Is Medicare Free?

Don’t make the mistake of thinking Medicare is free – each part of Medicare has different costs, which can include coinsurances, deductibles, and monthly premiums.
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Introduction

You’ve been working your whole life and paying your Medicare taxes regularly. It’s only fair that Medicare is free, right?

 

Not exactly – the truth about Medicare is that while your contributions will help pay for some parts of Medicare, it is not entirely free.  You still need to pay premiums and share out-of-pocket costs.

Leaving out Medicare costs from your personal budgeting or financial plan can be a big mistake as costs can add up.

 

The Key Parts of Medicare

There are five (5) parts of Medicare that you need to know when considering potential costs:

Original Medicare (Default Government Program)
Medicare Part A
  • Part A is hospital insurance – inpatient hospitalization, home health care, skilled nursing facilities, and hospice care.
Medicare Part B
  • Part B is medical insurance – outpatient services like doctor’s visits, ambulance transport, and medical equipment.
Private & Supplemental Coverage
Medicare Part C
  • Part C is also known as ‘Medicare Advantage’.  These are a private health plan alternative that combine Part A and B coverage into a bundled package and often includes additional benefits such as Part D drug coverage, dental, vision, and hearing services
  • When you choose to enroll in a Medicare Advantage plan you receive your Medicare coverage from the private insurance provider rather than directly from the government
Medicare Part D
  • Part D – refers to prescription drug coverage.  Part D coverage can be bought standalone or bundled within a Medicare Advantage (Part C) plan
Medicare Supplement
  • Medicare Supplement is also commonly known as ‘Medigap’.  These are private insurance plans that charge a monthly premium to help cover out-of-pocket costs (or “gaps”) that you are responsible for paying under Original Medicare Part A and B
  • Typically seen as ‘Cadillac’ coverage – you can only buy this if you stay with Original Medicare

In summary, you can either stay in Original Medicare (Part A and B) and buy supplemental coverage or enroll in a Medicare Advantage (or ‘Part C’) plan that acts as a bundled private alternative to Original Medicare.

Original Medicare versus Medicare Advantage


How Much Does Medicare Cost?

 

Premium Key Out-of-Pocket Costs (2022)
Original Medicare (Default Government Program)
Medicare Part A
Hospital Insurance
  • $0 per month
    • If you have paid ten years of Medicare taxes while working
    • Up to $499 per month if you have not paid ten years of Medicare taxes
  • Days 1-60:  $1,556 deductible (flat fee)
  • Days 61-90:  $389 per day
  • Days 91 and over:  $778 per day if you have ‘lifetime reserve days’ (everyone gets sixty one-time use reserve days) otherwise 100% of the cost
Medicare Part B

Medical Insurance

 

  • $170 per month
    • Higher (up to $578) if your income is >$91k individually or >$182k jointly
  • Annual deductible: $233
  • Cost-share: 20% of medical costs after deductible
Private and Supplemental Coverage
Medicare Part C *

‘Medicare Advantage’

 

 

This is an ‘alternate’ to Original Medicare

 

  • $0 – $100 per month
    • In addition to your Part B premium
    • 59 percent of Medicare Advantage plans have no premium
  • Annual deductible:  $0 – $1,000 (many plans have no deductible)
  • Cost-share: 
    • $0 – $50 copay for primary/specialist doctors
    • $250-$600 copay for the first 3-7 days of your hospital stay, typically $0 after (up to 90 days)
    • Other cost-shares based in each plan’s benefits
  • Maximum Out-of-Pocket Cost Cap: $3,000 up to $11,300, depending on plan
Medicare Part D *

Prescription Drugs

 

  • ]$0 per month if bundled in a Part C /Medicare Advantage plan

OR

 

  • $7 – 99 per month if purchased separately (national average of $43)
  • Annual deductible:  $0 – $445 (max allowable deductible)
  • Cost-share:  You pay fixed copays for drugs based on the ‘drug tier’ of your drug as determined by your plan provider
Medicare Supplement *

‘Medigap’

  • $90 – $300+ per month
    • In addition to your Part B premium – plan premiums may be adjusted based on health status and age
  • Annual deductible:  You pay the $233 Part B deductible (above)
  • Cost-share: Typically limited-to-no out of pocket costs

* The costs range for Part C, Part D and Medicare Supplement are based on typical cost ranges.

 

Bottom Line:  Medicare is NOT free

You will still have to pay for premiums and out-of-pocket expenses.  Healthcare costs can add up. Not budgeting correctly for healthcare costs under Medicare can be a very costly mistake.

 

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Tip:  Plan ahead for Medicare costs

 

You could be excluding thousands of dollars from your budget buy not considering the potential costs of Medicare when retiring.

 

In order to get estimate costs, you should always consider your premiums, deductibles, out-of-pocket obligation for both medical and drug costs under your Medicare plan(s).

Related Posts

What Does Medicare cover?

Why You Shouldn’t Miss Your Initial Enrollment Period (IEP)

What Does Medicare Part D Cost?

Medicare Advantage vs. Medigap: How to Choose?

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