As you move closer to retirement age, you’re likely preparing for the transition to Medicare. If so, you may be wondering where to begin. It’s always beneficial to start with the basics, including what you should expect to pay. So, how much does Medicare cost at age 65?
The Parts of Medicare
The Medicare program consists of four different parts. Each part comes with different costs depending on various factors, so it can be overwhelming to understand all the information. Many beneficiaries choose to use Medicare agents to help make sense of all the expenses.
To begin, though, let’s take a look at each part of Medicare.
The first part is Medicare Part A. Part A provides coverage for inpatient hospital stays, including room and board. Part A can also help cover skilled nursing facility stays, nursing home care, hospice care, and more.
Your work history determines how much you will pay for your Part A premium.
If you’ve worked in the U.S. and paid taxes towards Medicare for at least 40 quarters (10 years), you qualify for premium-free Part A. This means you pay $0 each month for Part A.
Without enough work credits, you will have a monthly premium. If you have less than 30 work quarters in the U.S., the premium will be around $499. If you have less than 40 work quarters but more than 30, you’ll pay about $274 each month.
Additionally, you will have a Part A deductible when you are formally admitted to a hospital as an inpatient. This deductible is $1,556 in 2022. Once you meet this deductible, you will pay a daily cost which varies depending on how many days you are in the hospital. For example, from days 61 to 90, you pay $389 each day.
You may be overwhelmed by these costs. Fortunately, Medicare Supplement (Medigap) plans can help cover some or all of your cost-sharing with Part A, depending on your plan.
Part B helps cover your outpatient medical services, including surgeries, lab work, doctor’s visits, and more.
Unlike Part A, everyone must pay a monthly premium for Part B, which is $170.10 in 2022. However, you may have to pay more for Part B if you make over a certain amount of money.
Each year Social Security (SS) refers to your IRS tax return from two years prior. If that tax return shows that your income level was above a certain amount, you will pay more for Part B. This extra charge is referred to as an Income Related Monthly Adjustment Amount (IRMAA) charge.
For example, in 2022, SS will look at your 2020 tax return to determine if you need to pay more for Part B. Fortunately, it is possible to appeal this charge if you can prove you now make less money than you did two years ago.
Part B covers 80% of Medicare-approved services, leaving you responsible for 20%. However, Medigap plans can help cover some or all of the 20%, depending on your plan.
Part C is also known as the Medicare Advantage plan program. Advantage plans are a different way to get your Part A, and Part B benefits through a private insurance carrier instead of the federal government. You agree to have a private company handle your inpatient and outpatient benefits when you sign up for one of these plans.
These plans typically have a $0 or low monthly premium cost. In exchange for a lower premium, you’ll have more out-of-pocket costs. In other words, you will pay for medical services as you go. If you are a generally healthy person who does not need to see the doctor often, this can be a cost-effective option.
If not, your out-of-pocket costs can add up quickly. A maximum out-of-pocket amount for Advantage plans keeps you from spending too much in one year, but that maximum can be as high as $7,550 in 2022.
Medicare Part D provides coverage for your retail prescription medications. Private insurance carriers also offer these plans to Medicare beneficiaries.
Each Part D plan has a premium, so the exact monthly cost varies from plan to plan depending on what the carrier charges. Like Part B, your Part D premium can be higher depending on your IRMAA determination. Some Part D plans also have a yearly deductible. But insurance companies can charge no more than $480 for their plan’s deductible in 2022.
Additionally, you will have copays for your different medications. Each plan has a drug formulary (list of covered medications) that shows the cost of various medications. Be sure to check each plan to see if your medications are covered. Insurance companies also categorize the medications into five different tiers.
Understanding all the costs of Medicare and its supplemental plans can be confusing at times. It’s best to start your research ahead of time to prepare accordingly and create estimates for your expenses. Also keep in mind that Medicare costs can change from year to year, so be sure to stay up to date.