Medicare Premiums and Deductibles - The Cost in 2018

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Medicare Premiums and Deductibles

Medicare helps millions of Americans ages 65 and over and those with disabilities pay for health care costs. That said, Medicare isn’t free. Unless you qualify for certain kinds of assistance, you’ll have to pay certain costs for Medicare coverage.

Sure, you may have paid your Medicare taxes for years, but that investment covers only some of the costs of Medicare. Other expenses come in the form of premiums, deductibles, coinsurance, and copayments.

Let’s break down these costs and how much you may have to pay for each Part of Medicare.

The table below shows 2019’s premiums and deductibles for Medicare Parts A and B (Original Medicare)1. Part C (Medicare Advantage), Part D, and Medigap are not shown here because the costs of these plans vary widely. We’ll explain why as we go.

Parts A and B also have some quirks when it comes to their costs, so check out the sections for those below, too.

 Standard PremiumDeductable
Part A$437$1,364
Part B$135.50$185

What are premiums and deductibles?

Medicare uses many of the same terms as other health insurance programs, so you may already be familiar with some of the most important, like these:

  • premium is a monthly amount that you pay for health care coverage. For Medicare, you’ll pay your Part B premium directly to Social Security (usually deducted from your social security check). Any additional premium for your Medicare Advantage plan, as well as premiums for Medigap or Part D coverage, are paid to your private health insurance company. You must pay your monthly premiums to maintain coverage.
  • deductible is a yearly amount that you must pay for health care services before your coverage “kicks in” or takes effect. You usually pay your health care providers, such as doctors and pharmacists, directly for deductible costs.
  • A copayment is a portion of costs that some beneficiaries cover out of their own pockets for certain services, prescriptions, and more. Copayments are usually a face-value amount, such as $20 per visit to your primary care doctor. Copayments are common among Medicare Advantage and Part D plans.
  • Like copayments, coinsurance is a portion of costs you’re responsible for paying. The difference is that coinsurance is usually a percentage of the cost, such as 20% of a doctor’s visit. If you’re enrolled in Original Medicare, The Centers for Medicare and Medicaid Services (CMS) will use a coinsurance model to calculate your share of costs.

Each part of Medicare (and for that matter, each plan) handles premiums and deductibles a little differently, so let’s dive a little deeper.

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Medicare Part A premiums and deductibles

Medicare Part A covers services like inpatient hospital stays, skilled nursing facilities, hospice, and some home health care. Often called “hospital insurance,” Part A is available to most Americans age 65 and older and people with specific disabilities and health conditions.

That said, Part A is a bit of an odd duck when it comes to how you’ll share costs. Here’s a breakdown of its premium, deductible, and various copayments.

Part A premium

The standard Part A premium for new enrollees buying into Medicare in 2019 is $437 per month.2

Before you go into sticker shock, however, know that most people don’t pay a dime for Part A premiums each month.

That’s right. For most people, Medicare Part A is entirely premium-free.

Remember those Medicare taxes that came out of your or your spouse’s paychecks? Ensuring Part A coverage is what they went toward. If you or your spouse paid them for at least a total of 10 years (40 quarters), great news: your Part A premium is zero. Zilch. Nada.

If you owned your own business, freelanced, or worked as an independent contractor, you’ve earned a credit for each quarter you paid your Self-Employment Tax.

Most people aged 65 or older and some people with specific disabilities or health conditions fall into the “free Part A” camp, but not everyone does.

Some people will have to pay a monthly premium for Medicare Part A because they didn’t earn enough quarter “credits” (meaning they didn’t pay Medicare taxes for 40 or more quarters).

Fortunately, Medicare taxes aren’t all or nothing. If you paid them during some quarters, but not all, you may be entitled to a lower Part A premium.

Medicare Part A Premiums for 2019 3

CreditsPremium
40+$0
30 - 39$240
0-29$437

The Centers for Medicare and Medicaid Services (CMS) set the standard Part A premium and update it annually. Typically, the amount rises a few dollars each year.

Are my Part A premiums free?

If you’ve paid Medicare taxes long enough to have earned 40 credits (ten years), you shouldn’t have to pay a premium for Part A. But how do you know if you’ve racked up enough credits? After all, no one told you to keep track.

Don’t panic. There are three good indicators (though not guarantees) that you’ll get to skip the Part A premium, even if you haven’t kept track of your work credits:

  • You get retirement or disability benefits from Social Security or the Railroad Retirement Board (RRB).
  • You or your spouse worked in Medicare-covered employment (such as for the government)
  • You have end-stage renal disease (ESRD).4

For people who pay for Medicare Part A, the following are typically true:

  • You have not worked or have not paid Medicare taxes for a total of at least ten years (40 quarters).
  • You are not married to someone who has paid Medicare taxes for 40 quarters.

Part A deductible

No matter what your premium is for Medicare Part A, you’ll need to pay a deductible. Recall that a deductible is the amount of medical expenses you must pay before Medicare begins covering its share of the costs.

The Part A deductible applies to most covered inpatient care needed while you’re in the hospital. You may be asked to pay all or part of the deductible while you’re in the hospital, or you may get a bill later.

Unlike other Medicare deductibles, however, the Part A deductible doesn’t reset annually. It resets after each separate hospital benefit period.

(Did we mention Part A is an odd duck?)

So what is a hospital benefit period?

  • It begins your first day of being admitted into the hospital.
  • It ends once you’ve been out of the hospital for at least 60 days.5

Let’s say you check into the hospital on January 1. That same day, you enter a hospital benefit period. Whether your stay lasts three days or 300 days, you’ll still be in the same hospital benefit period the entire time.

If you leave the hospital on February 20 but are admitted again on April 20 (59 days later), your deductible won’t reset during this second stay, no matter how long that second stay lasts.

If, however, you’re re-admitted just one day later, on April 21, you’ll be in a new hospital benefit period, and you’ll need to meet the deductible again before Part a coverage kicks in.

That deductible can get expensive if you start more than one new coverage period in a year.

In 2019, the Part A inpatient hospital deductible is $1,364; once you’ve paid that, Medicare will pay for 100% of covered costs for your first 60 days of the hospital stay.6

What happens after your 60th day in the hospital? That’s where your coinsurance comes in.

Part A coinsurance

After you meet the deductible, the cost-sharing portion of Part A takes effect.

From day 61 through day 90 of your hospital stay, you’ll pay a daily coinsurance of $341 in 2019.7

If you need to stay in the hospital for more than 90 days in a single hospital benefit period, you have two options:

  • Cover all costs out of pocket.
  • Use your lifetime reserve days.

Lifetime reserve days are exactly what they sound like. These are a pool of 60 covered days that you can draw on, but they don’t reset when a new hospital benefit period begins.

You only have 60 total for life, and they come with a steep coinsurance of $682 in 2019.8 Still that’s better than footing the entire bill yourself, right?

Medicare Part B premiums and deductibles

If the unique way the Medicare program handles costs in Part A has left your head spinning, you’ll be relieved to find that Part B expenses are a lot more like other kinds of health insurance.

Sometimes called “medical insurance,” Part B covers preventive care and medically necessary services like doctor visits, outpatient facility care, and durable medical equipment. Part B includes its own premiums and deductibles separate from Part A.

Part B premiums

As with the Part A premium, CMS sets a standard premium for Part B coverage.

Also like Part A, different people pay different premiums for Part B. For this coverage, however, premiums have nothing to do with Medicare taxes. Instead, Part B requires you to pay a monthly premium based on your income.

In 2019, the standard monthly Part B premium is $135.50.9 However, you may pay more or less than the standard premium depending on your income.

How is your income established? Medicare uses your Modified Adjusted Gross Income (MAGI) from your latest tax return.

That means that the Part B premiums you pay in 2019 depend on the tax returns you filed in April 2018, for the income you received in 2017. Your current Part B premiums are calculated from what you made two years ago.

A lot can happen in two years! If you see a premium increase, but you’ve had significant life changes that have lowered your income since your latest MAGI, you may be able to qualify for a lower premium.

Before you go through all the effort, however, take a look at the Medicare income limits for each premium rate. You may be pleasantly surprised.

2019 Medicare Income Limits10

IncomePremium
Less than or equal to $85,000 (single) or $170,000 (married)$135.50 (standard premium)
$85,001–$107,000 (single) or $170,001–$214,000 (married)$189.60
$107,001–$133,500 (single) or $214,001–$267,000 (married)$270.90
$133,501–$160,000 (single) or $267,001–$320,000 (married)$352.20
>$160,001-$500,00 (single) or >$320,001-$750.000 (married)$433.40
>$500,000 or >$750,000 (married)$460.50

Since the median household income in the United States as of 2016 was $57,617, 11and less than 28%12 of households (including married couples) hit the $100,000 mark, most Medicare beneficiaries pay the standard premium.

If you get Social Security benefits, your Part B premium will automatically come out of your monthly Social Security checks. Otherwise, you’ll get a bill each month.

Lower Part B premiums

For individuals who make $84,999 or couples who make $169,999, the standard premium may be an easily managed cost. But what if your income is considerably less?

In some situations, you could be eligible for a lower premium.

Social Security recipients

Getting Social Security benefits may entitle you to pay a lower Part B deductible than the standard one, thanks to the Social Security Cost-of-Living Adjustment, or COLA.

The “hold harmless” provision says that if Part B’s deductible increases more than the cost-of-living increase Social Security accounts for, you may not have to pay the entire Part B premium.

Medicaid enrollees

If you’re eligible for Medicaid in addition to Medicare, your Part B premium may be paid by your state’s low-income subsidy Medicaid program.

Part B deductible

Medicare Part B includes a yearly deductible that’s separate from the Part A deductible. It’s also much lower and resets each year on January 1.

The standard Part B deductible in 2019 is $185.13 That means you’ll pay all qualifying medical costs until you meet this amount. After that, you’ll pay a copayment or coinsurance for medically necessary services.

Part B coinsurance

Once you’ve met the deductible, Medicare will pay for 80% of covered medical expenses, and you’ll pay the other 20%.

Medicare Part C premiums and deductibles

Medicare Part C, or Medicare Advantage (MA), is an alternative to Original Medicare. Medicare Advantage combines Part A and Part B (and in some cases Part D) into one plan that you buy on the open market from a private company.

All Medicare Advantage plans cover what Original Medicare does, but some may have extra benefits like dental, vision, and hearing aid coverage.

Also, some Part C plans include coverage for prescription drugs. Because different Medicare Advantage plans cover different items, the premiums and deductibles each plan offers will be different as well.

Part C premiums

MA plans are offered by private companies, so you may pay a monthly fee to your insurance company. This fee will be in addition to your Part B premium, which you’ll still pay to the SSA. Usually, your Part B premium will come directly out of your Social Security or Railroad Retirement Benefits, but you’ll get a separate bill from your insurance company.

Yes, you’ll still need to pay your Part B premium in a sense, even though you’ve chosen Medicare Advantage over Traditional Medicare.

While that sounds like a terrible deal, MA premiums are actually very low. In fact, sometimes they’re $0 above the standard Part B premium. You may even find a plan that gives you a rebate on your Part B premium.

That’s right. You may be able to get better coverage than Original Medicare while the insurance company pays you.

How is this possible? Medicare pays MA plans a flat rate for each enrollee. This flat rate is reimbursement for giving you the same coverage as Medicare Part A and Part B would.

In some areas, particularly in larger cities, the competition for enrollees is so high that it makes financial sense for a Medicare insurance company to offer the lowest possible premium to attract more consumers.

Generally, these plans come with fewer bells and whistles than other MA plans on the market, but you could snag a fabulous deal if you keep your eyes peeled during your Initial Enrollment Period and each year during Open Enrollment (October 15 through December 7).

Premiums for Medicare Advantage plans can vary widely and will depend on the plan’s features, but on average, MA plans add more value than they cost.14

The average monthly Medicare Part C premium for a plan with prescription drug coverage in 2019 is $28 (down $1.81 from 2018) and adds $88.41 of value to an individual’s monthly health care.15

Low-deductible plans with coverage for prescription drugs and additional services such as dental, vision, and long-term care will generally have higher premiums than high-deductible plans without any extra coverage.

Part C deductible

As mentioned above, Part C plans may have their own yearly deductibles depending on offered coverage. Many have a zero deductible, meaning the plan starts covering its full share of costs right away. In general, plans with higher deductibles have lower premiums and vice versa. A good rule of thumb is this: the more health care you expect to need, the lower the deductible you should get.

Once you meet your deductible, the plan’s copayments, coinsurance, or other cost-sharing rules take effect until you hit your Maximum Out-of-Pocket costs limit (known as MOOP) for in-network costs. After that, your MA plan pays all covered in-network costs.

What’s your maximum? As with other kinds of Medicare Advantage expenses, they vary per plan but meet Medicare’s requirement for minimal coverage.

In 2019, the Maximum Out-of-Pocket limit for in-network Medicare Advantage covered costs is $6,700.16

To give you an example of the costs of Part C plans, here is a sample AARP plan offered in 2019.

2019 AARP MedicareComplete Plan 2 (HMO)*
Premium$0 per month
Deductible$0
Out-of-pocket maximum$4,000 per year
Doctor visit$0 copayment
Specialist visit$45 copayment
Emergency room$90 copayment
X-rays and laboratory tests$3 to $8 copayment or 20% coinsurance
Urgent care$30 – $40 copayment
Mental health visit$40 copayment
Ambulance$200 copayment
Plan detailsH0609-027 (Using ZIP 85225)

* Data effective 10/07/2018. AARP MedicareComplete Plan is an HMO with a Medicare contract. Enrollment in this plan depends on contract renewal. † You must continue to pay your Medicare Part B premium. This is not a complete listing of plans available in your service area. For a complete listing, please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult medicare.gov. This information is not a complete description of benefits. Contact the plan for more details. Limitations, copayments, and restrictions may apply. Benefits, premiums and/or copayments/coinsurance may change on January 1 of each year.

Medicare Part D premiums and deductibles

Medicare Part D helps cover the cost of both generic and brand-name drugs via Prescription Drug Plans (PDPs) sold by private companies. You can get this coverage as part of a Medicare Advantage plan that offers prescription drug coverage (known as an MAPD plan) or as a stand-alone Part D plan if you have Original Medicare.

Because all Part D plans are offered by private companies, premium and deductible costs vary from plan to plan.

Part D premiums

If you have an MAPD plan, it will include your Part D premium. If you choose a stand-alone Part D plan, you may (if you have a high income) need to pay part of your premium directly to Medicare and part to your Part D plan’s insurance company.

Why so complicated? Like Medicare Advantage premiums, Part D premiums are made up of two parts:

  • An income-based portion, established by Medicare
  • A portion set by the insurance company that varies based on which plan you choose

The chart below shows Medicare’s portion of Part D premiums in 2019. If the income limits for each level look familiar, that’s because this is the same breakdown Medicare uses for Part B premiums. Remember that Medicare uses the MAGI (Modified Adjusted Gross Income) from your more recent tax return to calculate income.17

IncomeMedicare Portion of Part D Premiums
Less than or equal to $85,000 (single) or $170,000 (married)$0
$85,001–$107,000 (single) or $170,001–$214,000 (married)$12.40
$107,001–$133,500 (single) or $214,001–$267,000 (married)$31.90
$133,501–$160,000 (single) or $267,001–$320,000 (married)$51.40
>$160,001-$500,000 (single) or >$320,001-$750,000 (married)$74.90
>$500,000 (single) or >750,000 (married)$77.40

The remaining portion of Medicare Part D premiums vary depending on the plan you choose and the benefits that plan offers, such as which drugs are covered, copayments and coinsurance, your deductible, and more.

The average total monthly premium for Medicare Part D in 2019 is $32.50.18

Part D deductible, initial coverage, and catastrophic coverage

We have a confession. If this is your first introduction to Medicare Part D, the next section may confuse you. That’s because we’re not going to go into detail about how Part D’s deductible, Initial Coverage Limit, and Out-of-Pocket Threshold work here.

We’ve covered that in-depth on our Medicare Part D Plans page, so if any of this next bit feels like a foreign language, you may want to pause your reading here and beef up your Part D knowledge with the above link.

All good? Then let’s keep going.

Okay, so like with Medicare Advantage plans, your coverage will depend on the Part D plan you choose. You could have a low deductible, or even no deductible at all, for example. To ensure your costs aren’t too high, however, the Medicare program sets some limits. For 2019, these are those limits:

  • A deductible no higher than $415
  • An Initial Coverage Period no lower than $3,820
  • A Catastrophic Coverage Limit no higher than $5,10019

Also, thanks to the Affordable Care Act (ACA), the Donut Hole has been closed. In 2019, you’ll pay 25% of generic drug costs from the time you meet your deductible until you reach your out-of-pocket threshhold.20

Below is an example of a Part D plan from AARP, illustrating what costs you might pay for drug coverage.

2019 AARP MedicareRx Walgreens* (PDP)
Premiums$28.10 (average monthly)
Deductible$0 for Tier 1 and Tier 2
$415 for Tiers 3–5
CopaymentAs low as $0 for prescriptions filled at a Walgreens pharmacy
90-day supply$0 copayment for Tier 1 with preferred mail delivery pharmacy
Plan detailsS5921-383 (using ZIP 33601).

*Data effective 10/17/2018. The AARP MedicareRx Walgreens plan is a PDP with a Medicare contract. Enrollment in this plan depends on contract renewal.
†You must continue to pay your Part B premium.
This is not a complete listing of plans available in your service area. For a complete listing please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult medicare.gov.
The formulary and pharmacy network may change at any time. You will receive notice when necessary.
This information is not a complete description of benefits. Contact the plan for more information. Limitations, copayments, and restrictions may apply. Benefits, premiums and/or copayments/coinsurance may change on January 1 of each year.

By this time, you’ve probably gathered that Medicare isn’t free, nor does it cover all your health care expenses. Medicare Advantage programs may offer more coverage than Original Medicare, but what if you prefer to stick with Parts A and B? How can you pay a lower deductible or coinsurance? And what if you want coverage for other things like dental or vision?

You may be able to supplement your Medicare coverage with employer-provided coverage, but if that’s not possible, you may want to add a Medicare Supplement Plan.

Medicare Supplement, or Medigap, is coverage designed to help pay for some of the costs that Original Medicare doesn’t cover, such as deductibles, copayments, and coinsurance.

Some plans (called “innovative” Medigap policies) even offer coverage for things Medicare won’t pay for at all, although availability of these policies varies by state.

Like Medicare Advantage and Part C, Medigap policies are offered by private companies. Medicare regulates these plans carefully. With few exceptions, all plans of the same type offer precisely the same coverage: no better, no worse, no matter which company you purchase the policy from.

To learn what each plan covers, visit our Medigap page.

Still, insurance companies can (and do) charge different premiums for Medigap plans of the same type, so shopping around is essential.

Medicare supplement premiums

Medigap plans with basic coverage typically have lower premiums than those with more complete coverage. Each company sets its own rules for pricing each plan based on age, state of residence, and type of plan.

Medigap plans use one of three pricing methods. Here’s the difference between community-rated- vs. issue-age- vs. attained-age pricing:

  1. Community-rated (no age-rated) pricing:With this model, your premium is not based on age, but it may increase due to inflation and other factors. Example: Jon is 65 and Ramona is 70. They each purchase the same Medigap plan for a $130 monthly premium, even though they are different ages.
  2. Issue-age-rated (entry age-rated) pricing: Premiums are lower for younger buyers and will not increase based on age—but they may increase due to inflation and other factors. Example: Jon is 65 and Ramona is 70. They each buy the same Medigap plan at the same time. Jon pays a $125 monthly premium, while Ramona pays $145 because she is older.
  3. Attained-age-rated pricing: Premiums are lower for younger buyers but increase with age, inflation, and other factors. Example: Jon is 65 and Ramona is 70. They each buy the same Medigap plan. Jon pays a $125 monthly premium, while Ramona pays $145 because she is older. In five years, Jon pays $150 per month, and Ramona pays $170 as the rates increase for Jon’s and Ramona’s current ages.

Medicare supplement deductible

Medigap plans usually don’t have a separate deductible, but instead, they help cover the deductibles of Medicare Parts A and B.

The exception is Plan F, which comes in a high-deductible option.

The deductible for Plan F in 2019 is $2,240.21

Here’s an example of a Medicare Supplement Plan F from AARP in 2019.

2019 AARP Plan F*
Premium$179.04
Basic benefitsPlan pays 100%
Part A deductiblePlan pays 100%
Part B deductible and excess chargesPlan pays 100%
Skilled nursing facility coinsurancePlan pays 100%
Foreign travel emergency servicesPlan pays 80% after $250 deductible ($50,000 lifetime limit)
Plan detailsPlan F (using ZIP 92672)

Data effective 10/17/2019. *This is a Medigap Plan with a Medicare contract. Enrollment in this plan depends on contract renewal. †You must continue to pay your Part B premium.This is not a complete listing of plans available in your service area. For a complete listing, please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048), 24 hours a day/7 days a week or consult medicare.gov. The formulary and pharmacy network may change at any time. You will receive notice when necessary.This information is not a complete description of benefits. Contact the plan for more details. Limitations, copayments, and restrictions may apply. Benefits, premiums and/or copayments/coinsurance may change on January 1 of each year.

Late Enrollment Penalties

One of the hidden costs of Medicare comes in the form of a Late Enrollment Penalty (LEP). If you don’t enroll in Medicare as soon as you’re eligible, you may have an LEP attached to your premiums when you do eventually enroll.

Medicare, like many forms of health insurance, is a way to pool the resources of many people so they can then tap into those resources when medical costs arise.

The resources you give to the group are your premiums and any Medicare taxes you’ve paid. But if you haven’t paid your share of those taxes or sign up for Medicare only when your health worsens (this is possible because eligibility for Medicare is guaranteed despite preexisting health conditions), you’ll be pulling out far more than your fair share.

To prevent unfairness (and possible federal bankruptcy), Medicare adds an LEP to the premiums of Parts B and D for people who don’t enroll right away. If you have to pay for Part A, Medicare could add an LEP to that premium as well.

Compare Medicare costs

When it comes to comparing Medicare costs – from premiums to deductibles – the costs can vary significantly. We make it easy to compare plans in your area in two ways:

  • Use our Suggest-a-Plan tool to answer a few questions and get some personalized options.
  • Give us a call at 855-802-1206. If you’re ready to talk about your options, our licensed agents can help weekdays from 7 a.m. to 5 p.m. MT.

How can we best help you with your Medicare needs?

 

Sources:

    1. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    2. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    3. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    4. Medicare.gov, “Part A Costs
    5. Medicare.gov, “Medicare Costs at a Glance
    6. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    7. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    8. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    9. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    10. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    11. Census.gov, “Median Household Income in the United States
    12. Census.gov, “Income and Poverty in the United States: 2016
    13. CMS.org, “2019 Medicare Parts A & B Premiums and Deductibles
    14. US.Milliman.com, “State of the 2018 Medicare Advantage Industry: Stable and Growing
    15. CMS.org, “2019 Medicare Advantage and Part D Prescription Drug Program Landscape
    16. CMS.gov, “Prescription Drug Coverage – General Information
    17. CMS.gov, “Monthly Premium for Drug Plans
    18. CMS.org, “2019 Medicare Advantage and Part D Prescription Drug Program Landscape
    19. CMS.org, “Costs for Medicare Drug Coverage
    20. CMS.org, “Costs in the Coverage Gap
    1. gov, “F & J Deductible Announcements

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