The True Cost Of Medicare

Understanding Medicare and its costs may seem complicated, but don’t worry; we’re here to help. To make planning for your healthcare future easier, we’ve put together a straightforward guide. We’ll walk you through the actual costs of Medicare so that you won’t have any surprise expenses. As a bonus at the end I’ll give you seven ways to save on your Medicare costs without breaking a sweat.

Understanding the Real Costs of Medicare

First off, let’s talk about the different costs that come with Medicare. There are three main types you should know about premiums, deductibles, and copays. A premium is what you pay each month to have Medicare. You also have a deductible, the amount you must pay for medical care before Medicare starts footing the bill. Lastly, copays are small fees you pay each time you see a doctor or get healthcare services.

Medicare is divided into different parts, each with its costs. Part A, which covers hospital stays, is usually free if you or your spouse have paid Medicare taxes for at least ten years. But it does have a deductible. Part B insurance covers doctor visits and outpatient services. It comes with a monthly premium and also has a deductible and copays. Part C, also known as Medicare Advantage, combines Parts A and B and usually includes Part D, which is prescription drug coverage. Each plan’s cost varies. Finally, Part D costs include a monthly premium and, in some cases, a deductible and copays.

Now, let’s dive into extra coverage. Medicare Advantage Plans or a Medicare Supplement can help cover costs that original Medicare doesn’t. But keep in mind, these come with their premiums.

So, what affects these costs? The type of plan you choose and the specific services you need can influence your costs. Your annual income can also affect how much you pay, especially for Part B and D premiums.

So, while figuring out Medicare costs might seem like a lot, taking it one step at a time can make things manageable. Remember, understanding these costs can help you plan better for your future healthcare needs.

Understanding Premiums, Deductibles, and Copayments in Medicare

To better manage your healthcare expenses, it’s essential to understand the core concepts of premiums, deductibles, and copays in the world of Medicare. 

• A premium is the monthly payment you make to have your Medicare coverage. It’s like a subscription fee you pay, whether you use the services or not.
• A deductible is the amount you need to spend on healthcare before Medicare starts to pay its share. Until you meet this amount, you pay out of pocket for your healthcare.
• Copayments or copays are fixed amounts you pay when you get a medical service.

Now, let’s break down these costs for each Part of Medicare:

Medicare Part A

For most people, Part A has no premium cost. However, if you have to buy Part A, it can cost up to $471 per month. The inpatient hospital deductible is $1,484 for each benefit period.

Medicare Part B

Part B comes with a standard premium of $148.50 in 2021. However, if your yearly income in 2019 was above $88,000, you might pay more. The deductible for Part B is $203 per year. After your deductible is met, you usually pay 20% of the Medicare-approved amount for services.

Medicare Part C (Medicare Advantage)

Premiums, deductibles, and copays for Part C vary widely based on your chosen plan. Sometimes you may find a plan with a $0 premium, but you still need to pay the Part B premium. 

Medicare Part D (Prescription Drug Coverage)

Part D costs depend on the plan you choose, the drugs you use, and whether the pharmacy is in your plan’s network. Some people with higher incomes get an extra amount added to their premium by Social Security (also known as the income-related monthly adjustment amount).

Medicare Supplement Insurance (Medigap)

Medigap policy costs include a monthly premium and may also include deductibles, copays, or coinsurance. Premiums can vary widely between plans and insurance companies, even for the same benefits.

By understanding these costs, you can better anticipate your financial responsibility and make informed decisions about your Medicare coverage.

The Price Tag on Part A: Hospital Insurance

Let’s start with the basics of Part A costs. If you or your spouse paid Medicare taxes while working for at least forty quarters, you are eligible for premium-free Part A. If you have to buy Part A, you could pay up to $471 each month. 

Now, let’s talk about the deductible. In 2021, the deductible for Part A is $1,484 for each benefit period. A benefit period begins the day you’re admitted to a hospital and ends when you have yet to receive any hospital or skilled nursing facility care for 60 days. 

Next, we have copayments. If you’re in a hospital for more than 60 days, you’ll pay $371 per day for days 61-90 in 2021, and $742 per “lifetime reserve day” after day 90 in each benefit period. In a skilled nursing facility, you pay nothing for the first 20 days. From day 21 to day 100, you pay $185.50 per day in 2021. Beyond day 100, you pay all costs.

Part A provides inpatient hospital stay coverage, which includes semi-private rooms, meals, general nursing, and drugs as Part of your inpatient hospital services. It also covers stays in skilled nursing facilities rather than long-term care. It can also help with certain home health care services and hospice care. Remember, costs can vary depending on the length of stay and the type of facility, so it’s always good to check beforehand.

In short, understanding Part A costs helps you better prepare for inpatient stays, whether in hospitals or skilled nursing facilities, home health care and hospice care.

Breaking Down Part B Costs: Medical Insurance

Understanding Part B costs is critical to predicting your medical expenses. For starters, the standard Part B premium in 2021 is $148.50 per month, but it could be higher depending on your income. The deductible for Part B is $203 for the year. After you’ve met your deductible, you usually pay 20% of the Medicare-approved amount for doctor services, outpatient therapy, and durable medical equipment (DME) – this is your coinsurance. 

There is a late penalty if you don’t enroll in Part B when you’re first eligible. Your premium may go up 10% for each 12-month period that you could have had Part B, but didn’t. 

Let’s talk about income-related surcharges. If your income, as reported on your tax return from two years ago, is above a certain amount, you’ll pay an Income Related Monthly Adjustment Amount (IRMAA) which is a complicated way to say you need to pay more because you’re a “high earner”.

Part B covers essential healthcare services like doctor visits, outpatient therapy, medical equipment, and preventive services. But for more extensive coverage, some people opt for Medicare Advantage Plans, also known as Part C. On average, the monthly premium for these plans in 2021 is around $30, but this is in addition to the Part B premium. 

Finally, let’s touch on the maximum out-of-pocket limits for Advantage Plans.  

Understanding Part B costs, including deductibles, coinsurance, penalties, and income-related surcharges, is crucial for managing your medical expenses. Knowing the average monthly premium and maximum out-of-pocket limits for Advantage Plans can also help you make informed healthcare decisions.

Shedding Light on Plan Costs and Supplemental Coverage

Now that we’ve broken down the costs of Medicare Part A and Part B, let’s delve into the financial aspects of Medicare Advantage Plans (Part C) and Medicare Supplements. Understanding these costs will provide a more complete picture of your potential healthcare expenses. Medicare Advantage Plans often combine Parts A, B, and sometimes D into one plan, and their costs can vary widely. Medicare Supplements, on the other hand, fill in the gaps of original Medicare while you still retain original Medicare, often resulting in extra monthly premiums. 

The Costs of A Medicare Advantage Plan (Part C):

Medicare Advantage Plan, also known as Part C, bundles up Part A, B, and often D, offering a full-fledged healthcare plan. Part C costs can vary, but understanding the breakdown of expenses helps you budget better for your healthcare needs. 

Firstly, Part C comes with a monthly premium, the amount of which can differ based on the plan you choose. Some plans may even offer $0 premiums, but it’s important to note that you still have to pay your Part B premium. 

In addition to premiums, you may also have to pay a deductible before your plan begins to pay. Like premiums, deductibles can also vary from plan to plan. 

Copayments are another cost to consider with Part C. These are usually small, fixed amounts for covered services like doctor visits and prescription drugs. 

One unique aspect of Medicare Advantage Plans is the yearly limit on your out-of-pocket expenses for medical services. Once you’ve reached this limit, you won’t need to pay for covered services for the rest of the year. This limit can differ between plans but is designed to protect you from massive medical bills.

Part C plans often offer additional benefits not covered by Original Medicare. These can include prescription drug coverage, along with dental, vision, and hearing services. Some plans even provide perks like gym memberships or an allowance for over-the-counter health products. These extra benefits can contribute to both your health and your quality of life, adding value to your plan.

In a nutshell, understanding Part C costs, including premiums, deductibles, copayments, and the out-of-pocket limit, along with the potential additional benefits, helps you fully grasp the financial aspects of your healthcare and make informed decisions accordingly.

A Closer Look at Medicare Supplement Insurance (Medigap) Costs:

Medicare Supplement Insurance, also known as Medigap, is a type of health insurance plan that helps cover some of the costs that Original Medicare doesn’t. These costs can include copayments, coinsurance, and deductibles. Medigap coverage varies based on the specific policy chosen, but a key feature is that they help manage those unexpected out-of-pocket expenses.

One important aspect to consider with Medigap is the monthly premiums. The cost of your Medigap policy premium can depend on several factors, such as the type of plan, your location, and even your personal health status. For instance, some Medigap plans have a higher monthly premium but cover more healthcare costs, while others might have a lower premium but cover fewer costs. Also, prices can vary among insurance companies for the same standardized benefits, so it’s essential to shop around.

Medigap plans offer standardized benefits, which are consistent across the lettered plan types (A through N), although the cost-sharing arrangement for these benefits can vary by plan type. For instance, Plan F offers comprehensive coverage, including all deductible, coinsurance, and copayment costs in Original Medicare, but often comes with a higher premium. At the same time, other plans might cover less, but have lower premiums.

Certain Medigap policies also offer high-deductible options, meaning you need to pay for Medicare-covered costs up to a certain amount before the Medigap policy pays anything. In 2021, the high-deductible amount is $2,370. Furthermore, out-of-pocket limits can also apply to some Medigap plans, capping the amount you need to spend in a year.

In conclusion, understanding Medigap costs, including monthly premiums, the standardized benefits of each plan type, the concept of high-deductible plans, and out-of-pocket limits can help you make an informed decision about your healthcare coverage.

Strategies to Make Medicare More Affordable

Taking control of your healthcare costs is not as hard as it seems. Here are seven easy-to-follow tips to make Medicare more affordable:

1. Compare plans every year: Insurance companies change the details of their plans every year. Make sure you review your plan annually during the Open Enrollment Period and compare it with others to ensure you’re getting the best deal. 
2. Consider a Medicare Advantage Plan: Medicare Advantage Plans (Part C) often provide extra benefits at lower costs than Original Medicare. They also cap your out-of-pocket expenses, providing more predictability in costs.
3. Look into Medigap policies: If you have Original Medicare, a Medigap policy can help pay for costs that Original Medicare doesn’t cover, potentially saving you money in the long run.
4. Utilize preventive services: Medicare covers many preventive services at no cost to you. Regular health check-ups and preventive screenings can help detect health issues early, saving on expensive treatments later.
5. Apply for financial aid programs: If you’re having difficulty meeting Medicare costs, you might qualify for programs like Medicaid, Medicare Savings Programs, or Extra Help. These programs can significantly reduce your out-of-pocket expenses.
6. Optimize prescription drug costs: Consider a Part D plan that covers your medications. Use preferred pharmacies, request generic drugs, or explore mail-order pharmacies to save on prescription costs.
7. Stay within the network: If you have a Medicare Advantage Plan, ensure that you use doctors, hospitals, and pharmacies within the plan’s network to avoid higher costs.

By following these tips, you can make your Medicare experience more affordable and less stressful. Remember, the key is to stay proactive and informed about your healthcare options.