Medicare costs money, and you pay it three ways: premiums, deductibles, and copayments

Most people age 65 and older pay a monthly premium for Part B (doctor visits) and Part D (prescription drugs). You also pay a deductible before Medicare starts to cover hospital or doctor visits, and you pay a share of the cost when you actually use care. Some people pay nothing for Part A (hospital insurance) because they or their spouse paid Medicare taxes while working. The amount you pay depends on your income, which coverage you choose, and when you sign up.

The federal government collects these payments and uses them to run the Medicare program. You do not pay a private insurance company — you pay Medicare directly, usually through automatic deductions from your Social Security check or bank account.

Key Takeaways

  • Part A (hospital) is free for most people at 65 if they or a spouse paid Medicare taxes for at least 10 years; Part B (doctor) costs a monthly premium that increases if you delay signing up.
  • Your Part B and Part D premiums are higher if your income was above a certain level two years ago, a rule called Income-Related Monthly Adjustment Amount (IRMAA).
  • You pay a deductible before Medicare covers hospital or doctor visits, and then you pay a percentage of the cost (coinsurance) or a fixed amount per visit (copayment).
  • Most people have premiums taken automatically from their Social Security check; if you do not receive Social Security, you pay Medicare directly by mail or online.
  • If you cannot afford premiums or out-of-pocket costs, Medicaid, Medicare Savings Programs, and Low-Income Subsidy programs may cover some or all of them.

Part A premiums: who pays and who does not

Part A covers hospital stays, skilled nursing facility care, hospice, and home health services. If you or your spouse paid Medicare taxes for at least 10 years while working, you pay no monthly premium for Part A at age 65. This is true even if you did not work in the United States — if you worked for a U.S. employer and paid into the system, you may have access to.

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. The premium amount depends on how many years you or your spouse paid Medicare taxes. In 2024, the premium ranges from about $278 to $505 per month, but this amount changes each year. You pay this premium for as long as you have Part A.

You also pay a deductible when you go to the hospital. In 2024, the Part A deductible is $1,676 per hospital stay, meaning you pay this amount out of your own pocket before Medicare starts to pay. After you meet the deductible, Medicare covers most of your hospital costs, though you may pay coinsurance (a percentage of the cost) for stays longer than 60 days.

Part B premiums: the standard amount and income-based increases

Part B covers doctor visits, outpatient care, medical equipment, and preventive services. Almost everyone pays a monthly premium for Part B. In 2024, the standard premium is $164.90 per month, but this amount increases each year. If you delay signing up for Part B after you turn 65, your premium goes up by 10 percent for each year you wait — this penalty is permanent and stays with you for life.

If your income is above a certain level, you pay more than the standard premium. This is called Income-Related Monthly Adjustment Amount, or IRMAA. Medicare looks at your income from two years ago to decide if you owe extra. For example, in 2024, if your income was above $97,000 (or $194,000 if you are married and file jointly), you pay a higher premium. The more your income exceeds the threshold, the more you pay — premiums can reach $560 or more per month for high earners. This extra amount goes away if your income drops in future years.

You also pay a deductible for Part B services. In 2024, the Part B deductible is $240 per year. After you meet this deductible, you typically pay 20 percent of the cost of doctor visits and other services, and Medicare pays 80 percent.

Part D premiums and the coverage gap

Part D covers prescription drugs. You choose a Part D plan from private insurance companies, and each plan has its own monthly premium. Premiums vary widely — some plans cost $5 per month, others cost $100 or more. You pay this premium whether or not you fill any prescriptions.

Part D also has a deductible, usually between $35 and $545 per year depending on which plan you choose. After you meet the deductible, you pay a copayment or coinsurance for each prescription. As you spend more on drugs throughout the year, you may enter the "coverage gap" or "donut hole" — a range where you pay a higher percentage of the drug cost. Once your total out-of-pocket spending reaches a certain amount (about $7,050 in 2024), catastrophic coverage kicks in and you pay only a small copayment for the rest of the year.

If you delay signing up for Part D after you turn 65, you pay a penalty of about 1 percent of the national average Part D premium for each month you wait. Like the Part B penalty, this is permanent.

How your payments are collected

If you receive Social Security, your Medicare premiums are deducted automatically from your check each month. This is the most common way people pay. The amount deducted appears on your Social Security statement, and you can see it online through your Social Security account.

If you do not receive Social Security, Medicare sends you a bill by mail each month. You can pay by check, by phone, or online through the Medicare website. Some people set up automatic bank payments so they do not have to remember to pay each month.

When you use Medicare services, you pay deductibles and copayments directly to the provider — the hospital, doctor's office, or pharmacy. These are separate from your premiums. Keep receipts and track what you spend, because some costs count toward your deductible or out-of-pocket maximum.

Medigap and Medicare Advantage: different payment structures

Some people buy Medigap (supplemental insurance) to cover costs that Medicare does not pay, like copayments and coinsurance. Medigap is sold by private insurance companies, and you pay a separate monthly premium on top of your Medicare premiums. The amount depends on which Medigap plan you choose and your age. Medigap does not cover prescription drugs — you still need Part D for that.

Others choose Medicare Advantage (Part C), which is an alternative to Original Medicare. With Medicare Advantage, you pay your Part B premium to Medicare, but then you pay a separate premium to the Medicare Advantage plan itself. Some plans charge zero premium, but most charge $0 to $200 per month. Medicare Advantage plans include prescription drug coverage, so you do not need a separate Part D plan. However, you typically pay higher copayments and coinsurance when you use services, and you may have to use doctors within the plan's network.

Income-based help paying premiums and costs

If your income is low, you may not have to pay the full amount of your premiums and out-of-pocket costs. Medicare Savings Programs, run by your state, can pay your Part B and Part D premiums and your deductibles. Medicaid, also run by your state, covers premiums and costs for people with very low income and limited savings. The Low-Income Subsidy program helps pay Part D premiums and copayments for people with income below 150 percent of the federal poverty level.

To learn about you may have access to, contact your state Medicaid office or call 1-800-MEDICARE. Each state has different income limits and rules, so what qualifies you in one state may not in another. You can also ask a social worker at your local senior center or aging agency — they often know the programs in your area and can help you understand what you might may have access to for.

Frequently Asked Questions

What happens if I cannot afford my Medicare premiums?

Contact your state Medicaid office or call 1-800-MEDICARE to learn about Medicare Savings Programs and Medicaid. These programs can pay your premiums if your income is low enough. You can also ask about payment plans or hardship waivers if you fall behind.

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

If you are still working and earning wages, you and your employer continue to pay Medicare taxes (1.45 percent each). This does not reduce your Medicare benefits or change what you pay for premiums and services. Self-employed people pay 2.9 percent total.

Can I change my Medicare plan if my income drops and my IRMAA goes down?

Yes. If your income drops significantly due to retirement, loss of a job, or death of a spouse, you can request a reduction in your IRMAA premium. Contact Social Security or Medicare to report the change and ask about a Special Enrollment Period so you can switch plans without penalty.

What if I have both Medicare and employer health insurance?

If your employer has 20 or more employees, your employer plan is primary and Medicare is secondary. You still pay your Medicare premiums, but Medicare only pays after your employer plan pays its share. If your employer has fewer than 20 employees, Medicare is primary.

Do I pay taxes on Medicare benefits?

Medicare benefits themselves are not taxed. However, if your total income (including Social Security and other sources) exceeds a certain level, up to 85 percent of your Social Security benefits may be subject to federal income tax. This is separate from Medicare premiums and costs.