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The Cost of Medicare Coverage

Paying for Medicare coverage works a little differently then how we paid our health insurance premiums during our working years. While most of us have paid one large premium for all of our healthcare coverage (Doctor, hospitalization, and drug coverage) during our working years, Medicare coverage is paid in several smaller amounts for individual parts of coverage.

Part A Medicare Costs

Typically, there is no cost associated with Medicare Part A (Hospital Insurance). As long as you have worked and paid taxes for at least 10 years (40 quarters), you will be entitled to Part A at no cost. Occasionally, you will hear people refer to this also as “premium-free Part A.” Additionally, you may also be eligible for Part A at no cost if your spouse has met the previously mentioned requirements. An easy rule of thumb we like to tell our clients is that if you are eligible for Social Security Benefits, you should be eligible for Medicare Part A at no cost.

Part A Premiums

If you have to buy Part A, you will pay up to $471 per month in 2021. People that paid Medicare taxes for less than 30 quarters, the standard Part A premium is $471 in 2021. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $259 in 2021.

Part A Deductible

Any expenses you incur while an inpatient in the hospital would fall under Part A of Medicare. In 2021, you would have to pay a $1,484 annual deductible before your Medicare Part A hospitalization coverage begins.

Part B Medicare Costs

Premiums for Medicare Part B are based upon your modified adjusted gross income (MAGI) from 2 years ago; since this is the most recent tax return information provided to Social Security by the IRS.  Items that contribute to your MAGI include: wages, interest, required minimum dividends from investments, capital gains, Social Security benefits, and tax-deferred pensions. Medicare uses your tax return from 2 years ago to determine what you’ll pay for Medicare Part B and Part D. (Part D drug plans premiums are also based on income.)

Part B Premiums

Most Medicare beneficiaries will pay the standard Part B premium of $148.50 in 2021.  However, if your income is over $88,000 (single) or $176,000 (married), then your premium will be higher based on the Income Related Monthly Adjustment (IRMAA). See the chart below to find out what your premium will be in 2021. See the chart to the right to find out what your premium will be in 2021.

Part B Deductible

The Medicare Part B annual deductible for 2021 is $203. After you met your deductible, Medicare pays 80% of any Part B approved services. You are responsible for paying the remaining 20%. Medicare Part B covers the most frequently used services such as doctor visits, lab tests, x-rays, and other services received outside of the hospital. One very important thing  to remember is there is no cap on your out-of-pocket costs under Medicare Part B, which means if your total bill was $100,000,  you would owe $20,000 or more as the bill rises.

Your Part B premium will automatically be deducted from your benefit payment if you receive any of the following benefits:

    • Railroad Retirement Board
    • Social Security
    • Office of Personnel Management

Part D Medicare Costs

MosMedicare Part D plans charge a monthly premium that varies by plan carrier. If you are enrolled in an Medicare Advantage Plan, or a Medicare Cost Plan that includes Medicare prescription drug coverage, your prescription drug coverage will most likely be included in your monthly premium, and in some Part C plans, there will not be a premium.

Since the monthly Part D premium is set by the individual insurance company, premiums will vary based on several different factors including the insurance carrier, where you live, the drug formulary, etc. Most plans vary from $10 – $100 depending on the factors mentioned previously, but the projected national average monthly premium in 2021 is $33 for a Part D drug plan (according to cms.gov)

If you have a high income you may pay an extra amount on top of your standard plan premium. Just like with Part B of Medicare, in 2021, if you make over $88,000 as an individual or over $176,000 if you file your taxes jointly then you will pay an Income Related Monthly Adjustment Amount also called an IRMAA. Below is a chart that will tell you the extra amount you may have to pay based on your income.

In 2021, the annual for Part D deductible is $445. Keep in mind, this is the max deductible amount insurance carriers can charge you. Companies may charge the full deductible, a partial deductible, or waive the deductible entirely. You will pay the network discounted price for your medications until you have satisfied the deductible. After that, you enter the Initial Coverage Phase.

If you find Medicare costs still all a little confusing, don’t worry, you’re not the only one. That’s where our our Medicare Experts come in. We can help you understand exactly what you will pay for each part of your Medicare coverage and help calculate your annual costs. We can discuss your options right over the phone. Simply give us a call at 1-(888)-321-6361 or click the “get help”  button to the right of the page and fill out the form and one of our licensed agents will give you a call to to assist you.

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Continue learning about Medicare in the next article: Medicare Enrollment