Medicare Costs

Medicare Costs

The Costs of Original Medicare

As a rule you do not pay a monthly premium for Medicare Part A if you and or your spouse paid Medicare taxes while working. If you do not quality for premium-free Part A, you may be eligible to purchase Part A if:

  • You are 65 or older and you have Part B
  • You are under 65 and have a disability and your premium-free Part A coverage ended as a result of you returning to work.

If you purchase Part A, you will pay up to $413 per month (2017). In most instances, if you have chosen to purchase Part A, you must also have Part B and pay a monthly premium for both.

Medicare Part B beneficiaries pay a premium each month for Medicare Part B. If you receive Social Security, RRB or Office of Personnel Management benefits, your Part B premium will automatically be deducted from your benefit payment.

The majority of subscribers will pay the standard Medicare Part B premium amount of $134 in 2017 (may be higher depending on your income). Social Security will inform you each year if you need to pay more than the standard premium.

You will pay the standard premium amount if the following applies:

  • You enroll in Medicare Part B for the first time in 20
  • You do not receive Social Security benefi
  • You are billed directly for Medicare Part B premiu
  • You receive Medicare and Medicaid, and Medicaid pays for your premium
  • Your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount. If it is, you will pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). Income Related Monthly Adjustment Amount (IRMAA) is an extra charge added to your premium.

Original Medicare Out-of-Pocket Costs

Medicare Part A hospital inpatient deductibles and coinsurance fees are as follows:

  • $1,316 deductible for every benefit timeframe
  • Days 1 – 60: $0 coinsurance for every benefit timeframe
  • Days 61 – 90: $329 coinsurance each day of every benefit timeframe
  • Days 91 and beyond: $658 coinsurance for every “lifetime reserved day” after day 90 for every benefit timeframe (up to 60 days over your lifetime)
  • Beyond lifetime reserve days: all costs

Medicare Part B (Medicare Insurance) deductibles and coinsurance fees are capped at $183 per year. Once your deductible is met, you typically pay 20% of the Medicare-approved amount for most doctor services. This also includes services during your hospital inpatient visit, outpatient therapy and durable medical equipment (i.e. walker, wheelchair or hospital bed that’s specifically order by your doctor for use in your home).

Medicare Part D Costs

Medicare Part D (Medicare prescription drug coverage) costs will vary depending on your plan. There are four different stages of costs for Medicare Part D plans:

  • An annual deductible
  • An initial coverage period
  • A coverage gap (also referred to as the Donut Hole)
  • A catastrophic coverage

Medicare Part D Donut Hole

The majority of Medicare Part D plans have a gap coverage which is also referred to as the Medicare Donut Hole. Once your Medicare Part D plan has paid its portion to cover your prescription drugs, you then must pay all of the out-of-pocket costs for the prescription drugs up to a certain limit.

The Donut Hole cost will vary from year to year however for 2017, you and their Medicare Part D plan have reached $3,700 on covered prescription drugs, you are in the gap coverage.

Anyone with Medicare who receives additional help (Extra Help) paying Medicare Part D costs will not enter into the gap coverage.

Medicare Extra Help Program

The Medicare Extra Help program is a government subsidy designed to assist those with limited income to pay for Medicare drug plan costs (Medicare Part D), including premiums, deductibles, co-payments and coinsurance requirements.

Here are a few ways to find out if you are eligible for Medicare’s prescription drug Extra Help program:

If you receive a purple notice it means you are automatically qualified as a result of the following:

  • You have Medicare and Medicaid.
  • You are in a Medicare Savings Program.
  • You receive Supplemental Security Income (SSI) benefits.

If you receive a yellow or green notice it means you automatically qualify for Medicare’s Extra Help program because you qualify for Medicare and Medicaid and currently receiving benefits through Original Medicare. You will be automatically enrolled in the prescription drug program unless you decline or join a program on your own.

If you receive an Extra Help “Notice of Award” from Social Security that will mean Medicare may believe you are eligible for a Medicare Savings Program (MSP). This form will notify you about MSP’s and the Extra Help program availability for the Medicare prescription drug coverage.

If you receive an orange notice stating yearly changes about your copayment amount if Social Security determines that you still automatically qualify for Extra Help, however this will mean you have different copayment levels the following year.

If you receive Supplemental Security Income (SSI) you can use your letter of award from Social Security as proof that you have SSI.

Medicare Savings Program

Medicare Savings Programs are benefits managed by each state targeting to share the costs of Medicare. These programs were created to provide financial assistance and help individuals handle Medicare costs.

Your state may help pay for your Medicare premiums as well as some hospital insurance, medical insurance, coinsurance, copayments and deductibles.

Here are the 4 savings programs in detail:

  • Qualified Medicare Beneficiary Program (QMB)
    • For the year 2016, QMB applies to individuals with a monthly income of up to $1,010, who could tap into a resource limit of up to $7,280, or married couples with a monthly income limit of up to $1,355, in which case the resource limit is $10,930.
    • The program helps pay for Medicare Part A and B premiums, coinsurance, copayments and deductibles.
  • Specified Low Income Medicare Beneficiary Program (SLMB)
    • SLMB can be enjoyed by individuals with a monthly income for the year 2016 of up to $1,208, or married couples earning up to $1,622 per month.
    • The resource limit in this case is the same as above, namely $7,280 and $10,930, respectively.
    • The program covers Medicare Part B premiums only.
  • Qualifying Individual Program (QI)
    • These benefits are applied on a first-come, first-serve basis, and applications must be renewed each year.
    • QI beneficiaries from the previous year are granted priority. Those who qualify for Medicaid lose their eligibility for QI benefits.
    • The monthly income limit is $1,357 for individuals and $1,823 for married couples.
    • The resource limits above applies in this case as well, and this program also only covers Medicare Part B premiums.
  • Qualified Disabled and Working Individual Program (QDWI)
    • In order to qualify for the QDWI, you should meet at least one of these criteria:
      • be disabled, working, and under 65
      • going back to work meant you lost your Medicare Part A coverage
      • your state offers you no medical assistance
      • your entitlement is in line with your state’s requirements
    • In this case, qualifying beneficiaries are those with an individual monthly income of up to $4,045, or married couples earning up to $5,425 per month.
    • The program only covers Medicare Part A premiums up to $4,000 per individual or $6,000 per married couple.

When you qualify for any of the first three programs, you are automatically also entitled to Medicare Extra Help, which applies to Medicare prescription drugs.


How much does the average Medicare beneficiary spend in out of pocket costs year?

Medicare premiums and deductibles will vary depending upon the plan and options you select.

Is there help if I can’t afford Medicare premiums?

There is help for those that cannot afford Medicare premiums. There are Medicare Savings Programs (MSP) which pay for Medicare Part A and Medicare Part B premiums, deductibles, coinsurance and copays for beneficiaries with limited income.

Who is eligible for "premium-free Part A"?

In order to qualify for "premium-free Part A" you must be 65 or older as well as the following:

  • You currently receive retirement benefits from Social Security or the Railroad Retirement Board.
  • If you are eligible to receive Social Security or Railroad benefits however you have not enrolled.
  • If you or your spouse received a Medicare-covered government employment.

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