Medicare Costs
To review the costs associated with Medicare, I am going to divide them into the following categories: PREMIUMS, OUT-OF-POCKET and EXEPTIONS. I’ll start with Premiums.
PREMIUMS
PART A – No Premiums1
PART B – Most people pay the standard Part B monthly premium amount ($174.70 in 2024).
PART C – For Medicare Beneficiaries who choose to receive their Medicare benefits through a Medicare Advantage plan, the premiums for Part B still apply. In addition, Medicare Advantage plans may also have a premium, but they may not. If the MA plan has a separate premium, it must be disclosed prior to enrollment.
PART D – Many Stand-Alone Prescription Drug Plans (PDPs) charge a monthly premium. These premiums vary from plan to plan and often change from year to year. All premiums associated with a PDPs must be disclosed prior to enrollment.
MEDIGAP (or MEDICARE SUPPLEMENT) PLANS – All Medigap plans charge a premium separately from Part B premiums. These premiums are paid directly to the Private Insurance carrier and cannot be deducted from one’s Social Security or Railroad Retirement Board benefits. (Although they can be set up to be auto drafted from one’s bank account.) The Medigap premiums vary from Plan type to Plan type and from Carrier to Carrier. They can range from less than $80 to well over $300 per month depending on one’s age and zip code. Moreover, most Medigap plans are priced to increase each year with age, though there are exceptions to this.
1Most people don’t pay a Part A premium because they paid Medicare taxes while working. If you don’t get premium-free Part A, you pay up to $505 each month. If you don’t buy Part A when you’re first eligible for Medicare (usually when you turn 65), you might pay a penalty.
OUT-OF-POCKET
Out-of-pocket costs are the Deductibles, Copays, and Coinsurance amounts that the Patient is responsible to pay. Medicare Parts A & B were not designed to be comprehensive care covering 100% of all expenses. In most cases, Medicare Advantage plans also have a cost-sharing portion that comes out of the patient’s pocket. Here is a quick review of the out-of-pocket categories:
Deductible – the portion that the patient must pay BEFORE the insurance carrier covers anything.
Co-Pay – coPAY, think “PAY” – This is a dollar amount, like $25 or $75, that the patient must pay to the provider, usually at the time of service.
Co-Insurance – Emphasis on Insurance, think PERCENTAGE. The insurance policy covers a percentage portion of the cost, and the patient must pay the remaining percentage. For example, if a policy has a 20% Co-Insurance, the insurance company will cover 80% of the bill and the patient must pay the 20% portion, usually billed later.
Excluded or Not-Covered Services – For treatment, services or drugs not covered by Medicare or the Medicare Advantage plan, the patient is responsible for 100% of the cost. One example is an elective procedure, such as Tattoo Removal. Another example is NON -urgent / emergency care that is received by an out-of-network provider on a HMO Medicare Advantage Plan. 100% of the cost will be passed on to the beneficiary if the Insurance Carrier does not cover it.
EXCEPTIONS
Here are a few exceptions to the standard costs that most Medicare Beneficiaries pay. We can divide it up easily into Higher costs exceptions and Lower costs exceptions.
Higher Costs Exceptions
IRMAA – Income Related Monthly Adjustment Amount. This is a cost added to the standard Part B and Part D premiums each month. It is charged to higher-income earners and based on income levels set by the government. (More details about IRMAA here.)
Part A premiums – For those who do not get premium-free Part A, the premium for Part A is up to $505 per month (2024).
Late-enrollment Penalties – Both Part B and Part D can have late enrollment penalties tacked on to the premium if enrollment into these parts occurred after the beneficiary was initially eligible to enroll. Those who can prove Credible Coverage can be given an exemption to the penalties, but the burden of proof is on the Beneficiary.
Lower Costs Exceptions
Medicaid – Medicaid is a joint federal and state program that helps cover medical costs for some people with limited income and resources. Medicaid offers benefits not normally covered by Medicare, like nursing home care and personal care services. The rules around who’s eligible for Medicaid are different in each state. (https://www.medicare.gov/basics/costs/help/medicaid)
Extra Help – The Extra Help program helps people with limited income and resources lower or cut Part D costs. Medicare Part D provides drug coverage. The Extra Help program helps with the cost of your prescription drugs, like deductibles and copays. You can apply for Extra Help any time before or after you enroll in Part D. (https://www.ssa.gov/medicare/part-d-extra-help#main-content)
Premium reduction offered by certain Medicare Advantage Plans – Some plans will help pay all or part of your Part B premium, but this isn’t available in all areas. This is sometimes called ”Medicare Part B premium reduction.” For example, if a beneficiary pays the standard premium for Part B ($174.70 in 2024) but she enrolls in a Medicare Advantage plan that offers a $40 premium reduction, her 2024 Part B premium will only be $134.70. It is reduced, not because of a state or federal program. Rather, it is reduced because the plan she enrolled in is paying a portion of her premium on her behalf. If she disenrolls from the plan, then her Part B premium will return to the standard amount.
