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Is Medicare Free?

You’ve been working your whole life and paying your Medicare taxes regularly and it’s only fair that Medicare is free? Unfortunately we don't have good news.

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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:

Medicare Part APart A is hospital insurance – inpatient hospitalization, home health care, skilled nursing facilities, and hospice care.
Medicare Part BPart B is medical insurance – outpatient services like doctor’s visits, ambulance transport, and medical equipment.
Medicare Part CPart 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 servicesWhen 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 DPart D – refers to prescription drug coverage.  Part D coverage can be bought standalone or bundled within a Medicare Advantage (Part C) plan
Medicare SupplementMedicare 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 BTypically seen as ‘Cadillac’ coverage – you can only buy this if you stay with Original Medicare
The Different ‘Parts’ of Medicare

How Much Does Medicare Cost?

Medicare costs vary depending on what coverage you are looking at. Outlined below are the key costs for the various parts of Medicare.

Original Medicare PremiumKey Out-of-Pocket Costs (2023)
Medicare Part A
Hospital Insurance
$0 per month if you have paid ten years of Medicare taxes while working– Days 1-60:  $1,600 deductible
Days 61-90:  $400 per day
Days 91 and over:  $800 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 
$164.90 per month

Higher if your income is above certain thresholds
– Annual deductible: $226
Cost-share: 20% of medical costs after deductible
Original Medicare Costs – 2023

Private Plans PremiumKey Out-of-Pocket Costs (2023)
Medicare Part C *‘Medicare Advantage’– $0 – $100 per month In addition to your Part B premium
– 66% of 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 and $0 after
Maximum Out-of-Pocket Cost Cap: $3,000 up to $12,450
Medicare Part D *Prescription Drugs – $0 per month if bundled in a Part C /Medicare Advantage plan


$7 – 99 per month if purchased separately
Annual deductible:  $0 – $505
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– Annual deductible:  You pay the $226 Part B deductible (above)
Cost-share: Typically limited-to-no out of pocket costs
Medicare Private Plan Costs – 2023

* 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.

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?

Richard Chan

Richard is the Founder of CoverRight and based in New York. He is passionate about empowering consumers to take control of their health and finances. Prior to starting CoverRight, Richard had extensive experience working in financial services with over 8 years' experience in consumer lending and investment banking.

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