Medicare has multiple costs, and they vary by which parts you choose

Medicare is not free. You pay premiums (monthly fees), deductibles (what you pay before coverage kicks in), copayments (fixed amounts per visit), and coinsurance (a percentage of the bill). The total depends on which parts of Medicare you enroll in, your income, and whether you choose Original Medicare or a Medicare Advantage plan. Most people pay something every month, and costs rise each year.

The four parts of Medicare each have their own cost structure. Part A covers hospital stays. Part B covers doctor visits and outpatient care. Part D covers prescription drugs. Part C (Medicare Advantage) is an alternative to Parts A and B, bundled with drug coverage. You do not have to take all of them, but skipping coverage you need will cost you more later through late-enrollment penalties.

Key Takeaways

  • Part B premiums are deducted from your Social Security check automatically, and the amount depends on your income from two years ago.
  • Part A is usually free if you or your spouse paid Medicare taxes for at least 10 years, but you pay a deductible when you go to the hospital.
  • Original Medicare (Parts A and B) has no monthly premium for Part A but does for Part B, plus deductibles and coinsurance that vary by service.
  • Medicare Advantage plans often have lower or zero premiums but restrict which doctors you can see and may have higher out-of-pocket limits.
  • Part D prescription drug plans cost between roughly $7 and $100 per month depending on the plan and your drugs, plus a deductible and copayments.

Part A costs: hospital coverage with a deductible

Part A is free for most people who are 65 or older and have worked and paid Medicare taxes for at least 10 years (or whose spouse did). You do not pay a monthly premium. However, you do pay a deductible when you are admitted to the hospital. The deductible amount changes each year; it covers your first 60 days in the hospital. After 60 days, you pay a daily coinsurance amount for days 61 through 90, and a higher daily amount for days 91 and beyond.

If you did not work long enough to may have access to for free Part A, you can still buy it. The monthly premium varies depending on how many years you or your spouse paid Medicare taxes. The fewer years, the higher the premium. Part A also covers skilled nursing facilities (not regular nursing homes), hospice care, and some home health services, but each has its own deductible or coinsurance rules.

Part B costs: doctor visits and outpatient care

Part B has a monthly premium that most people pay automatically from their Social Security check. The standard premium amount changes each year. However, if your income from two years ago was above a certain threshold, you pay a higher premium — this is called Income-Related Monthly Adjustment Amount (IRMAA). The higher your income, the higher your Part B premium, up to a maximum. This income threshold is recalculated every year.

Beyond the premium, Part B has an annual deductible you pay once per year before coverage begins. After you meet the deductible, you typically pay 20 percent coinsurance for most services — meaning Medicare pays 80 percent and you pay the remaining 20 percent. For some preventive services like annual wellness visits and cancer screenings, there is no coinsurance; Medicare covers them fully after you meet the deductible.

Part D costs: prescription drug coverage

Part D is optional but recommended. If you do not enroll when you first become may be able to access and later decide you want it, you will pay a penalty on top of your premium for as long as you have Medicare. Part D plans are offered by private insurance companies, and each plan has a different premium, deductible, and list of covered drugs (called a formulary). Monthly premiums typically range from around $7 to $100 or more, depending on the plan and your location.

Part D also has an annual deductible (the amount you pay out of pocket before the plan starts paying) and copayments or coinsurance for each prescription. There is also a coverage gap, sometimes called the "donut hole," where you pay a higher percentage of drug costs after you and your plan have spent a certain amount together. Once your out-of-pocket costs reach a yearly limit, catastrophic coverage kicks in and you pay only a small copayment for the rest of the year.

Medicare Advantage (Part C) costs and trade-offs

Medicare Advantage plans are an alternative to Original Medicare (Parts A and B). Many have zero or low monthly premiums, which makes them attractive. However, they typically have higher deductibles and out-of-pocket limits than Original Medicare. You also must use doctors and hospitals in the plan's network, except in emergencies. If you see an out-of-network provider, you may pay the full cost yourself.

Medicare Advantage plans include Part D drug coverage automatically, so you do not buy a separate prescription plan. The total out-of-pocket limit — the maximum you will pay in a year for covered services — is set by law and varies by plan. Once you hit that limit, the plan pays 100 percent of covered services for the rest of the year. However, this limit does not include premiums, so you still pay your monthly premium even after reaching the out-of-pocket maximum.

Income-based premiums and how they work

If your income is above a certain level, you pay more for Part B and Part D. Medicare uses your Modified Adjusted Gross Income (MAGI) from your tax return from two years before the current year. For example, in 2024, Medicare uses your 2022 income. If your income was high in 2022 but dropped in 2023 or 2024, you can request a review and potentially lower your premiums.

The income thresholds and surcharge amounts change each year. A single person with higher income pays more than a married couple with the same combined income. If you are newly retired or had a major life event (marriage, divorce, death of a spouse), you may be able to request a reduction in your premium surcharge by submitting documentation to Social Security.

Costs you pay out of pocket at the doctor or hospital

Beyond premiums and deductibles, you pay when you actually use services. With Original Medicare, you typically pay 20 percent coinsurance for doctor visits, tests, and outpatient procedures after you meet the Part B deductible. For hospital stays covered by Part A, you pay the deductible for the first 60 days, then daily coinsurance amounts for longer stays. Skilled nursing facilities have their own coinsurance structure.

With Medicare Advantage, your costs depend on the specific plan. You might pay a copayment (a fixed amount like $25 per doctor visit) or coinsurance (a percentage). Some plans have zero copayments for preventive care. The key difference is that your total out-of-pocket costs are capped by the plan's annual limit, whereas Original Medicare has no annual out-of-pocket cap — you could theoretically pay more if you have a very expensive year.

Medigap insurance: an optional layer that covers gaps

Medigap (also called Supplemental Insurance) is a private insurance policy you buy to cover some of the costs that Original Medicare does not pay — like coinsurance, copayments, and deductibles. It is only available if you have Original Medicare (Parts A and B), not if you have Medicare Advantage. Medigap premiums vary widely by plan type, your age, your location, and the insurance company.

There are 10 standardized Medigap plans (labeled A through N). Each plan covers a different combination of out-of-pocket costs. A more comprehensive plan (like Plan G or Plan N) costs more per month but covers more of your costs when you use services. A basic plan (like Plan A) costs less but leaves you paying more at the doctor or hospital. If you enroll in Medigap within six months of turning 65 and enrolling in Part B, you have may provide issue rights, meaning the insurance company cannot deny you or charge you more based on health conditions.

Frequently Asked Questions

Do I have to pay for Part A if I worked long enough?

Yes, Part A is free if you or your spouse paid Medicare taxes for at least 10 years, but you still pay a deductible when you go to the hospital. The deductible covers your first 60 days of a hospital stay. After that, you pay daily coinsurance for additional days.

What happens if I do not enroll in Part D when I turn 65?

If you do not enroll in Part D when you first become may be able to access and you do not have other creditable drug coverage, you will pay a late-enrollment penalty. This penalty is added to your Part D premium for as long as you have Medicare, even if you enroll years later.

Can my Medicare costs go down if my income drops?

Yes. If your income drops significantly due to retirement, job loss, or a major life event, you can request that Social Security recalculate your Part B and Part D premiums based on your current income instead of the income from two years ago. You will need to submit documentation of the change.

Is Medicare Advantage cheaper than Original Medicare with Medigap?

It depends on your health and which doctors you use. Medicare Advantage often has lower or zero premiums, but you are limited to in-network providers and may pay more per visit. Original Medicare with Medigap costs more in premiums but gives you more flexibility and predictable costs. Compare the plans available in your area.

What is the most I could pay out of pocket in a year?

With Original Medicare, there is no annual out-of-pocket cap — costs depend on how much care you use. With Medicare Advantage, there is a yearly out-of-pocket limit set by law, but this does not include your monthly premium. With Medigap, your costs are more predictable because the plan covers most out-of-pocket expenses, but you pay a higher monthly premium.