Medicare is not free at 65, but the cost depends on what you earned and paid into Social Security

When you turn 65, you become may be able to access for Medicare, the federal health insurance program. But may be able to access is not the same as free coverage. Most people pay a monthly premium for Part B (doctor visits and outpatient care), and many pay premiums for prescription drug coverage under Part D. Some people pay nothing for Part A (hospital insurance) because they or their spouse paid Medicare taxes for at least 10 years while working. Others pay a premium for Part A as well.

The amount you pay depends on your work history, your current income, and which parts of Medicare you choose. A person who worked 30 years and paid Medicare taxes will pay differently than someone who worked 10 years. Someone with higher income may pay a higher premium. And if you delay signing up when you first become may be able to access, you may face a permanent penalty on your premium.

Key Takeaways

  • Part A (hospital insurance) is free for most people at 65 if they or a spouse paid Medicare taxes for at least 10 years; others pay a monthly premium.
  • Part B (doctor and outpatient care) costs a monthly premium that increases if you have higher income, and you pay a penalty if you delay signing up past 65.
  • Part D (prescription drugs) requires a separate monthly premium and also carries a penalty for late sign-up.
  • You must sign up for Medicare during your enrollment window around your 65th birthday, or you will face higher costs later.
  • Supplemental insurance (Medigap) and Medicare Advantage plans have their own costs and may offer different coverage than Original Medicare.

Part A: Hospital Insurance and What It Costs

Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. If you or your spouse paid Medicare taxes for at least 10 years (40 quarters), you pay no monthly premium for Part A. This applies to most people who worked full-time for a decade or more.

If you do not meet the 10-year requirement, you can still get Part A, but you will pay a monthly premium. The amount varies depending on how many quarters of Medicare tax you paid. Someone who paid for 30 quarters pays less than someone who paid for fewer than 30 quarters. You can find the exact premium amounts on Medicare.gov, and they change each year.

Even if Part A is free, you still pay out-of-pocket costs when you use it. You pay a deductible for each hospital stay, and you pay coinsurance (a share of the cost) for longer stays. These costs are separate from the monthly premium.

Part B: Doctor Visits and Outpatient Care

Part B covers doctor visits, lab tests, imaging, outpatient surgery, and other medical services. Almost everyone pays a monthly premium for Part B. The standard premium is the same for most people, but if your income is above a certain level, you pay a higher premium called an Income-Related Monthly Adjustment Amount (IRMAA).

IRMAA is based on your income from two years before you sign up. If you earned more than a certain threshold (the amount changes each year), Medicare will add extra money to your Part B premium. For example, if you are single and earned over $97,000 in 2021, you would pay more for Part B in 2023. The higher your income, the more you pay, up to a maximum amount.

You also pay a 20 percent coinsurance for most services after you meet your annual deductible. If you delay signing up for Part B after you turn 65 (and you are not still working with employer coverage), you will pay a permanent penalty of 10 percent of the standard premium for each year you were late. That penalty stays with you for life.

Part D: Prescription Drug Coverage

Part D is optional, but it is important to understand the cost of not having it. If you do not sign up for Part D when you first become may be able to access, and you go without creditable drug coverage for more than 63 days, you will pay a permanent penalty when you do sign up. The penalty is 1 percent of the national average Part D premium for each month you were without coverage.

Part D premiums vary widely depending on which plan you choose. Plans are offered by private insurance companies, and each plan covers a different set of drugs at different costs. Some plans cost $5 a month; others cost $100 or more. You can compare plans on Medicare.gov during the annual enrollment period (October 15 to December 7 each year).

You also pay out-of-pocket costs when you fill prescriptions: a copay or coinsurance for each drug, depending on the plan. Costs change throughout the year as you move through different coverage stages, including a gap in coverage called the "donut hole."

Income-Based Premiums and How They Work

If your income is higher, you will pay more for Part B and Part D. Medicare uses your Modified Adjusted Gross Income (MAGI) from your tax return from two years before you sign up. If you are married and file jointly, both spouses' income counts.

The income thresholds change each year. In 2024, for example, single filers with income over $97,000 pay higher premiums; married couples filing jointly with income over $194,000 do. The more your income exceeds the threshold, the higher your premium. There is a maximum amount you can be charged, but it is still significantly more than the standard premium.

If your income drops because you retire or have a major life change, you can report that change to Medicare and ask for a recalculation. You will need to provide documentation of the change, such as a tax return or a letter from your employer.

Medigap and Medicare Advantage: Additional Costs

Original Medicare (Part A and Part B) leaves you responsible for deductibles, coinsurance, and copays. Many people buy Medigap (supplemental insurance) to cover some of these costs. Medigap plans are sold by private insurance companies and have their own monthly premiums, which vary by plan and by where you live.

Alternatively, you can choose Medicare Advantage (Part C), an all-in-one plan offered by private insurers that includes Part A, Part B, and usually Part D. Medicare Advantage plans often have lower or no monthly premiums, but they typically have higher out-of-pocket costs when you use care, and they limit which doctors and hospitals you can use.

Both Medigap and Medicare Advantage require you to sign up during your initial enrollment period or during the annual enrollment period. If you miss the window, you may not be able to switch plans or may face higher costs.

When You Must Sign Up and What Happens If You Do Not

Your Initial Enrollment Period (IEP) is the seven-month window that begins three months before the month you turn 65 and ends three months after. If you sign up during this window, your coverage starts the month you turn 65 (or the month after, depending on when you sign up).

If you do not sign up during your IEP, you can still sign up later, but you will face penalties. For Part B, the penalty is 10 percent of the standard premium for each year you were late. For Part D, the penalty is 1 percent of the national average premium for each month you were without coverage. These penalties are permanent and added to your premium for life.

The only exception is if you have creditable coverage through an employer or union while you are still working. If you have employer coverage, you can delay signing up for Medicare without penalty, as long as you sign up within eight months of losing that coverage.

Frequently Asked Questions

Do I have to sign up for Medicare at 65 if I am still working?

If you have health insurance through your employer or union, you can delay Medicare Part B without penalty as long as you are actively working. You must sign up within eight months of leaving that job or losing the coverage. Part A is different — you should sign up even if you are working, because there is no penalty for having it while you work.

What if I cannot afford the Medicare premiums?

If your income is low, you may be able to get help paying premiums through programs like Medicaid, the Medicare Savings Program, or the Low-Income Subsidy program for Part D. These programs are run by your state, and may be able to access varies. You can contact your local Medicaid office or call 1-800-MEDICARE to learn what programs may be available where you live.

Can I change my Medicare plan after I sign up?

Yes, but only during certain times. The Annual Enrollment Period runs from October 15 to December 7 each year, and any changes take effect January 1. If you have a major life change (like moving, losing employer coverage, or getting married), you may be able to make changes outside the enrollment period. Contact Medicare to report the change.

Will my Medicare premium go up every year?

Yes. Medicare premiums increase most years, though the amount varies. The increase is based on inflation and changes in the cost of health care. If your income increases, your Part B and Part D premiums may also increase due to IRMAA. You will receive a notice each year showing your new premium amounts.

What happens to my Medicare if I move to another state?

Your Medicare coverage works in all 50 states and U.S. territories. However, if you have a Medicare Advantage plan or Medigap plan, you may need to switch plans because not all plans are available in every state. You can make changes during the Annual Enrollment Period or if you move, you may have a special enrollment period to change plans.