While many pay into the Medicare program, Medicare coverage is not free; there are many costs associated with Medicare that must be paid out of a beneficiary’s own pocket.
Individuals who are eligible for the Medicare program often enroll in both Part A and Part B, which cover medically necessary hospital and medical benefits. However, given that not all health care costs and benefits are covered by Part A and Part B, beneficiaries looking for additional coverage then have the option to enroll in Medicare plans offered by private health insurance companies. There are out-of-pocket costs associated with each of these different parts and plans associated with the Medicare program.
Cost of Medicare Part A
While many beneficiaries are eligible for “premium-free Part A,” there may be deductibles, copayments, and other out-of-pocket costs associated with Part A coverage. Below are some of the costs of Part A in 2013 that you may be responsible for:
- Monthly premium: For those who are not eligible for premium-free Part A, the Part A monthly premium would be $441 per month for those who paid Medicare taxes for less than 29 quarters and $243 per month for those who paid Medicare taxes between 30 to 39 quarters.
- Late enrollment penalty: A 10 percent increase of your monthly premium would apply for twice the number of years you were eligible for Part A, but chose not to sign up.
- Deductible: There is a $1,184 deductible for each benefit period in 2013. This can apply to inpatient stays in hospitals and mental health institutions.
- Coinsurance and copayment: Additional costs may be required for various medical services covered by Part A, which includes cost sharing for inpatient stays in hospitals and skilled nursing facilities. These costs will vary depending on how many days the stay lasts.
Cost of Medicare Part B
All beneficiaries enrolled in Part B have to pay a monthly out-of-pocket cost no matter if they enroll in any additional coverage plans, such as a Part C plan or Medigap policy. Here are some costs that you may expect with your Part B coverage in 2013:
- Monthly premium: The standard Part B premium is $104.90 per month in 2013. Depending on your income and tax filing status from 2 years ago, your Part B premium may be as high as $335.70 per month. Many people will continue paying the previous standard amounts of $99.90 or $115.40 per month, or whatever the standard premium was when they first signed up for Part B.
- Late enrollment penalty: A 10 percent increase would apply for each full year that you were eligible for Part B, but chose not to sign up. This penalty would apply for as long as you are enrolled in Part B.
- Deductible: Before Part B benefits begin, you must pay an annual deductible of $147.
- Coinsurance: You are responsible for 20 percent of the Medicare-approved cost for covered services and supplies. However, if a doctor does not accept assignment, your out-of-pocket costs could equal as much as 35 percent of the Medicare-approved cost.
Cost of Medicare Advantage (Part C)
Medicare Advantage (MA) plans provide beneficiaries with their Part A and Part B coverage and may include additional benefits, such as prescription drug coverage. Given that these plans are offered by various private insurance companies, 2013 MA costs vary by plan and may include:
- Monthly premium: Some MA plans may offer a monthly premium as low as $0 per month. Keep in mind that although you would be receiving Part B benefits through this MA plan, you are still responsible for paying your monthly Medicare Part B premium.
- Deductible: Some MA plans include an annual deductible amount, while others do not.
- Coinsurance and copayment: Many MA plans charge copayments for the benefits and services offered; others may require a coinsurance instead. MA plans may restrict you to certain doctors and hospitals that participate in the plan’s network of providers. If you choose to go to a health care provider outside of your plan’s network, you may be responsible for all associated costs.
Keep in mind that MA plans are required to protect their plan members from high cost sharing by limiting their Part A and Part B out-of-pocket costs. The annual out-of-pocket maximum for MA plans in 2013 is $6,700.
Cost of Medicare Part D
Similar to other plans offered by private insurance companies, the costs associated with prescription drug coverage varies by plan as well. For both stand-alone Prescription Drug Plans and MA plans with prescription drug coverage (MAPD plans), the following 2013 costs may apply:
- Monthly premium: Part D coverage comes with a monthly cost, with this premium amount varying by plan. High-income beneficiaries may pay more for coverage.
- Late enrollment penalty: The Medicare program requires all beneficiaries to have Part D coverage or creditable prescription drug coverage. If you go 63 or more days in a row without creditable drug coverage, you will be subject to a late enrollment penalty of 1 percent of the “national base beneficiary premium,” which is $31.17 in 2013, times the number of uncovered full months you were eligible for Part D, but chose not to sign up. This penalty is added to the monthly premium and is applied for as long as you are enrolled in Part D coverage.
- Deductible: While deductible costs vary between drug plans, no Part D plan is allowed to have an annual deductible of more than $325 in 2013.
- Coinsurance and copayment: For most plans, you are responsible for some cost sharing after you have paid the deductible, if there is one associated with your Part D plan. Many Part D plans will place medications onto different pricing tiers, with generic and inexpensive drugs on the lower tiers and brand-name and expensive drugs on the higher tiers.
Keep in mind that cost sharing for Part D plans can be broken down into a three-stage process. In the initial coverage state, you and your plan share the total cost for your medications. In the second stage, which is reached when you hit $2,970 in total drug costs paid, you will fall into the Medicare donut hole and must pay most of your drug costs out of your own pocket (79 percent of the cost of generic drugs and 47.5 percent of the cost of brand-name drugs). In the third stage, which is reached when you hit $4,750 in eligible out-of-pocket drug costs, you pay a small copayment or coinsurance for prescription medications.
Cost of Medicare Supplement (Medigap)
While cost sharing and coverage are standardized among Medigap plans offered in most states, these plans may charge different premiums depending on the plan type and the insurance company offering the plan. In 2013, here are some costs you can expect with Medigap plans:
- Monthly premium: Generally, the more coverage a Medigap plan provides, the higher the premium may be; this means that the premium for the comprehensive Medigap Plan F may be higher than the premium for Medigap Plan A. Premiums will also vary by insurance company.
- Deductible: High-deductible versions of certain Medigap plans may be available.
- Copayment: Some plans may require Part B copayments to be paid.
Keep in mind that each insurance company decides how it wants to set its premiums for Medigap policies. There are three ways in which Medigap policies may be priced or “rated.” Community-rated plans, also known as no-age-rated plans, are priced at the same monthly premium for all beneficiaries enrolled in the policy, regardless of age. Issue-age-rated plans, also known as entry-age-rated plans, prices premiums based on your age when you are issued the policy. Pricing for attained-age-rated plans are based on your current age, which means that the premium for your plan will go up as you get older. Outside of these pricing factors, Medigap premiums may also go up because of inflation and other factors. Depending on how a Medigap policy is rated, it will affect the cost of your coverage now and in the future.
Medicare has neither reviewed nor endorsed this information.