How Much Does Medicare Cost? What You Need to Know About Premiums

Key Takeaways:

• Most Medicare Part A enrollees don't pay a monthly premium, but you're responsible for certain out-of-pocket costs which are determined by the length of your hospital stay

• What you pay for Medicare Part B per month is based on your income, but the 2020 standard premium is $144.60 per month. Medicare Part B also has out-of-pocket expenses

• Medicare Part C plans are purchased from a private insurer and a monthly premium depends on the selected plan and where you live. On average, monthly premiums for these plans can range from $0 a month to as high as $200 or $300 a month

• If you choose a standalone Medicare Part D plan to reduce your out-of-pocket cost for prescription drugs, the average monthly premium for Part D in 2020 is $32.74 a month

• Medicare Supplement plans vary by state, with up to 10 plan options in 47 states.

• Beginning January 1, 2020, Medicare Supplement plans C and F will no longer be available to those newly enrolled in Medicare

If you're eligible for Medicare (or will be soon), you might ask: How much does Medicare cost per month? This is need-to-know information that can help you financially prepare for future healthcare expenses.

Medicare is federal health insurance available to those age 65 and older, as well as younger individuals with disabilities. But although a type of health insurance, what you pay is often less than the cost of health insurance during your working years.

This article will discuss the different parts of Medicare, and what you can expect to pay depending on the coverage you receive.

What Are the Types of Medicare?

Medicare has four parts — Part A, Part B, Part C and Part D. Part A and Part B are hospitalization and medical insurance, respectively. This is also known as Original Medicare.

Medicare Part C, or Medicare Advantage is Medicare you purchase from a private insurer. Meanwhile, Medicare Part D is prescription drug coverage.

If you're enrolled in Original Medicare, you can also purchase Medigap (Medicare Supplement insurance), which covers expenses Medicare doesn't.

There isn't a set price for Medicare coverage. What each person pays for Medicare varies considerably depending on whether they have Original Medicare or Medicare Part C.

Other factors that influence the cost of Medicare include your income and the amount you've paid for Medicare taxes.

How Much Does Medicare Part A Cost?

Medicare Part A, or hospital insurance, covers a variety of services, such as:

• Inpatient care

• Hospice care

• Home health care

• Skilled nursing facility care

One benefit of Medicare Part A is that most enrollees don't pay a monthly premium. You're eligible to sign up for Part A starting three months before the month you turn 65, and up until three months after you turn 65.

Whether or not you'll pay a monthly premium for Part A typically depends on your work history. As long as you've worked at least 10 years in the US, the equivalent of forty quarters, you can get Part A at no cost.

If you've worked less than 10 years, you'll pay a premium depending on the number of quarters worked. For example:

• If you've worked 30 to 39 quarters in the US, your Part A premium (in 2020) is $252 per month.

• If you've worked less than 30 quarters in the US, your Part A premium (in 2020) is $458 per month.

Keep in mind other costs are associated with Medicare Part A, too. You're responsible for certain out-of-pocket costs, which are determined by the length of your hospital stay. Here's what you can expect to pay:

• $1,408 deductible per benefit period

• Days 1 to 60: $0 coinsurance per benefit period

• Days 61 to 90: $352 coinsurance per benefit period

• Days 91 and beyond: $704 coinsurance per "lifetime reserve day" after 90 days per benefit period

Once you've exceeded the lifetime reserve days, you're responsible for all costs.

How Much Does Medicare Part B Cost?

Medicare Part B health insurance also has out-of-pocket expenses. This part of Medicare includes preventative services like routine physicals, doctor appointments, ambulance services, labs, testing and other medically necessary services.

What you pay for Medicare Part B per month is based on your income. However, the standard premium is $144.60 per month, as of 2020.

Keep in mind you'll pay a higher premium if you're in a higher income bracket. The Social Security Administration uses your adjusted gross income to determine your premium. In most cases, though, many people pay the standard premium.

You're eligible for the standard premium if you earn less than $87,000 a year as an individual tax filer, and less than $174,000 a year if you file a joint tax return.

Medicare Part B has a $198 deductible, and after meeting your deductible, you're only responsible for 20% of Medicare-approved Part B services like doctor appointments and outpatient therapy.

How Much Does Medicare Part C Cost?

You can purchase a Medicare Part C (Medicare Advantage) plan through a private insurance company authorized to sell Medicare plans.

Medicare Advantage is useful if you seek additional health benefits. Part C includes the benefits of Medicare Part A and Part B, as well as other services, such as:

• Vision

• Dental

• Hearing

• Prescription drug plan (optional)

• Wellness benefits like a free gym membership

• Transportation services to and from medical appointments

Since you'll buy Medicare Part C from a private insurer, you may have a monthly premium. This depends on the selected plan and where you live.

On average, monthly premiums for a Medicare Advantage plan can range from $0 a month to as high as $200 or $300 a month. Additionally, Medicare Part C Advantage plans have annual deductibles and coinsurance.

Always compare different plans and estimate your out-of-pocket expense to determine which one is right for you.

How Much Does Medicare Part D Cost?

Medicare Part D prescription drug plans are included with some Medicare Advantage plans. However, you can also purchase a standalone policy if you're enrolled in Original Medicare.

If you choose a standalone policy to reduce your out-of-pocket cost for prescription drugs, the average monthly premium for Medicare Part D (in 2020) is $32.74 a month. This is a decrease from the 2019 cost.

How Much Does Medicare Supplement Insurance Cost?

If you're enrolled in Original Medicare, there's also the option to sign up for a Medicare Supplement insurance plan.

These plans are designed to cover some of the costs that Medicare doesn't. Also known as a Medigap policy, the plan pays most of your out-of-pocket expenses like copayments, coinsurance and deductibles.

Medicare Supplement insurance varies by state, with up to 10 Medigap plan options in 47 states. It's important to know that starting January 1, 2020, Medicare Supplement insurance plans sold to new Medicare enrollees will no longer pay Part B deductibles. Because of this change, Plans C and F will no longer be available to those newly enrolled in Medicare.

You can, however, keep your plan or purchase one of these discontinued plans if you enrolled in Medicare prior to January 1, 2020. The best time to get a Medigap plan is within six months of turning 65.

Find the Right Medicare Plan for You

To find the right Medicare Advantage plan for you, or to compare Medicare Supplement insurance and Medicare Part D plans, connect with a licensed insurance agent who can help guide you through the enrollment process.

Valencia Higuera is a personal finance writer with more than 10 years of professional writing experience. She resides in Chesapeake, Virginia.