Is Medicare Free?
I’ve talked with many people who thought it was. Assuming that Medicare is free can spoil your retirement plans if you’re not aware of the cost. Medicare cost include monthly premiums, copays, coinsurance and often deductibles. Those on Medicare typically pay 10% – 20% of their Social Security retirement income on just Medicare Part B and Part D.
The various cost you pay with Medicare will come in the form of premiums, deductibles and co-pays. Let’s look at the cost you can expect to pay.
· A Premium is the monthly amount deducted from your Social Security check or your personal checking account if yet not yet taking your Social Security for your Part A and Part B benefits.
· A Deductible is the amount you first pay for a hospitalization or surgery before your Medicare plan starts paying on the bill. For example, if you are hospitalized, you may pay a $1,484 deductible before your insurance pays anything.
· Coinsurance is the percentage of the bill you pay for your healthcare services. For example, on a C-scan or outpatient surgery you may pay 20% and your plan pays 80%.
· A co-pay is the flat dollar amount you pay to see your doctor, specialist or therapist. For example, you may pay $5 to see your primary care doctor and $40 to see a specialist.
How do premiums, deductibles and co-pays apply to Medicare?
Medicare Part A Costs:
Part A is the part of Medicare paying for hospital stays and other inpatient services you receive. Below is a breakdown of the monthly premium, Deductible, Coinsurance and Copays for Part A
Premium: The good news here is that Medicare Part A is a $0 premium if you or your spouse paid FICA payroll taxes for at least 10years or 40 quarters. Your premium could be up to $471 per month without the tax withholding work history.
Deductible: The Part A deductible for 2021 is $1,484 per hospitalization “benefit period”. The Part A deductible historically sees a slight annual increase.
A Benefit Period when you’re admitted to the hospital and ends once you’ve been out of the hospital for 60 consecutive days. The Part A deductible is not a calendar year deductible. It’s possible to pay the Part A deductible two or more times in a year because it’s not an annual deductible.
For instance, if you were hospitalized for pneumonia on Jan. 15 and released on Jan. 20, will be responsible for the $1,484 Part A Hospitalization deductible. If you’re hospitalized again on April 15 for 3 days because you fell and broke your hip, you will be responsible for a second $1484 deductible because the Jan. 60 day benefit period ended on March 20th. Then, if I had a really bad year and was hospitalized again after June 18th, I would owe another $1,484 Part A deductible.
Coinsurance for Part A is uncommon. Home hospice patients may pay a small coinsurance amount for inpatient respite care or durable medical equipment (oxygen, respirator) used at home.
Copays under Medicare are also uncommon, but do exist.
Hospital Copay Skilled Nursing Facilities
$0 Days 0-60 $0 Days 1-20
$371/per day Days 61-90 $185.50/per-day Days 21-100
$742/per day Days 91+
Medicare Part B Costs:
Medicare Part B covers outpatient care. Outpatient care include doctor visits, outpatient surgery, ambulance and emergency room services, preventive services like flu shots or mammograms, lab services like blood and urine screenings, X-rays, CT scans, and EKGs, physical or occupational therapy and durable medical equipment for home use, like wheelchairs, walkers and oxygen.
Premium: The Part B premium range in 2021 is $148.50 - $504.90. Most of us on Medicare will pay the base premium, which in 2021 is $148.50. The amount you pay varies, depending on your tax reported income from two years prior. For example, in 2021, if your 2019 individual Modified Adjusted Gross Income was $88,000 or less (or $176,000 or less if you filed a joint tax return), you’ll pay t$148.50. If your individual or joint income amounts exceeded the $88,000 individual /$176,00 joint income level, then your Part B premium is will be more than $148.50.
The Part B premium is set annually by congress, usually in November, and in most years, the premium increases by 1% – 3%. Those below, at or near the federal poverty line receive assistance with paying their Part B premium. Your Part B premium, if you’re taking your Social Security, is deducted from your month check. You’ll be billed quarterly by CMS and writing them a check if you’re not yet receiving Social Security.
Deductible: The Part B deductible for 2021 is $203 per year. Like the Part B premium, the annual deductible is also reset by congress each year and typically sees a slight increase.
Coinsurance: After you’ve paid your deductible ($203 in 2021), you pay a 20% coinsurance amount for all your Part B out-patient healthcare services. It’s important to understand that with Part B, there’s no annual out-of-pocket maximum such is common with Employer or Union sponsored health insurance plans. This 20% coinsurance responsibility is a huge risk should that will be in the $10,000’s should you ever need cancer related radiation or chemotherapy, dialysis, or stroke.
Medicare Part C (Medicare Advantage) Costs:
Medicare Part C is more commonly known as Medicare Advantage. Part C plans are offered by private insurance companies approved by Medicare. Medicare Advantage plans combine Part A and Part B benefits, and have a Out-of-pocket annual maximum for your financial protection. Other Medicare Advantage plan benefits that some plans offer ate:
· Part D prescription drug coverage
· Dental exams, cleanings, X-rays and dental care
· Eye exams, eyeglasses or contact lenses
· Hearing exams and hearing aid discounts
· Gym memberships and wellness incentives
· Spending allowances for Over-the-counter pharmacy supplies
Medicare Advantage plans are required by law to have an out-of-pocket maximum on the total amount you pay during a plan year. Any copays or coinsurance you pay count towards the out-of-pocket maximum. Once you reach the plans out-of-pocket maximum, your Medicare Advantage plan pays 100% of any further Part A and B bills.
Premium: Medicare Advantage plans are often premium free ($0 month). However, you’ll still pay your Part B premium ($148.50/mo. In 2021 or more for high income earners) directly to Medicare. More Part C benefit loaded plans may have monthly premiums in the $15-$95 range.
Deductibles: Medicare Advantage plans don’t have an annual deductible for in or out-patient healthcare services. The plan’s Part D prescription coverage can have its own separate deductible.
Coinsurance: You often find an20% coinsurance expense on cancer related radiation and chemotherapy, Part B drugs, durable medical equipment and renal dialysis up to the plan’s out-of-pocket maximum.
Copays: Medicare Advantage plans have copays for doctor visits, hospitalizations, ER and Urgent Care visits, ambulance services, outpatient surgery, physical and occupational therapy, diagnostic exams.
Medicare Part D (Prescription Drug Coverage) Costs:
Medicare Part D provides coverage for prescription drugs and some vaccines. You can get your drug coverage through a stand-alone Part D plan or as part of a Medicare Advantage plan. Part D plans are offered by private insurance companies with approval and oversight by the Medicare. (Medicare is administrated by the Centers for Medicare and Medicaid Service (CMS), a federal agency within the US Department of Health and Human Services).
Your Part D plan choices vary depending on where you live. My county has 26 plans available this year through 8 private insurance companies! The good news is that all prescription drug plans must meet the same basic guidelines created by the federal government. But beware, not all plans are the same.
Every Part D plan has a drug list or formulary, that shows all the brand name and generic drugs it carries. The formulary, or drugs carried by the plan, are categorized into 4 or 5 tiers based on how much they cost. Tier 1 generic drugs are the cheapest, while Tier 4 or 5 drugs the most expensive. Each plan is able to set the price on the drugs they carry in their formulary, so the actual cost to you varies from plan to plan.
Low-income individuals often qualify for Extra Help, which is a financial assistance program to assist with the Part D cost-sharing. There is a penalty if you don’t enroll during your initial enrollment period. The late-enrollment penalty amount is an additional 1% of the average Part D plan premium for each month you delay your enrollment. This penalty stays with you for as long as you’re enrolled in Part D.
Premiums: Stand-alone Part D plans have a monthly premium that range from $7 to around $100. Medicare. You can find Medicare Advantage plans with Part D coverage and a $0 premium in many areas of the country.
Deductible: Deductible vary by the stand-alone Part D or Medicare Advantage plan you enroll in. Some plans have no deductible. Other plans have no deductible for lower Tier drugs and a deductible that must be met for higher Tier drugs. Some plans have a deductible regardless of what Tier your prescription falls into. In 2021, CMS set the annual deductible limit at $445.
Copays: Copays vary by plan. Private insurance companies set their own copays. Generally, Tier 1 and Tier 2 copays are $10 or less. Some plans offer $0 copays for Tier 1 and 2 drugs if you use their mail order pharmacy for 90-day supply orders. Prescriptions in Tier 3, 4 and 5 will have the highest co-pays. A copay is generally required each time you fill a prescription.
Coinsurance: Coinsurance may be required on a higher Tier drug or when your prescription spending puts you in the Coverage Gap (aka ‘Donut Hole). In the Donut Hole, you’ll pay 25% of the cost for brand-name and generic drugs. In 2021, $4,130 of total drug cost spending will put you in the Coverage Gap stage of your drug plan.
Medicare isn’t free for the vast majority of those enrolled in it. Part A (Hospital Care) will be premium free for those that have worked an equivalent of 10 years/40 quarters. Only the low-income will not have to pay a Part B (Out-patient Care) premium. Medicare Part B provides 80/20 coverage with no annual out-of-pocket maximum. The financial risk of an un-capped 20% coinsurance responsibility motivates most Medicare beneficiaries to enroll in a Medicare Supplement or Medicare Advantage plan. These two options put a cap on your annual out-of-pocket spending. Medicare Supplements and Medicare Advantage plans also come their own separate premiums, copays and coinsurance.
It’s always beneficial to meet with an experienced, independent Medicare agent to talk about the specifics of your cost. A Medicare agent can go into further detail than covered here. They can help show you the monthly premiums of Medicare Supplement, Medicare Advantage and Part D plans in your area. I am always happy to answer your questions.
Medicare Plans and Education
839 Main St. Suite 550
Lafayette, IN 47901