Medicare costs

By Ed Crowe | General Articles | 0 comment | 7 June, 2024 | 0

In general, Medicare is an affordable way for qualified individuals to receive healthcare coverage. However, there are some Medicare costs both agents and beneficiaries need to understand.

Plan Premiums

Premiums are a monthly fee the beneficiary pays for Medicare coverage.

Part A premiums

Although most beneficiaries do not pay a premium for Part A as long as they have worked for a Medicare-taxed job for a period of at least 10 years (40 quarters). In 2024, the premium for those who do not qualify for free Part A are between $278 to $505 monthly. The amount is based on the number of quarters the beneficiary or their spouse worked and paid Medicare taxes.

Part B premiums

Unlike Part A, almost everyone pays a Part B premium with the exception of those who meet certain income and asset levels and qualify for extra help. In general, most beneficiaries pay a standard amount for Part B. In 2024, the Part B premium amount is $174.70, although this amount may be adjusted according to each beneficiary’s income level. Those who earn over a specific thresh hold will pay an additional amount (IRMAA).

Part C (Medicare Advantage)premiums

Part C plans offer a variety of premiums, although many provide coverage for $0. The premium amount is based on the beneficiary’s location and plan availability. Please note; an IRMAA can also apply to a Medicare advantage plan if it includes Part D coverage.

Part D premiums

Similar to Part C premiums, the cost for Part D coverage varies by plan and coverage area. The national base beneficiary premium for 2024 is $34.70 per month. This is just a general premium amount CMS uses to calculate LEP penalties and not an actual premium amount. Premiums actually vary from $0 up to over $100 per month. Similar to Part B, individuals may pay a higher rate if they qualify for an IRMAA.

Find out how ancillary health insurance can cover some of the gaps in coverage.

An IRMAA is an additional amount CMS adds to the beneficiary’s monthly premium amount for Part B and Part D if their income exceeds the threshold amounts set by Medicare each year. The IRMAA is based on the individuals tax return from 2 years prior.

Click here to learn more about the income brackets for IRMAA 2024

LEP (Late enrollment penalty)

There are specific times beneficiaries must enroll in Medicare coverage. These are enrollment periods. If the beneficiary misses their enrollment period, they may pay an LEP. Medicare will add the penalty to their monthly premium.

Watch a YouTube video on OEPs, SEPs and Late Enrollments

Part A LEP

The LEP only applies to those who do not qualify for premium free Part A. Those who do not enroll on time have to pay a 10% higher Part A premium. Medicare applies the penalty for twice the number of years the beneficiary was eligible but didn’t enroll in Medicare. This means, if the beneficiary was eligible for Medicare but didn’t sign up for 3 years, they would pay an additional 10% for their Part A premium for 6 years.

Part B LEP

This penalty adds 10% times the number of years the beneficiary did not enroll in Medicare to the monthly premium and applies as long as the beneficiary has Medicare. In other words, if the beneficiary signs up for Medicare 3 years late, they pay 30% more for their premium. However, if they are actively working or have coverage through a spouse who is working, they can delay Part B enrollment without an LEP. Once they stop working, they qualify for an SEP and are eligible to enroll in Part B.

Part D and Part C plans that include drug coverage LEP

The LEP for Part D or Part C plans that include prescription drug coverage is 1% of the national base premium (this premium changes annually), multiplied by the number of months the beneficiary was eligible and did not enroll. This penalty is similar to the Part B penalty, because it lasts as long as the individual is enrolled in Medicare Part D. The federal government uses the standard rate (national base premium) to calculate Part D penalties not the individual’s actual plan premium. If the beneficiary delays Part D enrollment because they have another creditable drug plan, the penalty doesn’t apply to them.

Deductibles

Enrollees pay a deductible each year before their plan pays it’s portion of covered medical expenses.

While other Medicare plans have annual deductible, the deductible for Medicare Part A is $1,632 for each inpatient hospital stay. An individual could pay this deductible more than once a year depending on how many times they are admitted to the hospital. Each hospital admission counts as a new benefit period, unless the beneficiary is readmitted before the end of the benefit period. Each benefit period ends 60 days after the enrollee is discharged.

Both Part B and Part D plans have one annual deductible. The Part B deductible is $240 in 2024. Although Part D deductibles vary according to plan, Medicare puts an annual limit on the maximum deductible allowed; in 2024 the maximum deductible is $545.

Copays and coinsurance

Both copays and coinsurance are fixed amounts the beneficiary pays for covered services or medications. These amounts apply after the beneficiary pays the deductible.

Part A coinsurance and copays

Once the beneficiary is in the hospital for over 60 days, they pay a coinsurance amount of $408 per day in 2024 for days 61 to 90. If the beneficiary is in the hospital for over 90 days, they can use some or all of their 60 lifetime reserve days. In 2024, each of these days cost $816. Each beneficiary qualifies for 60 reserve days for their lifetime. Once the beneficiary uses them all, they pay the entire remaining cost of their hospital stay.

Part A pays the first 20 days in a skilled nursing facility, once the beneficiary goes over the 20 days, they pay $204 per day for days 21-100. After day 100, the beneficiary is responsible for all costs. Many beneficiaries apply for Medicaid if they qualify, once they exhaust the Medicare coverage.

Part B coinsurance and copays

Part B normally provides coverage for 80% of approved Medicare expenses. That leaves the beneficiary with the remaining 20%. However, Medicare fully covers most preventative visits. Beneficiaries pay a higher co-insurance amount if their provider does not accept Medicare assignment.

Supplemental insurance can cover the 20% co-insurance cost and some of the copays with original Medicare. Click here to learn more.

Part C coinsurance and copays

Because Medicare Advantage plans work differently than Original Medicare, the coinsurance and copays work in a very different way. Medicare advantage plans use a specific network of providers who agree to accept the terms of payment. Each plan has it’s own co-pay amounts for doctor and specialist visits. Some plans provide coverage for visit to out of network providers at a higher cost share amount.

Each plan also has an out of pocket maximum. Once the beneficiary reaches this amount, the plan pays 100% of their approved medical costs.

Part D coinsurance and copays

Part D copays and coinsurance can vary quite a bit from one plan to another. That is why it is important to check all medications and cost sharing amounts before choosing a plan. In general, the cost for a prescription is higher for brand-name medications especially if they are on a higher tier in the plans formulary. If the beneficiary uses medications that are not on the formulary, they may have to pay the full costs of the medication.

There are other factors that decide the cost of medications such as the deductible, tier, the coverage gap and the catastrophic phase of coverage. Although there are changes coming in 2025 that will alter some of those cost shares. Plan enrollees should check their plan every year to ensure they are on the best plan to meet their coverage and budgetary needs.

Click here to learn about the Part D changes for 2025

Providers who don’t participate in Medicare

It is important to note: Not all doctors participate with Medicare. In some instances (rarely, but some), a provider has opted out of Medicare and does not accept Medicare as payment. This means the patient is responsible for paying any fees for service out of pocket.

Find out what Medicare Advantage plans don’t cover

As you can see, there are many potential costs associated with Medicare plans. We have not listed all of them. It is important to check the summary of benefits or evidence of coverage each year to ensure enrollment in the best plan option for each individual situation. A licensed Medicare agent can provide invaluable insights into plan choices and coverage options.