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 part of Medicare you have, your income, and whether you choose additional coverage. Most people pay a premium for Part B (doctor visits) and Part D (prescription drugs), and you may owe a deductible before your coverage kicks in.

Key Takeaways

  • Part A (hospital care) has no monthly premium for most people, but you pay a deductible when you are admitted to the hospital.
  • Part B (doctor and outpatient care) costs a monthly premium that increases if you enroll late or earn above a certain income.
  • Part D (prescription drugs) requires a separate monthly premium and varies by plan; you choose which plan to join.
  • Original Medicare does not cover everything, so many people buy Medigap or choose Medicare Advantage to reduce out-of-pocket costs.
  • Your actual costs depend on the doctors you see, the drugs you take, and how much care you need in a given year.

Part A: Hospital Insurance Costs

Part A covers hospital stays, skilled nursing facility care, hospice, and some home health services. You do not pay a monthly premium for Part A if you or your spouse paid Medicare taxes for at least 10 years while working. If you do not meet that requirement, you can buy Part A, and the monthly premium varies depending on how many years you or your spouse worked.

When you are admitted to a hospital, you pay a deductible before Medicare begins to pay. The deductible amount changes each year. After you pay the deductible, Medicare covers all approved hospital costs for the first 60 days of a hospital stay. If you stay longer, you pay a daily coinsurance amount for days 61 through 90, and a higher daily amount for each day beyond 90 days (called "lifetime reserve days"). Skilled nursing facility care has its own cost structure: Medicare covers the first 20 days fully, then you pay coinsurance for days 21 through 100.

Part B: Doctor and Outpatient Care Costs

Part B covers doctor visits, outpatient care, medical equipment, and preventive services. Nearly everyone on Medicare pays a monthly premium for Part B. The standard premium amount changes each year. If you have a higher income (above a threshold that varies by filing status), you pay an additional amount called an Income-Related Monthly Adjustment Amount (IRMAA). This means your Part B premium can be significantly higher than the standard amount.

After you pay your monthly premium, you also pay an annual deductible before Part B coverage begins. Once you meet the deductible, you typically pay 20 percent coinsurance for most services — Medicare pays 80 percent. For some preventive services like screenings and vaccines, you pay nothing after you meet your deductible. If you see a doctor who does not accept Medicare assignment (meaning they do not agree to Medicare's payment rate), you may owe more than the standard 20 percent.

Part D: Prescription Drug Coverage Costs

Part D is optional, but you should enroll when you first become may be able to access. If you delay enrollment without having other creditable drug coverage, you pay a penalty for as long as you have Medicare. Part D plans are run by private insurance companies, and each plan has its own monthly premium, deductible, and list of covered drugs (called a formulary).

When you fill a prescription, you pay a copayment or coinsurance depending on the drug's tier (how the plan categorizes it). Generic drugs usually cost less than brand-name drugs. If your annual drug costs reach a certain threshold, you enter a coverage gap (sometimes called the "donut hole"), where you pay a higher percentage of the cost. Once your out-of-pocket spending reaches another limit, catastrophic coverage kicks in and you pay only a small copayment for the rest of the year. The exact amounts and thresholds change each year.

Medicare Advantage and Medigap: Alternative Ways to Cover Costs

Medicare Advantage (Part C) is an alternative to Original Medicare offered by private insurance companies. It includes Part A, Part B, and usually Part D in one plan. Instead of paying the standard Part B premium and deductible, you pay the Medicare Advantage plan's premium (which may be zero), deductible, and copayments. Out-of-pocket costs are often lower than Original Medicare if you use a lot of care, because plans have annual out-of-pocket maximums. However, you must use doctors and hospitals in the plan's network, except in emergencies.

Medigap (supplemental insurance) is sold by private companies and works alongside Original Medicare. It helps pay the costs that Original Medicare does not cover — deductibles, coinsurance, and copayments. You pay a monthly Medigap premium in addition to your Part B premium. Different Medigap plans (labeled A through N) cover different amounts, so a more comprehensive plan costs more. Medigap does not cover prescription drugs, so you still need Part D.

Income-Based Premiums and Extra Costs

If your income is above a certain level, you pay higher premiums for Part B and Part D. Medicare uses your tax return from two years prior to calculate your income. The income thresholds and premium amounts change each year. If your income drops significantly (because of retirement, marriage, or loss of a spouse), you can request that Medicare recalculate your premium using your current year's income instead.

You may also owe a premium for Part A if you do not have enough work history. Some people who are not yet 65 but have End-Stage Renal Disease or ALS (Lou Gehrig's disease) pay different premiums than those who enroll at 65.

What Medicare Does Not Cover

Original Medicare does not cover dental care, vision care, hearing aids, or routine foot care. It does not cover long-term care in a nursing home or assisted living facility. Prescription drugs are only covered if you enroll in Part D. If you need these services, you either pay out of pocket or buy additional coverage. Some Medicare Advantage plans include dental or vision benefits, so costs vary depending on which plan you choose.

You are also responsible for any costs above what Medicare approves. If a doctor charges more than Medicare's approved amount and does not accept assignment, you pay the difference. This is called balance billing. Doctors who accept assignment agree not to bill you more than Medicare's approved amount.

How to Estimate Your Own Costs

Your actual Medicare costs depend on your health, the doctors you see, the drugs you take, and whether you choose Original Medicare, Medicare Advantage, or Medigap. The Centers for Medicare & Medicaid Services (CMS) publishes the standard premium and deductible amounts each year on Medicare.gov. You can use the Medicare Plan Finder tool on that website to compare costs for specific plans in your area.

If you are considering a particular doctor or drug, ask the doctor's office or your pharmacy what Medicare will pay and what you will owe. Many people find that their actual costs vary from year to year depending on how much care they need. Keeping track of your deductible and out-of-pocket spending throughout the year helps you plan for costs in the months ahead.

Frequently Asked Questions

Do I have to pay for Part A?

Most people do not pay a monthly premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years. If you do not meet that requirement, you can buy Part A, and the cost depends on how many years of work history you have. Part A still has a deductible when you use hospital care.

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

If you delay enrolling in Part D without having other creditable drug coverage, you pay a penalty for each month you were not enrolled. This penalty is added to your Part D premium for as long as you have Medicare. You can enroll during the Annual Enrollment Period (October 15 to December 7 each year) or if you have a may have access to life event.

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

Yes. You can change plans during the Annual Enrollment Period or if you have a may have access to event like moving to a new state or losing other coverage. If you switch from Original Medicare to Medicare Advantage, you may not be able to buy Medigap later without paying higher premiums, so understand the rules before you switch.

Why is my Part B premium higher than my neighbor's?

Your Part B premium may be higher because of your income. If your income is above a certain threshold (based on your tax return from two years ago), you pay an additional amount called IRMAA. The threshold and surcharge amounts change each year. You can request a recalculation if your income has dropped.

Does Medicare cover everything my doctor recommends?

No. Medicare covers services it deems medically necessary, but some treatments, tests, or equipment may not be covered. Your doctor's office can tell you whether Medicare will pay for a specific service. If Medicare denies coverage, you have the right to appeal the decision.