Medicare has a free part and paid parts
Medicare Part A — hospital insurance — is free at 65 for most people who paid Medicare taxes while working. You do not pay a monthly premium for it. But Part A is not completely free: you pay a deductible when you go to the hospital, and you pay coinsurance for longer stays.
Medicare Part B — medical insurance for doctor visits and outpatient care — costs a monthly premium. In 2024, the standard premium is $164.90 per month, though the amount changes each year and is higher if your income is above a certain level. Part B also has a deductible and coinsurance.
Medicare Part D — prescription drug coverage — is optional and costs a monthly premium that varies by plan, usually between $5 and $100 per month. You pay this only if you choose to enroll in a drug plan.
So when people say Medicare is "free at 65," they mean Part A has no premium. The other parts cost money, and all parts require you to pay out-of-pocket when you use them.
Key Takeaways
- Part A (hospital insurance) has no monthly premium if you paid Medicare taxes for at least 10 years, but you pay a deductible and coinsurance when hospitalized.
- Part B (doctor and outpatient care) costs a monthly premium starting at $164.90 in 2024, plus a deductible and coinsurance for each visit.
- Part D (prescription drugs) is optional and costs a separate monthly premium that depends on which plan you choose.
- If you do not enroll in Part B when you first turn 65, you may pay a penalty for the rest of your life unless you have other may have access to coverage.
- Your actual out-of-pocket costs depend on which parts you choose, which plan you pick, and how much medical care you use.
Who gets Part A for free and who pays a premium
You get Part A with no monthly premium if you or your spouse paid Medicare taxes for at least 10 years while working. Most people who worked full-time in the United States meet this requirement.
If you did not pay Medicare taxes for 10 years, you can still enroll in Part A, but you will pay a monthly premium. The premium amount depends on how many quarters of Medicare tax you paid. In 2024, the premium ranges from about $278 to $505 per month, though these amounts change yearly.
If you are not yet 65 and receive Social Security Disability Insurance (SSDI) or have end-stage renal disease, you may may have access to for Medicare earlier. The same 10-year rule applies to whether Part A is free.
What you actually pay when you use Part A
Even though Part A has no premium, you pay money when you use it. In 2024, if you are admitted to the hospital, you pay a deductible of $1,632 for the first 60 days of each hospital stay. After 60 days, you pay coinsurance — a daily amount — for days 61 through 90. If you stay longer than 90 days, the costs go higher.
For skilled nursing facility care (like rehabilitation after surgery), you pay nothing for the first 20 days, then coinsurance of about $204 per day for days 21 through 100. After 100 days, you pay all costs yourself.
For hospice care, you pay nothing for the hospice services themselves, but you may pay a small coinsurance for medications and medical equipment.
These deductible and coinsurance amounts change each year. The point is that "free" Part A still requires you to pay when you use hospital services.
Part B costs and when you must enroll
Part B costs $164.90 per month in 2024 for most people, but the premium is higher if your income from the previous two years was above a certain threshold. The income thresholds and premium amounts change yearly. You can find the current rates on Medicare.gov.
You should enroll in Part B when you turn 65, even if you do not plan to use it right away. If you delay enrollment without a valid reason — such as having employer coverage — you will pay a penalty of 10 percent of the Part B premium for each year you did not enroll. That penalty is permanent and added to your monthly bill for life.
The exception is if you or your spouse are still working and have health insurance through that job. In that case, you can delay Part B without penalty, but you must enroll within eight months of losing that coverage or retiring.
Part D enrollment and prescription drug costs
Part D is optional, but like Part B, there is a penalty for late enrollment if you go without drug coverage. If you do not enroll in Part D when you first become may be able to access, and you later sign up, you will pay a penalty of about 1 percent of the national average Part D premium for each month you were not enrolled. That penalty is also permanent.
Part D premiums vary widely depending on which plan you choose and which pharmacy you use. Plans range from about $5 to $100 per month or more. You can compare plans on Medicare.gov during the annual enrollment period, which runs from October 15 to December 7 each year.
Even with Part D, you pay out-of-pocket for prescriptions. You typically pay a copay or coinsurance for each drug, and there is a deductible. Once you spend a certain amount on drugs in a year, you enter the "donut hole," where you pay a higher percentage of drug costs until you reach catastrophic coverage.
How income affects your Medicare costs
If your income is above a certain level, you pay higher premiums for Part B and Part D. These are called Income-Related Monthly Adjustment Amounts (IRMAA). Medicare uses your income from two years prior to calculate IRMAA, so your 2024 premiums are based on your 2022 income.
The income thresholds and premium amounts change each year. If your income drops — for example, because you retired or had a major life change — you can request that Medicare recalculate your IRMAA using your current year income instead of the prior-year amount.
Medigap and Medicare Advantage as alternatives
After you enroll in Original Medicare (Part A and Part B), you have two main choices for additional coverage. Medigap is supplemental insurance sold by private companies that pays some of the deductibles, coinsurance, and copays that Original Medicare does not cover. Medigap has its own monthly premium, which varies by plan and location.
Medicare Advantage (Part C) is an alternative to Original Medicare. It is offered by private insurance companies and includes hospital, doctor, and usually prescription drug coverage in one plan. Medicare Advantage often has lower or no monthly premiums than Original Medicare plus Medigap, but it typically has higher out-of-pocket costs when you use care, and it may limit which doctors and hospitals you can use.
You cannot have both Original Medicare with Medigap and Medicare Advantage at the same time. You must choose one path or the other.
Frequently Asked Questions
Do I have to enroll in Medicare at 65 if I am still working?
If you or your spouse are still working and have health insurance through that job, you can delay Part B without penalty. However, you should still enroll in Part A at 65 because it is free and has no penalty for late enrollment. You must enroll in Part B within eight months of losing your job coverage or retiring, or you will face a permanent penalty.
What happens if I miss the enrollment important date?
If you miss your initial enrollment period and do not have a valid reason, you will pay a permanent penalty on your Part B and Part D premiums for as long as you have Medicare. The penalty is calculated as a percentage of the premium for each month you were not enrolled. You can enroll during the general enrollment period (January 1 to March 31 each year), but the penalty will still explore.
Can I change my Medicare plan after I enroll?
Yes. You can change your Part D plan or switch between Original Medicare and Medicare Advantage during the annual enrollment period (October 15 to December 7). If you have a may have access to life event — such as moving, losing coverage, or getting married — you may be able to change plans outside the annual period.
Will Medicare cover all my medical costs?
No. Medicare covers many services, but it does not cover everything. Long-term care, dental, vision, and hearing aids are generally not covered. You may want to explore Medigap or Medicare Advantage to fill some of these gaps, or plan to pay for these services out of pocket.
How do I know which Medicare plan is right for me?
The best plan depends on your health, your doctors, your prescriptions, and your budget. Medicare.gov has a plan comparison tool where you can enter your information and see which plans cover your doctors and drugs. You can also call 1-800-MEDICARE to speak with someone who can answer questions about your options.