Medicare is a United States national healthcare program designed for seniors aged 65 and older and others who qualify due to a disability. When you are in the workforce, you likely see that Medicare taxes are deducted from your paycheck. Due to this, many seniors assume Medicare is free since they have paid Medicare taxes throughout their careers. Unfortunately, Medicare does come with a cost in the form of premiums, deductibles, and coinsurance. If this comes as a surprise to you and you wonder how much Medicare will cost, continue reading to learn about Medicare’s costs.
Medicare Part A
The cost for Medicare Part A will depend upon your work history. When you worked ten years (40 quarters) in the United States and paid payroll taxes, you will have a $0 premium for Part A. When you were paying Medicare taxes throughout your career, you were funding your Part A premium. However, if you did not work for ten years in the United States, you will pay a monthly Part A premium.
To purchase Medicare Part A, you must be a legal resident or green card holder for at least five years in the United States. If you have worked between 30 to 39 quarters, your Part A premium is $259 per month in 2021. When you worked less than 30 quarters, the Part A premium is $479 per month in 2021.
Now, let’s say you have zero work history, but your spouse worked ten years and qualifies for premium-free Part A. In this case, you can be eligible for premium-free Part A through your spouse if you have been married for at least one year, and your spouse is eligible for Social Security.
Medicare Part A covers Medicare-approved inpatient services. Whenever you are admitted to the hospital, you are subject to the Part A deductible. The Centers for Medicare and Medicaid Services sets the Part A deductible and coinsurance costs every year. In the year 2021, the Part A deductible is $1,484 per 60-day benefit period. Once you meet the Part A deductible, Medicare covers you up to 60 days.
If you were to surpass 60 days in the hospital, Medicare would still cover you. However, you will have out-of-pocket costs. When you are in the hospital for 61 through 90 days, you will pay a daily copay of $371. For days 91 through 150, your copay is $742 per day in 2021.
Medicare Part B
Despite your work history, you will pay the monthly Part B premium. The Social Security office determines each beneficiary’s Part B premium each year, and they base it off your modified adjusted household gross income (MAGI). Social Security will look at your tax returns from two years prior and determine your premiums for Part B and Part D.
If you and your spouse filed your taxes jointly, Social Security would set each of your premiums based on your jointed taxes. Take note that you and your spouse will have two separate premiums you will pay monthly. If you and your spouse are in a high-income bracket, you will pay more for Medicare Part B. However, only 5% of seniors have a higher Part B premium.
The average base premium for Medicare Part B in 2021 is $148.50 per month. When you are receiving Social Security benefits, your premium will be deducted from your Social Security check. If you are not enrolled in Social Security yet, you will be billed quarterly.
The annual Part B deductible is $203 in 2021. Once you have paid the deductible, Medicare will cover 80% of your Medicare-approved services. Therefore, you will pay a 20% coinsurance for your Medicare-approved services for the remainder of the year. There are Medigap and Medicare Advantage plans you can purchase to help with your out-of-pocket costs.
Medicare Part D
Unlike Part A and Part B, Medicare Part D plans are sold by private insurance carriers. Although these types of plans are not through the government, you will receive a late enrollment penalty if you do not enroll in a plan during your Initial Enrollment Period.
Since these plans are sold through private insurance carriers, they will set your monthly premium. You will find plans that range from $7 to $100+ per month. However, like Part B, you can pay more for Part D if you are in a high-income bracket.
In 2021, the Part D deductible is $445. However, a carrier can lower the deductible but cannot increase it past $445. There are even some carriers who waive the Part D deductible. You will be able to look at your cost-sharing costs in your plan’s Summary of Benefits.
Conclusion
Medicare’s costs are subject to change every year. Luckily, some agencies specialize in Medicare and sell Medicare supplements to help with out-of-pocket expenses. Contact a reputable Medicare broker for more information on which plan can provide you with the most savings.