Understanding Medicare Premiums in 2020

Key Takeaways:

• If you are not eligible for premium-free Part A, you can still get Part A coverage by paying monthly premiums.

• Part B has lower premiums than Part A, but its premiums are based on your income.

• The base premium amount for Part B in 2020 is $144.60, and the maximum possible amount one would pay is $491.60.

• Your initial Part D premium will be what your insurance company charges you. Like Part C, this coverage is offered by independent insurance companies.

Costs of Medicare Premiums in 2020

Medicare Part A Premiums

Medicare Part A covers all hospital services. For most people, this is the baseline of their coverage, and it is usually offered without any accompanying monthly premiums. However, you may still have deductibles, copays or coinsurance fees associated with Part A. Also, it is important to note not everyone is eligible to receive premium-free Part A.

Premium-Free Part A

For most people, Part A is offered premium-free. However, there are a few conditions for premium-free Part A. If you are 65 or older, you can receive Part A without paying a premium only if:

• You have worked at a job where you paid Medicare taxes for 10 years or more

• You already receive Social Security benefits

• You are eligible for Social Security benefits

• You, or your spouse, had a Medicare-covered government job

If you are under age 65, then you can receive premium-free Part A if:

• You have received Social Security or Railroad benefits for more than 24 months

• You have end-stage renal disease (ESRD) and meet certain other requirements

How Much Does Part A Cost?

If you are not eligible for premium-free Part A, you can still get Part A coverage by paying monthly premiums. The cost of Part A coverage will depend upon how long you have paid Medicare taxes. If you have paid these taxes for under 30 quarters, then your monthly premium amount will be $458 per month. However, if you have paid these taxes for 30–39 quarters, then your cost will be $252 per month.

Most people will not be able to purchase Part A coverage without also having Part B coverage. However, as the situational qualifications for buying Part A can vary, it's wise to contact Social Security to get more information about your specific options when preparing to buy Part A.

How Much Does Part B Cost?

Medicare Part B covers all outpatient medical care, except for prescriptions. For many people, this will be the most used part of their coverage. Unlike Part A, there is no premium-free version available for this particular plan. Part B has lower premiums than Part A, but its premiums are based on your income and a few other factors, which means that not everyone will pay the same price.

Income-Based Premiums

The base premium amount for Part B in 2020 is $144.60, and the maximum possible amount one would pay is $491.60. The amount that you pay monthly depends entirely upon the income that you reported on your 2018 tax return. Here's the specific breakdown for what you can expect to pay:

Source: www.medicare.gov

To figure out your estimated premiums using the data above, simply find which row applies to you on this chart, then align it with the fee in the rightmost column. As these premium amounts change periodically, it is always good to check on your premiums each year, or if your tax bracket changes.

Part C Premiums

Medicare Part C, often called Medicare Advantage, refers to a collection of insurance options that you can purchase through independent private insurance companies. This is basically a way of redirecting your Medicare benefits, thus allowing you to claim those benefits through private insurance companies. In this case, your premiums will be paid to a private insurance company, not the government.

Check Your Options

Because Medicare Advantage is offered by private insurance companies, there is no uniform or standardized price that is set by the government that applies for everyone in the country. For this reason, your best option is to compare prices and coverage plans directly, as the options in your state may end up being cheaper for you than those offered elsewhere in the country.

Medicare Advantage may also offer more — or better — coverage than the baseline Medicare options offered by the government. However, to determine this, you must look at your options locally.

Part D Premiums

Medicare Part D covers your prescription drug coverage. It is also offered by independent insurance plans. This particular coverage may also be available as part of a Medicare Advantage plan.

How Much Does Part D Cost?

Your initial Part D premium will simply be what your insurance company charges you. Like Part C, this coverage is offered by independent insurance companies. You won't know what it will cost across the board. Like other insurance options, your specific cost depends on various factors and can vary depending upon the specific region in which you live.

Unlike Part B, which has a specific monthly premium amount based on your tax bracket and filing status, Medicare Part D premiums simply add an amount onto whatever monthly premium you pay to your insurance company.

The specific amounts are detailed in the chart below:

Source: www.medicare.gov

For example, if your plan costs $100 per month, your income for 2018 was $89,000, and you filed an individual return, your total monthly premium would be $112.20.

How Do I Pay My Medicare Premiums?

• Automatic — All Medicare premiums are payable as a deduction from your Social Security benefits. If you are already receiving Social Security benefits, then this will usually be automatic for Part A and Part B.

• Social Security benefits — Medicare Advantage and prescription coverage plans can also be paid through your Social Security benefits. In order for this to happen, you must submit an application directly to Social Security for approval. Once this is done, your premiums will come out of your Social Security benefits, just as they do for Part B and Part A.

• Pay directly — If you do not receive Social Security benefits, or you choose to pay your premiums directly, then you will simply receive a bill from the government for your premiums, just as you do for any other insurance payments.

Analyzing and comparing insurance premiums can be confusing. Luckily, Medicare's system is a lot simpler than most private insurance companies. If you choose a Medicare Advantage plan or Part D coverage, the option of being able to pay out of your Social Security benefits can greatly limit the amount of time spent thinking or worrying about your premiums.

Noam Flam is a professional writer with expertise in healthcare, insurance, and finance.