing for higher cost drugs until reaching catastrophic coverage threshold.

Part C Medicare Advantage Plans

• Premiums range from $0 to upwards of $150 per month depending on benefits, location, and carrier. Plus enrollees must continue paying their Part B premium.
• Out-of-pocket spending limits around $7,500 per year, protecting against catastrophic costs.

According to HHS.gov, for 2024, the standard monthly premium for Medicare Part B is $174.70, which is an increase from $164.90 in 2023. Additionally, beneficiaries will pay a deductible of $240 for Part B services.

For Medicare Part A, most individuals do not pay a premium if they have worked and paid Medicare taxes for at least 40 quarters. However, if you do not qualify for premium-free Part A, you may have to pay a monthly premium ranging from $278 to $505 depending on your work history. The deductible for inpatient hospital stays under Part A is set at $1,632 per benefit period in 2024, according to Medicare.gov.

As reported by CMS.gov, the costs for Medicare Parts A and B are determined annually. The standard premium for Part B enrollees will be $174.70, with higher-income beneficiaries paying more based on their income levels. The annual deductible for Part A is set at $1,632, while the deductible for Part B is $240.

According to Medicare.gov, beneficiaries should also consider costs associated with Medicare Part D (prescription drug coverage). The monthly premiums for Part D vary by plan and can change each year. Additionally, there may be deductibles and copayments depending on the specific drugs covered under each plan.

Knowing these costs by Part empowers you to anticipate and budget for Medicare expenditures.

Introduction to Medicare

Medicare is the largest federally-run health insurance program in the U.S., covering over 60 million beneficiaries. It is administered by the Centers for Medicare & Medicaid Services (CMS) and provides coverage for:

• Hospital and inpatient care (Part A)
• Doctor visits and outpatient services (Part B)
• Prescription drug benefits (Part D)
• Additional benefits offered through private Medicare Advantage insurance (Part C)

Medicare does involve premiums, deductibles, copays, and coinsurance costs that can really add up over time. Having a clear handle on pricing helps you accurately budget and pick the right coverage options.

You might also like our articles on the cost of health insurance, nursing home insurance, or medical malpractice insurance.

“Many people are surprised by the various out-of-pocket costs involved with Medicare, even with supplemental coverage added,” explains Medicare advisor Linda Park.

Medicare Premium Costs by Income

Higher income enrollees pay more for their Part B medical insurance and prescription drug coverage through income-related monthly adjustment amount (IRMAA) premium surcharges:

• Those with incomes between $97,000-$123,000 must pay an extra $68.10 to $230.80 per month in addition to base Part B and Part D premiums.
• Beneficiaries earning over $500,000 annually face IRMAA surcharges of an extra $408.20 per month.
• Applied based on one’s latest available annual income tax return on file with the IRS.

Here are a few examples of how IRMAA impacts monthly premiums for 2024:

• Income of $103,000: Base Part B premium of $164.90 per month.
• Income of $140,000: $297.60 Part B premium after IRMAA surcharges.
• Income exceeding $500,000: $573.10 Part B premium including IRMAA adjustments.

So have a realistic understanding of how IRMAA income adjustments will factor into your Medicare costs based on your retirement income. They can really add up.

Medicare Out-of-Pocket Expenses

Along with paying monthly premiums, Medicare enrollees must also pay:

• Part A deductibles for hospital stays, which occur per each benefit period.
• Part B’s 20% coinsurance for doctors visits, scans, tests, and other outpatient services after you meet the $233 deductible each year.
• Part D prescription drug plan copays or coinsurance for each medication filled until reaching the plans’ catastrophic coverage thresholds. These vary but average around $7,000 in spending annually before this relief kicks in.

These copays, deductibles, and coinsurance responsibilities result in thousands per year in typical out-of-pocket costs, making supplemental Medigap insurance policies appealing for budgeting certainty.

Medicare Supplement (Medigap) Plan Costs

Medigap insurance plans are sold by private insurers to help cover Medicare deductibles, coinsurance charges, and copays. Monthly premiums vary significantly:

• Lower-tier Medigap plans cover fewer gaps and cost in the ballpark of $100 to $150 per month.
• More generous Medigap plans filling most gaps and providing peace of mind can range from $250 up to $350 per month.
• Pricing also varies considerably between states and even counties, so shop around.

While a burden in themselves, Medigap premiums provide important financial protections that make overall Medicare costs more predictable.

Factors Influencing Expenses

Several important criteria determine what an individual can expect to spend on Medicare:

• Income level greatly affects premium costs through IRMAA as described above. Higher earners pay considerably more.
• Location also makes a sizable difference. Medigap and Part D drug plans cost significantly more in high-cost states like New York and California versus national averages.
• Health status and prescription medications needed also cause Medicare costs to vary widely. Less healthy enrollees with more conditions spend much more out of pocket managing their healthcare.
• Age at the time of Medicare enrollment also matters immensely – delaying Part B sign up until after 65 leads to permanent surcharges, for example. Enrolling on-time avoids penalties.

Medicare Savings Programs

Individuals with more limited financial resources and income may qualify for Medicare Savings Programs:

• Qualified Medicare Beneficiary (QMB): Covers all Medicare premiums, deductibles, and copays for those with incomes below the Federal Poverty Level.
• Specified Low-Income Medicare Beneficiary (SLMB): Helps pay Part B premiums for beneficiaries earning between 100-135% of the poverty level.
• Qualified Individual (QI): Helps pay Part B premiums for beneficiaries earning between 135-175% of the poverty level.

These essential programs can reduce annual Medicare costs by thousands of dollars for cash-strapped beneficiaries who meet the eligibility criteria.

Always be sure to inquire about them when evaluating Medicare plan options if your income falls under the federal poverty limits.

Health Costs Not Covered

Keep in mind that traditional Medicare does not cover:

• Vision care, dental services, or hearing aids and exams. You must purchase separate insurance policies for these common healthcare needs.
• Skilled nursing, long-term care, or custodial care costs. Requires additional costly Medigap or Medicare Advantage policies with coverage.

These benefits represent key gaps that lead to significant yet predictable out-of-pocket costs in retirement. Factor them into financial planning projections.

Estimate Medicare Costs

These two steps enable accurately calculating projected Medicare costs:

• Use Medicare’s online Plan Finder tool – Input your personal details and preferences to receive customized premium estimates and total cost calculations.
• Consult with a Medicare insurance agent – An expert can provide helpful personalized breakdowns of costs based on your specific situation, needs, and healthcare status.

Professional advice ensures you don’t overlook any cost factors and helps select the ideal supplemental and prescription drug plans to pair with Medicare for your health profile.

“Always double check total costs across Parts A, B, C, and D before making final plan selections during open enrollment periods,” Linda Park recommends. “Hidden premium penalties and gaps in coverage can really amplify overall expenses if you’re not diligent upfront.”

Medicare Advantage vs Original Medicare

Private Medicare Advantage plans generally cost:

• A $0 to $99 per month premium along with the standard Part B premium for basic plans.
• Minimal copays of $5 or $10 for routine doctor visits and lower-cost prescriptions.
• Maximum annual out-of-pocket spending caps around $7,500 which provide protection against catastrophic costs.

Whereas sticking with basic Original Medicare requires paying:

• The monthly Part B insurance premium.
• 20% coinsurance for all doctor visits and outpatient services after paying the annual Part B deductible.
• Premiums for a separate private Part D prescription drug plan.
• Medigap policy premiums to cover Medicare’s cost sharing amounts if pursuing a supplement.

In totality, the more predictable copay-based system of Medicare Advantage provides cost advantages for many retirees who don’t mind closed networks and plan restrictions.

Expert Insights

We asked Medicare experts for advice on getting the most affordable and cost-effective coverage:

“Always compare Medicare Advantage plan options in your area – prices and benefits can vary widely between insurance providers,” stresses Medicare advisor Linda Park. “An acceptable tradeoff in provider choice for lower copays and annual caps may make financial sense.”

“Don’t assume Original Medicare plus Medigap is necessarily the best or cheapest route. Do your homework on Medicare Advantage plans,” Park emphasizes. “They can provide significant cost savings for some.”

“Review all Medicare plan costs and coverage each year during open enrollment,” suggests Medigap insurance broker Chris Lee. “As new plans enter markets and benefits evolve, better options may exist to reduce your costs.”

Answers to Common Questions

Which state has the cheapest Medicare Advantage plans?

Minnesota, Oregon, and Hawaii tend to have the cheapest overall Medicare Advantage plan pricing and premiums nationwide based on average costs. This results from greater competition and plan availability applying downward pressure on costs in these states.

What is the biggest cost of Medicare?

For a majority of beneficiaries, the biggest drivers of total Medicare costs are supplemental Medigap plan or Medicare Advantage plan premiums and out-of-pocket expenses along with Part D prescription drug plan costs. Having robust coverage for these leads to highest peace of mind.

What is the best medicare package?

Consulting with a Medicare insurance broker provides tailored advice on pairing plans across Parts A, B, C, and D into the most cost-effective bundled package based on your specific health needs and prescriptions. This provides the highest value coverage.

Control Medicare Costs

“Compare premiums and benefits between at least 5 different Part D prescription plans – significant variance exists with one often standing above for your particular drug needs,” advises Medicare advisor Paula Bennett. “This reduces your annual costs.”

“If your income qualifies, apply for Medicare Savings Programs like QMB or SLMB which can cover premium costs to save you thousands per year,” stresses Medicare broker Chris Lee. “Too few take advantage of these essential programs.”

“Always opt for Medicare Advantage plans with the maximum out-of-pocket spending caps to protect against unexpected catastrophic costs from surgeries or hospital stays,” recommends Paula Bennett. “Avoid options with no annual limit.”

Final Words

From weighing Medigap plans vs Medicare Advantage to comparing Part D costs, accurately estimating your total Medicare expenses empowers minimizing costs. But focus on value over just lowest premiums – a higher monthly price can be worth better coverage and lower overall expenses. Consider all angles to make informed Medicare coverage choices.