Medicare costs you money in four ways: a monthly premium, an annual deductible, copayments when you use care, and coinsurance (a percentage of the bill). How much you pay depends on which parts of Medicare you have, your income, and which doctors and hospitals you choose. Most people pay something every month, even if they have no medical visits.

Key Takeaways

  • Part A (hospital insurance) has no monthly premium for most people, but charges a deductible when you are admitted to the hospital.
  • Part B (doctor visits and outpatient care) costs a monthly premium that increases if you enroll late or have higher income.
  • Part D (prescription drugs) requires a monthly premium and has a coverage gap where you pay more out of pocket for certain medications.
  • Medigap and Medicare Advantage plans have their own premiums and out-of-pocket limits, and costs vary widely by plan and location.
  • Your actual costs depend on the doctors you see, the hospitals you use, and whether they accept Medicare.

Part A: Hospital Insurance Costs

Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. Most people who worked and paid Medicare taxes for at least 10 years pay no monthly premium for Part A. If you did not work long enough, you can buy Part A, and the cost varies based on how many quarters of work history you have.

When you are admitted to a hospital, you pay a deductible for each benefit period. A benefit period starts when you enter the hospital and ends 60 days after you leave without returning. If you return within 60 days, you are still in the same benefit period and do not owe another deductible. The deductible amount changes each year.

After you pay the deductible, Medicare covers all hospital costs for the first 60 days. Days 61 through 90 require a daily coinsurance payment. Beyond 90 days, you can use lifetime reserve days (a limited number of extra days Medicare provides), and you pay a higher daily coinsurance for those days.

Part B: Doctor and Outpatient Care Costs

Part B covers doctor visits, outpatient surgery, diagnostic tests, and medical equipment. Everyone on Medicare Part B pays a monthly premium. The standard premium amount changes each year. If you have higher income (above a certain threshold that varies by filing status), you pay a higher premium called an Income-Related Monthly Adjustment Amount (IRMAA).

You also pay an annual deductible for Part B before Medicare starts to pay its share. After you meet the deductible, you typically pay 20 percent coinsurance for most services, and Medicare pays 80 percent. For some services like office visits, you may pay a fixed copayment instead.

If you enroll in Part B after you first become may be able to access, you may owe a permanent penalty on your monthly premium for as long as you have Part B. The penalty is 10 percent of the standard premium for each full year you delayed enrollment, unless you had other health coverage that was considered creditable.

Part D: Prescription Drug Coverage Costs

Part D is optional coverage for prescription medications. You choose a plan from private insurance companies, and each plan has its own monthly premium, deductible, and list of covered drugs. Premiums and covered drugs vary significantly by plan and location, so two people in the same town may pay different amounts for the same medication.

Most Part D plans have a coverage gap, sometimes called the "donut hole." Once you and your plan have spent a certain amount on drugs during the year, you enter the gap and pay a higher percentage of the cost until you reach a catastrophic coverage threshold. At that point, Medicare pays most of the cost again. The amounts that trigger the gap and catastrophic coverage change each year.

If you do not enroll in Part D when you first become may be able to access, you may owe a permanent penalty on your monthly premium if you enroll later, unless you had other drug coverage that was considered creditable. The penalty is based on how long you went without coverage.

Medigap Plans: Supplemental Coverage Costs

Medigap (also called Supplemental Insurance) is sold by private insurance companies and helps pay costs that Original Medicare does not cover — deductibles, coinsurance, and copayments. You buy a Medigap plan in addition to Part A and Part B. Medigap does not cover prescription drugs, so you would still need Part D.

Medigap plans are labeled with letters (Plan A, Plan B, Plan C, and so on), and each letter offers the same benefits no matter which company sells it. However, the monthly premium for the same plan letter varies by insurance company and by location. Some companies charge more for older enrollees; others charge the same regardless of age.

Medigap plans have no network restrictions — you can see any doctor or hospital that accepts Medicare. This flexibility comes at a cost: premiums are typically higher than Medicare Advantage plans. You pay the Medigap premium to the insurance company, and you continue to pay Part B premiums to Medicare.

Medicare Advantage Plans: All-in-One Coverage Costs

Medicare Advantage (Part C) is an alternative to Original Medicare. Private insurance companies offer these plans, which must cover everything Original Medicare covers, plus usually prescription drugs and dental or vision benefits. You pay a monthly premium to the Medicare Advantage plan (in addition to your Part B premium to Medicare), though some plans have zero premium.

Medicare Advantage plans use networks of doctors and hospitals. If you see a doctor outside the network, you pay more or the plan may not cover the visit at all. Plans have annual out-of-pocket maximums — once you reach that limit, the plan pays all remaining costs for the year. Original Medicare has no out-of-pocket maximum.

Medicare Advantage plans vary widely in cost, coverage, and which doctors participate. Two plans in the same county may have very different premiums, deductibles, and copayments. You can change plans once a year during the Annual Enrollment Period (October 15 to December 7), so comparing plans each year can lower your costs.

Income-Based Premium Increases

If your income is above a certain level, you pay higher premiums for Part B, Part D, and Medicare Advantage plans. This surcharge is called IRMAA and is based on your income from two years prior. For example, in 2024, your 2022 tax return determines your premium amount.

IRMAA thresholds and surcharge amounts change each year. If your income drops due to retirement, divorce, or death of a spouse, you can request that Medicare recalculate your premium based on your current income. You must report the life event within 60 days to be considered.

How to Compare and Reduce Your Costs

Your actual out-of-pocket costs depend on which doctors and hospitals you use, whether they accept Medicare, and which plan you choose. Using in-network providers in a Medicare Advantage plan or any Medicare-accepting provider with Original Medicare and Medigap will lower your costs.

Medicare.gov has tools to compare plans side by side. The Plan Finder tool lets you enter your medications and preferred doctors to see which plans cover them and what your costs would be. You can also call 1-800-MEDICARE to speak with someone who can walk you through your options.

Some people may have access to for Extra Help, a program that pays Part D premiums and reduces out-of-pocket drug costs if your income and resources are below certain limits. Others may may have access to for Medicaid, which can cover Medicare premiums and cost-sharing. Your local Area Agency on Aging or a benefits counselor can tell you whether you may be may be able to access.

Frequently Asked Questions

Do I have to pay for Part A if I never worked?

If you did not work long enough to may have access to for premium-free Part A, you can buy it. The cost depends on how many quarters of work history you have. If you have fewer than 30 quarters, the premium is higher than if you have 30 to 39 quarters. You can enroll in Part A during the Initial Enrollment Period or during General Enrollment.

What happens if I can't afford my Medicare premiums?

If your income is low, you may may have access to for Medicaid, which can pay your Medicare premiums and some out-of-pocket costs. You can also ask about Extra Help for Part D costs. Contact your state Medicaid office or local Area Agency on Aging to learn what programs may help you.

Can I change my Medicare plan if costs go up?

You can change plans during the Annual Enrollment Period (October 15 to December 7 each year). If you have a Medicare Advantage plan and your doctor leaves the network, you may be able to switch plans outside the enrollment period. Life events like moving, losing other health coverage, or a significant drop in income may also allow you to change plans.

Why does my Part B premium increase every year?

Part B premiums increase when the cost of healthcare rises. The increase is set by Congress and applies to everyone. If your income increased, your IRMAA surcharge may also increase. You can review your premium notice and request a recalculation if your income has dropped.

Does Medicare cover dental, vision, or hearing?

Original Medicare does not cover routine dental, vision, or hearing care. Some Medicare Advantage plans include these benefits, though coverage and costs vary by plan. You can also buy standalone dental, vision, or hearing plans, or pay out of pocket for these services.