In addition to taking eligibility into account when you are researching Medicare, you might also consider how coverage can impact your wallet. Many older Americans live on a fixed income or have to budget carefully during retirement and the cost associated with healthcare can have a big role in the decision-making process when it comes to purchasing care plans.
What’s the difference between Medicare Part A, Medicare Part B, and Part D?
Hospital, insurance, and prescription drug coverage through Medicare are broken into three different parts, Medicare Part A, Medicare Part B, and Medicare Part D.
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Medicare Part A is hospital insurance, covering hospital expenses including inpatient hospital stays, skilled nursing care in a nursing facility, hospice care, and home health-care services.
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Medicare Part B is health insurance, covering necessary medical services like doctor visits, lab tests, x-rays, outpatient care, medical care, and preventative services. Part B also includes coverage for wheelchairs, walkers, and other medically necessary durable equipment.
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Medicare Part D is prescription drug coverage.
While Medicare Part A and Medicare Part B complement each other, coverage in each part does not overlap. For full medical coverage, users should enroll in both Part A and Part B.
What do Medicare Part A premiums cost?
The cost of a Medicare Part A plan exists on a sliding scale, depending on your retirement benefits.
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Those who are age 65 and older can receive premium-free Medicare Part A if you currently receive (or are eligible to receive but have not filed for) retirement benefits from Social Security or the Railroad Retirement Board, or if you or your spouse previously had Medicare-covered government employment.
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For those who are under age 65, premium-free Medicare Part A is available if you’ve received Social Security or Railroad Retirement Board disability benefits for 24 months, or if you have End-Stage Renal Disease (ESRD), which is terminal kidney failure.
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If you do not fall into the categories covered in the cases above, the cost of the Medicare Part A premium depends on the amount of Medicare taxes you have paid out. As a frame of reference, the standard Part A premium costs $422 a month for people who have paid Medicare taxes for less than 30 quarters (7.5 total years) and costs $232 for people who have paid Medicare taxes for 30-39 quarters (between 7.5 and 9.75 total years).
If you don’t enroll in Part A when you first become eligible but decide that you’d like to enroll down the line, you may face a Part A late enrollment penalty, which increases your premium by up to 10 percent each month.
What do Medicare Part A deductibles and copays cost?
Medicare Part A, which covers expenses for hospital stays, nursing home care, home health services, and hospice, carries a $1,340 deductible for each benefit period, which is what you would be required to pay for out of pocket before Medicare insurance kicked in.
In addition to a deductible, coinsurance costs go into effect once you’ve hit a specific number of days of inpatient hospital care used over each benefit period:
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After 61 days of an inpatient hospital stay, coinsurance costs $335 per day
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After 91 days, coinsurance costs $670 for every “lifetime reserve day” in each benefit period. Users have up to 60 “lifetime reserve days” over the course of their lifetime
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For visits beyond the “lifetime reserve days,” you are responsible for paying all remaining costs
A limited amount of home health care is covered in full under Medicare Part A, but only under certain conditions. And if durable medical equipment and supplies are part of that care, you will have to pay 20 percent of the Medicare-approved cost. Hospice care is also included as a Part A Medicare. The majority of hospice costs are covered, with some exceptions.
What do Medicare Part B premiums cost?
Medicare Part B premiums are automatically deducted from your Social Security, Railroad Retirement Board, or Office of Personnel Management benefits; if you don’t receive these benefits, you will receive a bill. The cost of Medicare Part B premiums depends on your income level and the number of Social Security benefits you receive:
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If you made less than $85,000 as an individual or less than $170,000 for couples who file jointly on your 2016 tax returns, then the standard 2018 Medicare Part B premium costs $134 each month. If you made between $85,000 and $107,000 as an individual, or between $170,000 and $214,000 as a couple, the monthly premium is $187.50.
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If you made between $107,000 and $133,500 as an individual on your 2016 taxes or had a joint income between $214,000 and $267,000, the monthly premium for Medicare Part B in 2018 is $267.90.
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Individuals who made between $133,500 and $160,000 and couples who made between $267,000 and $320,000, the monthly premium is $348.30.
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And for those individuals who made above $160,000 in 2016 and couples who brought in over $320,000, the monthly premium is $428.60
If you don’t enroll in Part B when you first become eligible and instead decide to enroll down the line, you may face a Part B late enrollment penalty that increases your monthly premium. Be sure to enroll on time to avoid these added costs.
What do Medicare Part B deductibles and copays cost?
Medicare Part B, which serves as health care insurance, carries an annual deductible of $183. After meeting your deductible, you are responsible for a 20 percent copay of the Medicare-approved amount for the vast majority of doctor services, outpatient therapy, and durable medical equipment. This is why it’s important to check in with your healthcare provider prior to receiving their medical services to make sure they take Medicare insurance and avoid unnecessary out-of-pocket expenses.
What does Medicare Part D prescription drug coverage cost?
Researchers have estimated that 25 percent of people between the ages of 65 and 69 take at least five prescription drugs to treat chronic conditions, and a staggering 46 percent of those between the ages of 70 and 79. With the cost of prescription drugs ever on the rise, purchasing a Medicare Part D plan could end up saving you thousands of dollars in the long run.
The cost of Medicare Part D prescription drug coverage depends on your income level:
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Medicare Part D prescription drug coverage is included in the monthly premium for people who made less than $85,000 and couples who made less than $170,000 on their 2016 tax returns.
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For individuals who made between $85,000 and $107,000 and couples who made between $170,000 and $214,000, Part D is only an additional $13 per month on top of your monthly Medicare premium.
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Individuals who made between $107,000 and $133,500 and couples whose income was between $214,000 and $267,000, will pay an additional $33.60 per month on top of their monthly Medicare premium for a Part D plan.
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Those who made between $133,500 and $160,000 and couples who brought in between $267,000 and $320,000, Part D is an additional $54.20 per month on top of their monthly premium.
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People who made upwards of $160,000, and couples who brought in over $320,000, will pay an additional $74.80 per month on top of the monthly premium for their Medicare Part D plan.
How much will Medicare Part D prescription drug coverage deductibles and copays cost?
The annual Medicare Part D deductible varies based on the plan you choose, but the overall cost will not exceed $405. Prescription drug coverage can include copayments or coinsurance costs that also vary per plan.
Many Medicare prescription drug plans, however, include what’s known as a coverage gap, which places a temporary limit on how much you can spend on prescription drugs. Sometimes referred to as the “donut hole,” the coverage gap will kick in once you have spent $3,750 on covered drugs in the course of a year. You can avoid falling into the “donut hole” by making the following changes to your prescription drug purchasing habits:
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Buy Generic Medications. Many popular brand name prescription drugs have generic options available, which significantly reduce the cost of medications. The Food and Drug Administration requires that generic medications have the same ingredients as their big-name counterparts, so you won’t have to worry about not taking the right medications if you choose to go with the generic option.
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Order Medications In Advance Via Mail. Many Medicare Part D prescription plans actually offer medications at a discount if you order a 3-month supply by mail instead of going to pick them up at the pharmacy each month. You could even talk to your pharmacy about buying a 90-day supply in advance to see if they would price match what the mail-in rate would be.
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Ask For A Discount From The Manufacturer. Pharmaceutical companies have the ability to discount their drugs, either directly to consumers or doctor’s offices. You can research your medication to find out if the manufacturer offers consumer discounts, or talk to your physician about inquiring on your behalf.
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Consider Receiving Financial Aid. The Low-Income Subsidy Program is a federal program that provides financial assistance to those with limited income for Part D prescription costs. In addition, some states provide low-income seniors with financial aid to pay for certain medical expenses, including prescription medications. You would have to review the details of each specific program to make sure that you qualify.
If you’ve attempted all of the above but still end up spending more than $5,000 in out-of-pocket costs, you leave the coverage gap and receive catastrophic coverage, which allows you to pay a small coinsurance amount for the rest of the year’s covered drugs.
If you don’t enroll in Part D when you first become eligible but decide to enroll down the line, you may face a Part D late enrollment penalty that increases your coverage costs.
