One of the worst parts of this job is when we have to explain to folks that Medicare isn't free. So many people are shocked by this. 

If you’ve thought the same thing, first know you’re not alone. Second, you need to learn and understand the costs involved so there are no surprises when you get on Medicare. That’s why today we’re going to answer the question, “What does Medicare cost?” We’ll first outline how much original Medicare A and B costs, then dive into some of the additional coverage costs you might encounter. 

Original Medicare Costs

When you enroll in Medicare, you’ll need to get on Medicare Parts A and B. Medicare Part A actually does have no cost it! This is because you’ve been paying Medicare taxes which cover part A. If you (or your spouse) have worked for at least 40 quarters (or 10 years) Medicare part A will be free of charge. 

Medicare Part B, on the other hand, always has a premium. This premium is based on your income. Ninety-five percent of the Medicare population pays $170.10 each month for their Part B coverage. If you’re on Social Security, this premium will come directly out of your Social Security check. If you’re not on Social Security, you’ll receive a quarterly bill.

The final cost you’ll pay for original Medicare is your Part B deductible. The Medicare Part B deductible is a once-a-year deductible of $230 that you’re responsible to pay for out of your own pocket before your Part B coverage kicks in. 

Additional Coverage Costs

In addition to Medicare Parts A and B, most people on Medicare choose to get additional insurance coverage. Why? While Medicare A and B provides decent coverage it is far from perfect with many "gaps" and limits to the coverage. These additional plans fill in those gaps and extend coverage limits so you aren't left over-exposed to health care costs. 

There are only two options for additional insurance within Medicare. One option is to take a Supplemental plan and the other is to get on an Advantage plan. While both options provide great coverage, they are quite difference from one another. Let's dive into how these plans differ from one another. 

Supplemental Plans

Supplemental plans essentially cover all the gaps left in Medicare A and B coverage. This means you’ve transferred all the financial risk of those Medicare coverage gaps onto an insurance company. Now they obviously won’t cover those gaps for free, so you have to pay them a monthly premium. Your Supplemental plan’s monthly premium amount will vary based on the state you live in, your gender, tobacco use status, and your age. Right now, most people going on Supplemental plans are buying a plan G, and typically, the monthly premium for a Supplemental plan G is between $100 to $150 per month. 

So let’s say you purchase a Supplemental plan G (one of the most common plans). Your total Medicare costs (unless you get a prescription drug plan, which we’ll cover later in the article) will be your Plan G monthly premium plus your Medicare Part B deductible of $230. This means that all your medical bills will be covered by your Supplemental plan, leaving you with only a monthly premium to pay (except for yearly deductible of $230). 

Advantage Plans

While Supplemental plans are based on monthly premiums, Advantage plans often have very little to no monthly premiums. Instead, Advantage plans rely on copays and other costs - more of a "pay as you go" model. 

This means under the Advantage plan model if you see a doctor, go to the hospital, have lab work done, or even need a procedure - all of this will be paid for through copays.

There is a point when you’re no longer responsible to pay copays. This happens when you’ve reached the annual max out of pocket amount. Usually, this amount is somewhere in the $3,000 to $6,000 range. So if your hospital bill was $100,000, all you’d have to pay for out of your own pocket is the max out of pocket amount for the year, and that’s it. You are no longer responsible for any copays until the year resets on January 1st. 

Drug Plan Costs

There is one more additional Medicare cost you need to be aware of, and that is drug plan costs. If you go with a Supplemental plan, you will have to purchase a separate drug plan which comes with an additional monthly premium. Most zip codes offer about 20 drug plans to choose from, all with slightly different monthly premium costs. The average drug plan costs are around $30 a month. In addition to paying your monthly premium for the drug plan, you’ll also be responsible to pay copays when you pick up your prescriptions. 

If you decide to go with an Advantage plan, the drug plan will be embedded in the Advantage plan, meaning you won’t have to pay any extra monthly premiums for it. You will, however, still be responsible to pay a copay at the pharmacy when picking up your prescriptions. Embedded drug plans can be great, but the chances that your Advantage plan has the right drug plan for you (meaning it covers all your medications) isn't always the case so please pay special attention to the drug plan's formulary (list of covered medications). 

So How Much Does Medicare Cost?

Medicare, although providing great coverage for a relatively low price, is not free . You’ll be responsible to pay the Medicare Part B monthly premium (the average is around $170.10/month) plus a yearly Part B deductible of $230. In addition to original Medicare costs, you may also decide to get extra coverage in the form of a Supplemental plan or Advantage plan. Both of these plans come with their own set of costs, from monthly premiums and copays to drug plan costs and out of network expenses. 

If you would like to learn more about Supplemental, Advantage, and Drug plans we invite you to read our articles on each. Simply click on each of the topics in the previous sentence to go to each article.

If you have questions about which option is best for you our Medicare School Guides are always willing to help. To schedule a free appointment with a Guide click here, or call us today at (800) 864-8890.

 

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