Medicare costs vary by the plan you choose and the services you use

Medicare has different costs depending on whether you enroll in Original Medicare (Part A and Part B) or a Medicare Advantage plan (Part C). Original Medicare charges a monthly premium for Part B, an annual deductible, and coinsurance when you use services. Medicare Advantage plans often have lower or no premiums but may charge copays and coinsurance instead. Part D (prescription drug coverage) adds another monthly premium. The amount you pay also depends on your income — higher earners pay more for Part B and Part D.

Most people do not pay a premium for Part A (hospital insurance) if they or their spouse paid Medicare taxes for at least 10 years while working. Part B premiums, deductibles, and coinsurance amounts change each year. In 2024, the standard Part B premium was $164.90 per month, but your actual premium may be higher if your income was above a certain threshold two years ago.

Key Takeaways

  • Part A (hospital insurance) is usually free if you worked and paid Medicare taxes for at least 10 years; Part B (medical insurance) has a monthly premium that varies by income.
  • Original Medicare charges an annual deductible for Part B and coinsurance (a percentage of the cost) when you use services, while Medicare Advantage plans typically use copays instead.
  • Part D (prescription drug coverage) requires a separate monthly premium and has an annual deductible; costs vary by plan and pharmacy.
  • If your income is above certain thresholds, you pay a higher premium for Part B and Part D through an income-related adjustment.
  • You can reduce out-of-pocket costs by enrolling in a Medigap (supplemental insurance) plan, which covers some of the costs Original Medicare does not.

Part A and Part B premiums and deductibles

Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. Most people pay no monthly premium for Part A. If you do not have 10 years of work history under Medicare, you can buy Part A coverage; the premium varies based on how many quarters of coverage you have.

Part B covers doctor visits, outpatient care, medical equipment, and preventive services. The standard monthly premium changes each year. In 2024, it was $164.90 per month for most people, but the Social Security Administration announces the new amount each October for the following year. You also pay an annual deductible for Part B services (in 2024, this was $240), and then you pay 20% coinsurance for most services after you meet the deductible.

If your modified adjusted gross income from two years ago exceeds certain thresholds, you pay an income-related monthly adjustment amount (IRMAA) on top of your standard Part B premium. For example, in 2024, single filers with income over $97,000 paid more. The thresholds and adjustment amounts change yearly.

Medicare Advantage plan costs

Medicare Advantage (Part C) plans are offered by private insurance companies approved by Medicare. Many have a $0 monthly premium, though some charge a premium in addition to your Part B premium. Instead of the Part B deductible and coinsurance, Medicare Advantage plans typically use copays (a fixed dollar amount per visit) and coinsurance.

Each Medicare Advantage plan sets its own copay amounts and out-of-pocket maximum — the most you will pay in a year for covered services. Once you reach your plan's out-of-pocket maximum, the plan pays 100% of covered services for the rest of that year. Plans also include prescription drug coverage (Part D) built in, so you do not buy Part D separately.

Medicare Advantage plans often include extra benefits that Original Medicare does not, such as dental, vision, or fitness programs, but these vary by plan and location. You can only enroll in a Medicare Advantage plan during the annual enrollment period (October 15 to December 7) or if you may have access to for a special enrollment period.

Part D prescription drug coverage costs

Part D covers prescription medications at pharmacies. If you have Original Medicare, you must enroll in a standalone Part D plan during your initial enrollment period or pay a late enrollment penalty. Part D plans are offered by private insurance companies and have different formularies (lists of covered drugs), so costs vary by plan.

Each Part D plan charges a monthly premium, an annual deductible (which varies by plan), and copays or coinsurance for each prescription. In 2024, the average Part D premium was around $34 per month, but plans range widely. After you spend a certain amount out-of-pocket on drugs, you enter the "coverage gap" (also called the "donut hole"), where you pay a higher percentage of drug costs until you reach the catastrophic coverage threshold, at which point your costs drop again.

If your income is above the IRMAA thresholds, you also pay an income-related adjustment for Part D. You can change your Part D plan once a year during the annual enrollment period if you find a plan with lower costs or better coverage for your medications.

Medigap supplemental insurance and costs

Medigap (also called Supplement Insurance) is sold by private insurance companies and covers some of the costs that Original Medicare does not — such as copays, coinsurance, and deductibles. If you have Original Medicare and want to reduce your out-of-pocket costs, you can buy a Medigap plan.

Medigap plans are labeled with letters (A, B, D, G, K, L, M, N) and each letter covers a different set of costs. For example, Plan G covers the Part B deductible and 20% coinsurance for most services. Medigap premiums vary by plan, age, location, and insurance company. You have the best rates if you enroll within six months of turning 65 or enrolling in Part B, a period called the Medigap open enrollment period.

You cannot have both a Medigap plan and a Medicare Advantage plan at the same time. If you have Medicare Advantage, the plan's out-of-pocket maximum is designed to limit your costs, so Medigap is not needed.

Income-related costs and how they work

If your income is above certain thresholds, Medicare charges you higher premiums for Part B and Part D. This is called an income-related monthly adjustment amount (IRMAA). Medicare uses your modified adjusted gross income from your tax return from two years ago to calculate IRMAA.

For example, if you enroll in Medicare in 2024, Medicare looks at your 2022 tax return. If your income was higher in 2022 than it is now, you can request a recalculation by submitting a form to Social Security with proof of your current income (such as a recent tax return, pay stub, or letter from your employer). Life events like retirement, divorce, or death of a spouse may may have access to you for a recalculation.

The income thresholds and adjustment amounts change each year. Social Security publishes the current thresholds in October for the following year. If you are unsure whether IRMAA applies to you, you can call Social Security at 1-800-772-1213 to ask.

What is not covered and what you might pay extra for

Original Medicare does not cover dental, vision, hearing aids, or long-term care. If you need these services, you can buy separate insurance or pay out of pocket. Some Medicare Advantage plans include dental or vision benefits, but coverage and costs vary by plan.

Medicare also does not cover routine foot care, cosmetic surgery, or most acupuncture. If you receive services Medicare does not cover, you pay the full cost yourself. Some people buy long-term care insurance separately to cover nursing home or in-home care, which Medicare does not pay for.

Frequently Asked Questions

Do I have to pay for Part A if I worked and paid Medicare taxes?

If you or your spouse worked and paid Medicare taxes for at least 10 years, you do not pay a monthly premium for Part A. If you have fewer than 10 years of work history, you can buy Part A coverage, but the premium depends on how many quarters of coverage you have. You can check your work history by creating an account on ssa.gov.

Why is my Part B premium higher than the standard amount?

Your Part B premium is higher if your income from two years ago exceeded certain thresholds. This is called IRMAA. If your income has changed since then (retirement, job loss, divorce), you can request a recalculation by contacting Social Security with proof of your current income.

Can I switch from Original Medicare to Medicare Advantage or back?

You can switch during the annual enrollment period (October 15 to December 7) each year. If you have a may have access to life event (such as moving out of your plan's service area or losing employer coverage), you may have a special enrollment period outside the annual window. Contact Medicare at 1-800-MEDICARE to confirm your options.

What happens if I do not enroll in Part D when I first become may be able to access?

If you delay enrolling in Part D without a valid reason, you pay a late enrollment penalty for as long as you have Part D coverage. The penalty is about 1% of the national average Part D premium for each month you were not enrolled. You can enroll during the annual enrollment period, but the penalty will explore.

Does Medicare cover the cost of my medications?

Part D covers most prescription medications, but coverage and costs depend on your plan's formulary. Some drugs may require prior authorization or step therapy (trying a cheaper drug first). You can review which drugs your plan covers by visiting the plan's website or calling the plan directly before you fill a prescription.