Most people pay for Medicare through payroll taxes while working, then pay premiums and out-of-pocket costs once enrolled

You do not get Medicare free. Most people fund it two ways: first through Medicare taxes taken from paychecks during your working years, then through premiums, deductibles, and copayments once you turn 65 and enroll. The amount you pay depends on your income, which parts of Medicare you choose, and how much medical care you actually use.

If you worked at least 10 years and paid Medicare taxes, you may have access to for Part A (hospital insurance) at no monthly premium when you turn 65. Part B (doctor visits and outpatient care) costs a monthly premium that changes each year — in 2024 it was $164.90 per month for most people, though higher earners pay more. Part D (prescription drugs) and supplemental coverage cost extra. Even with Part A free, you will pay deductibles when you use the hospital, and copayments when you see doctors.

Key Takeaways

  • Part A hospital insurance is free if you worked at least 10 years and paid Medicare taxes, but you pay a deductible ($1,632 in 2024) when admitted to the hospital.
  • Part B doctor insurance costs a monthly premium (around $165 in 2024) plus 20 percent copayment for most services after you meet the annual deductible.
  • Part D prescription drug coverage requires a separate monthly premium that varies by plan, typically $7 to $100 per month.
  • Higher earners pay surcharges on Part B and Part D premiums based on income from two years prior, which can add $70 to $560 per month.
  • Supplemental insurance (Medigap) or Medicare Advantage plans add another monthly cost but may lower your out-of-pocket expenses for doctor visits and hospital stays.

How much you pay for Part A and Part B

Part A costs nothing per month if you or your spouse paid Medicare taxes for at least 10 years. You do not pay a premium when you turn 65. However, you pay an inpatient deductible — $1,632 in 2024 — each time you are admitted to the hospital. If you stay more than 60 days, you also pay a daily copayment ($408 per day in 2024 for days 61 through 90). Skilled nursing facility care and home health services have their own cost structure.

Part B costs a monthly premium. For 2024, the standard premium was $164.90 per month, but this amount increases most years. You also pay an annual deductible ($240 in 2024) before Part B starts covering anything. After you meet the deductible, you typically pay 20 percent of the cost for doctor visits, lab tests, imaging, and outpatient procedures. Medicare pays the other 80 percent. There is no upper limit on how much you can pay out of pocket under Original Medicare.

If you did not work long enough to may have access to for free Part A, you can still enroll and pay a monthly premium — $278 per month in 2024 if you have 30 to 39 quarters of work history, or $505 per month if you have fewer than 30 quarters. Your spouse's work history may also count toward your may be able to access.

What Part D prescription drugs cost

Part D is optional but recommended if you take regular medications. Each plan has a different monthly premium, typically ranging from $7 to $100 per month depending on the insurance company and which drugs the plan covers. You also pay a deductible (up to $545 in 2024) before the plan starts paying for drugs. After you meet the deductible, you pay a copayment or coinsurance for each prescription.

Part D has a coverage gap called the "donut hole." Once you and your plan have spent $5,030 on drugs in 2024, you enter the gap and pay a higher percentage of drug costs until you reach $7,781 in total spending. Then catastrophic coverage kicks in and you pay only a small copayment for the rest of the year. The exact amounts change yearly.

If you do not enroll in Part D when you first become may be able to access and later decide you want it, you may pay a late enrollment penalty — an extra percentage added to your premium for as long as you have Part D. The penalty is 1 percent of the national average premium for each month you delayed, so waiting several years can add significantly to your cost.

Income-based surcharges for higher earners

If your income is above a certain threshold, you pay higher premiums for Part B and Part D. These surcharges are called Income-Related Monthly Adjustment Amounts (IRMAA). Medicare uses your income from two years before you enroll, so if you enroll in 2024, Medicare looks at your 2022 tax return.

For 2024, if you filed taxes as a single person and your income was above $97,000, you paid a surcharge on top of your Part B premium. A married couple filing jointly with income above $194,000 also paid surcharges. The surcharge ranges from $70 to $560 per month depending on how much your income exceeds the threshold. Part D has its own income thresholds and surcharges, typically $12 to $77 per month.

If you have a major life event — retirement, divorce, or death of a spouse — that significantly lowers your income, you can ask Medicare to recalculate your IRMAA using your current year income instead of the two-year-old figure. You will need to file a form and provide proof of the event.

Supplemental insurance and Medicare Advantage costs

Original Medicare (Part A and Part B) leaves you responsible for deductibles and 20 percent copayments. Many people buy Medigap (supplemental insurance) to cover these gaps. Medigap plans are sold by private insurance companies and have their own monthly premiums, typically $100 to $300 per month depending on your age and the plan type. Medigap does not cover prescription drugs, so you still need Part D.

Medicare Advantage (Part C) is an alternative to Original Medicare. It is offered by private insurance companies and usually costs $0 to $100 per month in premiums, though some plans charge nothing. However, Medicare Advantage plans typically have lower deductibles and copayments than Original Medicare, and many include prescription drug coverage built in. The trade-off is that you must use doctors and hospitals in the plan's network, and you may need prior approval for certain services.

Neither Medigap nor Medicare Advantage is right for everyone. Medigap works best if you have favorite doctors outside a network and want predictable costs. Medicare Advantage works best if you are willing to use in-network providers and want lower monthly premiums. You can switch between them during the annual open enrollment period from October 15 to December 7.

What happens if you delay enrolling

If you do not enroll in Part B when you first become may be able to access at 65, you pay a late enrollment penalty — 10 percent of the standard Part B premium for each 12-month period you delayed. If you wait three years, your premium is 30 percent higher permanently. The same penalty applies to Part D.

There are exceptions. If you or your spouse are still working and covered by an employer health plan, you can delay Part B without penalty. You have eight months after you or your spouse stop working to enroll without penalty. If you miss this window, the penalty applies. You should contact Social Security or Medicare to confirm you may have access to for this exception before delaying.

Frequently Asked Questions

Do I have to pay Medicare taxes while I am working?

Yes. Medicare tax is automatically taken from your paycheck — 1.45 percent of your wages, plus your employer pays another 1.45 percent. If you are self-employed, you pay both portions (2.9 percent total). This is separate from Social Security tax. You cannot opt out of Medicare tax.

What if I cannot afford the monthly premiums?

If your income is low, you may may have access to for Medicare Savings Programs run by your state, which can pay your Part B premium and some out-of-pocket costs. Contact your state Medicaid office or call 1-800-MEDICARE to learn whether you may have access to based on your income and assets.

Can I get Medicare for free if I am disabled before age 65?

You can enroll in Medicare at no monthly premium for Part A if you have received Social Security Disability Insurance (SSDI) for 24 months, or if you have end-stage renal disease or ALS. You still pay Part B premiums and out-of-pocket costs. You become may be able to access automatically — you do not need to explore separately.

What is the difference between what I pay now and what I will pay in retirement?

While working, you pay 2.9 percent of your wages in Medicare tax (you and your employer combined). In retirement, you pay monthly premiums for Part B and Part D, plus deductibles and copayments when you use care. The total varies widely based on your health and which coverage you choose, but most people pay several hundred dollars per month in premiums alone.

Do I have to enroll in all parts of Medicare?

Part A is automatic if you are receiving Social Security. Part B is optional but recommended — if you delay, you pay a penalty. Part D is optional but carries a penalty if you delay and later enroll. Medicare Advantage (Part C) is optional and replaces Part A and Part B if you choose it. You decide which coverage fits your situation.