While Medicare is not free of charge, placing a price tag can be difficult considering the nature of the program. The four parts of Medicare – Medicare A, B, C, and D, and the supplement plan – Medigap – are designed for different uses. Despite the numerous discount and assistance programs open to beneficiaries, the final cost depends on which plans a beneficiary enrolls in.
What determines Medicare Costs?
The cost of Medicare is determined by your state of residence, your income, and the kind of supplemental coverage you chose. The best approach to understanding the costs of Medicare is to treat the parts separately.
Medicare Cost – Part A
Medicare Part A is free for most people. The only condition for eligibility is to have worked for over ten years in the United States. The government pays the Medicare Part A premiums for beneficiaries who fulfill this condition through their payroll taxes. This is why almost every Medicare beneficiary qualifies for Part A at zero cost.
However, if you do not meet this condition, you may have to pay for your Part A, which costs around $471 per month. A pro-rated premium is available at $259/month, open to people with over 30 quarters of work experience but less than 40 quarters. However, such potential buyers must have stayed in the United States as legal residents for at least five years.
Medicare Cost – Part B
Medicare Part B is not free. Beneficiaries are expected to pay premiums according to their adjusted household gross (MAGI) income. The Social Security office determines the exact premium payable on Medicare Part B by checking the beneficiary’s tax return over the previous two years.
The MAGI is influenced by the money earned through investment dividends, interest, and wages. Other contributors include tax-deferred pensions and Social Security benefits. In the case of beneficiaries who filed jointly with a spouse, the premiums will be estimated per spouse, according to their married income. However, each spouse is treated as an individual beneficiary and expected to pay their Part B premium.
The notification for the annual premium comes in December or early January through mail from Social Security.
Medicare Cost – Part C
Only private health insurance companies can provide Medicare Advantage or Part C plans. Hence, beneficiaries can only buy from them. The exact cost will vary, depending on the requirements of the private health insurance provider you are working with. However, there is a limit to how much a beneficiary can spend on out-of-pocket expenses.
Centers for Medicare and Medicaid Services (CMS) puts the average monthly premium at a possible $21 for 2021.
Medicare Cost – Part D
Medicare Part D is designed to cover prescription drugs and can only be purchased through Medicare-approved private insurance companies. The costs for Medicare Part D differ according to the income of the beneficiary and the chosen plan. There are several plans to choose from – up to 20 in some states. An average Medicare Part D plan costs around $15 per month for most states. Part D’s base premium is payable by every beneficiary, except people with higher incomes – who pay higher.
What is the cost of Medigap?
Medigap or Medicare supplement insurance are plans designed to cover the costs that are not included in the original Medicare coverage. Only private providers offer this set of plans, and they determine the exact premium payable based on the age, needs, and locations of the beneficiaries.
On average, you can spend between $20 and $500 on your Medigap premiums every month. We recommend that you compare the plans and prices of multiple Medigap providers before settling for the most favorable option.
How do you make Medicare payments?
Beneficiaries on federal retirement benefits will have their Medicare Part B premiums deducted from their Social Security checks. The Part D premiums can also be deducted from the benefit checks, depending on the insurer’s preferences.
Beneficiaries who are not on federal retirement benefits will be served a monthly Medicare Premium Bill for the parts of Medicare they are subscribed to. The bills are payable through the online service of your bank. Alternatively, you can mail back a check or money order payment, as well as use debit and credit cards.
Medicare Easy Pay is a dedicated payment method for Medicare Premium Bills. It is designed to remove the payments automatically from a bank account linked by the beneficiary. The copays and deductibles go to the healthcare providers directly.
Are Medicare Premiums taxed?
Medicare premiums are tax-deductible as part of the medical expenses of the beneficiary. For instance, if the beneficiary’s annual total medical expenses are more than 10% of their Adjusted Gross Income, it becomes tax-deductible. This arrangement also excludes some part of their income from being tax-deductible.
If you are not sure about your Medicare premiums and taxation, please speak to a tax professional for proper guidance.
How can you minimize your Medicare costs?
There are a few ways to lower your Medicare costs, including Medicare Savings Program and the Medicare Extra Help Program.
The Medicare Savings Program is targeted at low-income Medicare beneficiaries, so they can conveniently pay their original Medicare premiums, deductibles, and copays. The Medicare Extra Help program is designed to help low-income beneficiaries with their prescription drug coverage.
There is also Medicaid, which is a government-funded health insurance program established for low-income Americans. The eligibility for Medicaid differs across states – not all states are eligible.
Overall, the best way to lower your Medicare costs is to go for the best plan and program structure. But it is also important to note that the benefits and coverage are more robust in some plans than others
Talk to the Experts
Do you have any questions on Medicare costs or professional help in understanding the best coverage for you? Reach out to us today. Our Medicare experts are always available to discuss your needs and answer your questions.