Medicare has a monthly premium, a yearly deductible, and copays at the point of care

Medicare is not free. You pay a monthly premium for Part B (doctor visits and outpatient care), a yearly deductible before coverage kicks in, and then copays or coinsurance every time you use a service. Part A (hospital care) is usually premium-free if you or your spouse paid Medicare taxes for at least 10 years, but it has its own deductible. Part D (prescription drugs) adds another monthly premium. The exact amount you pay depends on your income, which parts you choose, and which insurance company you pick for Part D.

Most people on Medicare pay something every month. The size of that payment is not fixed — it changes year to year, and it can change based on how much money you earn. If you delay signing up when you first become may be able to access, you may pay a permanent penalty on top of your regular premium.

Key Takeaways

  • Part B premiums are deducted from your Social Security check each month, and the amount rises each year and can be higher if your income is above a certain threshold.
  • You pay a yearly deductible for Part B before Medicare starts to pay its share, and then you pay a percentage of the cost (coinsurance) for most services.
  • Part A has a separate deductible that applies per hospital stay, not per year, and the amount is higher than Part B's deductible.
  • Part D premiums vary widely depending on which drug plan you choose, and you pay more if you enroll late without a valid reason.
  • If your income is above $97,000 (single) or $194,000 (married), you pay an extra surcharge on top of your Part B and Part D premiums.

Part B premiums and what they cover

Part B covers doctor visits, outpatient surgery, lab tests, imaging, and some preventive care. The standard Part B premium for 2024 is $164.90 per month for most people, but this amount changes every January. If you enroll late — more than 12 months after you first become may be able to access — you pay a 10% penalty on top of your premium for each year you delayed, and that penalty is permanent.

The premium is usually taken directly from your Social Security payment. If you are not yet collecting Social Security, Medicare sends you a bill. If your income is above $97,000 (single) or $194,000 (married filing jointly), you pay an additional surcharge called Income-Related Monthly Adjustment Amount (IRMAA). This surcharge can double or triple your Part B premium depending on how much over the threshold you are.

Part B deductibles and coinsurance

After you pay your monthly premium, you also pay a yearly deductible before Part B starts to cover anything. For 2024, the Part B deductible is $240. Once you meet that deductible, Medicare pays 80% of the approved cost for most services, and you pay the remaining 20% (coinsurance). This coinsurance continues all year — there is no out-of-pocket maximum under Original Medicare, meaning your costs can keep climbing if you need a lot of care.

Some services are covered at 100% after you meet the deductible — preventive care like annual wellness visits, cancer screenings, and vaccines. But if you need physical therapy, mental health care, or other ongoing treatment, you will pay coinsurance on every visit. The 20% coinsurance can add up quickly if you see specialists or need frequent care.

Part A deductibles for hospital stays

Part A covers inpatient hospital care, skilled nursing facility care, hospice, and some home health services. Most people do not pay a monthly premium for Part A because they or their spouse paid Medicare taxes for at least 10 years. However, Part A has a deductible that is separate from Part B's deductible and is much higher — $1,632 per benefit period in 2024.

A benefit period starts when you enter the hospital and ends 60 days after you leave. If you go back to the hospital more than 60 days later, a new benefit period begins and you pay the deductible again. After you pay the deductible, you pay coinsurance for days 1 through 60 ($408 per day in 2024), and higher coinsurance for days 61 through 90 ($816 per day). If you stay longer than 90 days, you pay even more. Skilled nursing facility care also has coinsurance — you pay $204 per day for days 1 through 20, and $408 per day for days 21 through 100.

Part D prescription drug premiums and costs

Part D is optional, but if you do not enroll when you first become may be able to access and you go without creditable drug coverage, you pay a permanent penalty when you do join. The penalty is 1% of the national average Part D premium for each month you were not covered. Part D premiums vary widely — from about $7 to $100 per month depending on which insurance company you choose and which drugs are on their formulary.

Once you enroll in Part D, you pay a yearly deductible (up to $545 in 2024), then copays or coinsurance for each prescription. After you and your plan spend a combined $5,030 on drugs in 2024, you enter the "donut hole" — a gap where you pay a higher percentage of drug costs until your out-of-pocket spending reaches $7,860. After that, you pay a small copay for the rest of the year. The exact copay amounts and which drugs are covered depend on your plan.

How Medigap and Medicare Advantage change what you pay

Original Medicare (Part A and Part B) leaves you responsible for deductibles, coinsurance, and copays. Many people buy a Medigap (supplemental insurance) policy to cover some or all of these costs. Medigap premiums range from $100 to $300+ per month depending on your age, location, and which plan you choose. In exchange, Medigap covers your coinsurance and deductibles, so you pay less out of pocket when you use care.

Medicare Advantage is an alternative to Original Medicare. It is run by private insurance companies and usually has lower or no monthly premiums, but it has its own deductibles, copays, and out-of-pocket maximums. Medicare Advantage plans often include Part D drug coverage and dental or vision benefits that Original Medicare does not. However, you are limited to doctors and hospitals in the plan's network, and you may need prior authorization for certain services.

Income-based surcharges (IRMAA) and how they work

If your income is above a certain level, you pay more for Part B and Part D. The income thresholds for 2024 are $97,000 (single) or $194,000 (married filing jointly). Medicare uses your tax return from two years ago to calculate your income, so your 2024 surcharge is based on your 2022 income. If your income drops — because you retire, sell a home, or have other major life changes — you can ask Medicare to recalculate your surcharge.

The surcharge is tiered: the higher your income, the more you pay. Someone with income of $110,000 pays a different surcharge than someone with income of $150,000. The surcharge applies to both Part B and Part D, and it is added to your regular premium. If you are married and file jointly, both spouses' income is combined to determine whether you cross the threshold.

Late enrollment penalties and how to avoid them

If you do not enroll in Part B when you first become may be able to access at 65, you pay a 10% penalty on your premium for each year you delayed. This penalty is permanent — it does not go away even after you finally join. The same rule applies to Part D: if you go without creditable drug coverage for more than 63 days, you pay a 1% penalty for each month you were not covered, and this penalty also lasts as long as you have Part D.

There are exceptions. If you were still working and covered by your employer's health plan at 65, you can enroll in Part B without penalty during an 8-month window after you leave that job or lose the coverage. If you had creditable drug coverage through an employer or union, you do not pay the Part D penalty. The key is to document your coverage and enroll as soon as your exception period ends.

Frequently Asked Questions

Does Medicare cover everything once I pay my deductible?

No. Original Medicare covers 80% of approved costs after you meet the deductible, and you pay 20% coinsurance for most services. Some preventive care is covered at 100%, but ongoing treatment like physical therapy or mental health visits still requires you to pay coinsurance. There is no annual out-of-pocket maximum under Original Medicare, so your costs can continue to rise.

What happens if I cannot afford my Medicare premiums?

If your income is low, you may may have access to for Medicaid, which can pay your Part B premium and help with deductibles and coinsurance. Each state runs its own Medicaid program with different income limits. You can also contact your local Area Agency on Aging or call 211 to learn about programs that help pay Medicare costs for people with limited income.

Can I change my Part D plan if the premium goes up?

Yes. You can change Part D plans during the Annual Enrollment Period (October 15 to December 7 each year), and the change takes effect January 1. If your plan's premium increases significantly or your drugs are no longer covered, switching to a different plan may lower your costs. You can compare plans on Medicare.gov.

Do I have to pay for preventive care under Medicare?

Most preventive services are covered at 100% after you meet your Part B deductible — or with no deductible at all for some services like annual wellness visits and cancer screenings. However, if your doctor finds something during a preventive visit and you need treatment, that treatment is subject to your regular deductible and coinsurance.

What is the difference between what I pay for Original Medicare versus Medicare Advantage?

Original Medicare has a monthly Part B premium, yearly deductibles, and 20% coinsurance with no out-of-pocket cap. Medicare Advantage usually has a lower or zero premium but has copays, deductibles, and an annual out-of-pocket maximum (capped at $8,550 for 2024). Medicare Advantage also limits you to in-network providers, while Original Medicare lets you see any doctor who accepts Medicare.