What Is the Cost of Medicare?

As you get closer to retirement, you’re probably wondering about Medicare. Yeah, that’s the line item deducted from every paycheck you’ve ever drawn over your long career. Pretty soon you’re finally going to be able to use the benefits you’ve been paying for! And wouldn’t it be great to get your money’s worth?

Well, considering the government’s track record with budgeting, that might be asking a bit much, but you definitely want to make the most of what you’re entitled to. And with health care costs soaring, it also makes sense to find out how much Medicare will cost you once you’re enrolled.

The good news is, as long as you or your spouse have worked for 10 years, Medicare Part A is free to you. But there’s a whole lot more to Medicare than just Part A, and a lot more costs as well—things you’re already used to from other kinds of health insurance, like premiums, deductibles and copays.

Thankfully, you have options. Let’s see what the cost of Medicare is as well as some thrifty ways to get the best plan for your specific needs.

Understanding Medicare

Medicare is the federal government’s health insurance program for people age 65 and older, as well as those with certain disabilities. Depending on how long you’ve been working, you’ve likely already covered at least some of the costs of Medicare over your career, since it’s funded through payroll taxes.

During those working years, health insurance coverage through your employee benefit was probably the most affordable route. But once you retire and the company’s no longer chipping in, coverage will get expensive. (You self-employed folks have already been paying the entire Medicare tax instead of having half of it covered by an employer—and that can make Medicare seem expensive! Financial aid is available, and we’ll talk more about that below.) Medicare can be a big help—as long as you choose the right kind of coverage.

As a government program, Medicare has worked out discounted costs with any provider that accepts Medicare patients. That means the Medicare-approved price for services will be lower than you’d see with regular, private health insurance.

You can enroll in Medicare when you turn 65 during your Initial Enrollment Period. In fact, you’re required to enroll as soon as you’re eligible, or you’ll have to pay a penalty. But if you miss your IEP, you can sign up any year after that during a General Enrollment Period from January 1 to March 31 (or during a Special Enrollment Period, if you qualify). There’s also something known as the Medicare Open Enrollment Period, but—this part’s a little confusing—it’s only for making changes to an existing plan, not for signing up for the first time.

Those are your Medicare basics. Now, how much does all this stuff cost?

How Much Does Medicare Cost?

Your annual cost for Medicare depends on three main factors:

• Which part(s) of Medicare you participate in
• The plan you choose, if you have one of the parts that requires a plan
• Your ongoing health care needs

We’ve summarized what your premiums, deductibles and coinsurance will look like for each part of Medicare in the table below. Later, we’ll break down these basic costs.

Source: Medicare.gov unless otherwise noted.

Connect With Our Recommended Medicare Advisors Now for Annual Enrollment

Let’s imagine a typical year of costs. Say you have Original Medicare (aka Parts A and B). You’ll pay nothing in premiums for Part A and a total of $2,096 in premiums for Part B (your monthly premium times 12). Assuming that you never need any hospital or medical care during the year, you’ll spend a little over $2,000 for Medicare.

But now let’s say you need one hospital stay during the year. Your deductible for that stay will be $1,632 if it lasts less than 60 days. You’ll also be paying a $240 annual deductible for any use you make of Part B services (medical insurance). Your services for Parts A and B might or might not meet those deductible limits, but if they do, you’re looking at a total of $1,872 in annual deductibles for that benefit period. All told, your annual total (with premiums) would land at $3,968.

That total can vary even more if you

• Experience more than one benefit period
• Choose to supplement your coverage with Part C or Part D
• Buy Medigap

But the numbers above give you a rough outline of typical annual costs.

Here’s something to keep in mind with Part A: You can have more than one benefit period in a year (which we’ll describe more below), which means you’d be subject to another deductible for each new benefit period in which you need hospital services. Also, should a hospital stay exceed 60 days, you’d be responsible for additional daily coinsurance to cover that. And the additional coinsurance for skilled nursing care kicks in after just 20 days.

On the other hand, if you have a Medigap plan, it will usually cover all deductibles, copays or coinsurance for any services you receive under Parts A and B. Of course, the premiums on Medigap will vary by plan, so you’ll need to compare those annual premiums to the numbers in the Original Medicare examples we walked through above to find out which kind of Medicare is better for you.

Basic Costs Associated With Medicare

Next let’s break down the main costs for each part of Medicare.

Medicare Part A

Part A is your hospital coverage.

Premiums: Most people don’t pay a premium if they or their spouse paid Medicare taxes for at least 10 years. But if that’s not you, your premium will range from about $274 to $507 per month in 2024. For the few folks who do pay a Part A premium, it’s rising a bit in 2025 to a maximum of $518 a month.³

Deductibles: The Part A deductible is $1,632 (and rising to $1,676 in 2025⁴) per benefit period. What’s that? Let’s see.

Benefit Periods: Medicare uses benefit periods to calculate coverage. Each benefit period begins on the date you’re admitted for skilled nursing facility care or an inpatient hospital stay. It ends when you haven’t received inpatient hospital or skilled nursing care for 60 days in a row—which means, in theory, a single benefit period could last for many months. But once you pass that window of time between services, a new event would start a new benefit period—and you’d need to meet your deductible again.

Thankfully, it’s mathematically impossible to trigger more than six benefit periods in a single calendar year, so at most, your maximum Part A deductible cost would be around 10 grand. That explains why most people need some kind of supplemental coverage beyond Original Medicare.

Coinsurance: This depends on which service you need. The first 60 days of an inpatient hospital stay require no coinsurance, but you’ll pay $408 (or more) in daily coinsurance after day 60. Similarly, your first 20 days in a skilled nursing facility have no coinsurance, but it’s $204 each day after that.

Medicare Part B

This is your medical insurance. It covers things like doctor visits and outpatient services.

Premiums: The standard monthly premium is $174.70 in 2024 (rising to $185 in 2025), but it can be higher for individuals with higher incomes due to something the government calls income-adjusted premiums. Depending on your income, increases could range from $70 to $441 per month.

Deductibles: The Part B deductible is $240 per year in 2024, rising to $257 in 2025. You have to admit, that’s a lot more affordable than the Part A deductible.

Coinsurance: Once you’ve met your deductible, you’ll usually be responsible for 20% of the Medicare-approved cost for services.

Medicare Part C

Sometimes known as Medicare Advantage, Part C bundles together Parts A and B, and in most cases Part D too (more on Part D below). Private insurance companies offer these packages to supplement Original Medicare. One of the main reasons people might choose Medicare Advantage is because it carries a defined annual limit on how much you’ll pay out of pocket.

Here’s another thing to keep in mind about the cost of Part C—you can only use providers within a defined network. If you need (or choose) to go outside that network (say, for a certain specialist), all costs are coming out of your pocket.

Premiums: Perhaps surprisingly, there are sometimes two premiums to pay here. Most participants pay an average of $18.50 per month for the overall package, and many people also have to pay the premium for Part B (a standard rate of $174.50 a month). But many Medicare Advantage plans have no Part C premium. And some plans will help pay all—or at least a portion—of the Part B premium as well. So a Medicare Advantage plan could cost between $0 and $200 a month in premiums.

Deductibles: These vary a lot, depending on which insurance company you buy Part C from. You’ll want to read up on the plans as you shop. And along the way, consider using a well-informed Medicare advisor!

Out-of-Pocket Maximum: Plans are allowed to set their own out-of-pocket maximums, but the legal maximum is $8,850 (going up to $9,350 in 2025).⁵ Within a Medicare Advantage plan, that limit only applies to Parts A and B (which usually make up most of your costs anyway). It doesn’t apply to any costs you might be charged for under Part D during a coverage year.⁶ And what might Part D cover?

Let’s find out!

Medicare Part D

Part D (if you buy it) is your prescription drug coverage, once again coming to you from a private insurance company. And there’s some big and exciting news about how much those scripts will cost you. Due to a new law that goes into effect in 2025, the new annual out-of-pocket maximum for Part D drugs will be $2,000.⁷

Average Total Premium: It can vary a lot by plan and income level, but the monthly average is about $55. Similar to the premiums for Part B, premiums for Part D go up if you earn above certain income levels. This increase ranges from $12.90 to $81 per month.

Deductibles: These depend on which plan you buy, and not all plans require a deductible. The maximum deductible amount is $545 per year.⁸

Copays: You can probably guess—this also varies by plan. But it’s pretty easy to find out your plan’s prescription costs.

The Coverage Gap: This is also sometimes called the Part D “donut hole.” It refers to something that will soon become obsolete because of the legislation we mentioned earlier that limits the annual out-of-pocket maximum. But basically, once your drug costs go above a certain coverage limit for the year, you’ll have to start paying more for your prescriptions. Then, after you’ve reached another out-of-pocket limit, the plan will pick up your costs again. Thankfully, the new law is set to close the donut hole from now on—or at least until the law changes again!

As a recap, each part of Medicare comes with its own yearly deductible. In 2024, the Part A deductible is $1,632, the one for Part B is $240, and Part D’s is no more than $545 per year.^9,10 Since Part C comes from private insurance companies, its deductible varies. That’s a lot of deducting! And even once you hit your deductible, you still have to pay coinsurance—which is the percentage of the cost you’re responsible for (usually 20%).

All that adds up quick. Plus, there’s no out-of-pocket maximum for Original Medicare, if that’s all you have!

It would be nice if there were a way to supplement your coverage and save, right? Well, there is!

Medigap (Supplemental Insurance)

We’ve already talked about the government’s solution for managing the cost of Original Medicare, which they call Medicare Advantage, or Part C.

Another option, available through private insurance companies, is called Medigap (aka a Medicare supplement plan). Medigap plans are designed to help pay costs Medicare doesn’t cover—like coinsurance and deductibles.

Monthly Premiums: Again, these are going to vary quite a bit. Some of the factors that come into play for pricing your specific Medigap premium include:

• Plan type
• Smoking status
• Location
• Age
• Health
• Gender

Types of Medigap Plans and Coverage Portions

Source: Medicare.gov¹¹

The table gives you a pretty good sense of what’s covered in each Medigap plan and how much each plan covers of the benefit types. But not all plans are available to everyone, and some offer different benefits to different customers, depending on when they enroll. To zero in on the cost of a few plans, look at the following.

Plan G: It’s the most popular Medigap plan that’s still available to anyone, likely because it has a pretty affordable average monthly premium of $164 and 100% coverage for most benefits.

Plan K: This plan covers half the cost of most benefits, and the monthly premium range is $82-162.

Plan L: Charging slightly higher premiums of $182-212, Plan L also ups the share of coverage for most benefits to 75%.

At the risk of being repetitive: It’s smart to work with an experienced Medicare advisor who can walk you through the details of every available plan and point you to one that best fits your needs!

Financial Assistance Programs

Face it: Like any other form of health insurance, Medicare is expensive, regardless of your plan or parts. Thankfully, financial assistance programs can help.

Medicaid

Medicaid is not insurance—instead it’s a joint federal and state health care assistance program for lower-income Americans. Medicaid helps cover things like personal care, nursing home care and premium assistance. And it can be a big help in shouldering the cost of Medicare.

Services and benefits vary by state, but in general your eligibility for Medicaid is determined by your income level and your assets.

Medicaid costs are usually minimal or free. Those who qualify usually don’t have to pay any sort of premium because it’s not insurance. On the other hand, most states do require some form of out-of-pocket cost-sharing for certain services. For other services (like a trip to the emergency room), there’s never any copay.

Extra Help for Prescription Drug Costs

You can get more help covering your Medicare prescription drug costs if you qualify under certain income and resource limits. Medicare has a program called Extra Help with Medicare Prescription Drug Plan Costs. You can apply online.

Medicare Savings Programs

Medicare Savings Programs (MSPs) cover some or all of your premiums for Medicare Parts A and B, plus deductibles, copays and coinsurance for people who earn below certain income limits.

These programs are designed to make sure every American has health insurance coverage. You don’t have to qualify for Medicaid to get help through an MSP.

Planning for Medicare Costs

If you’re eligible for Part A, it just makes sense to take the free coverage. You’ll have to make the call on whether the other parts are worth it for you based on your specific financial situation. Keep this in mind: As complex as Medicare is (not to mention the laws around it), you’d be smart to work with a knowledgeable advisor as you shop and enroll.

Find Help as You Shop for Medicare

As you can see, there are a whole lot of costs no matter which plans or parts of Medicare you wind up choosing to enroll in. And although we’ve laid it all out as simply as we can, it wouldn’t be surprising if you still had plenty of questions about eligibility, services and (especially) cost!

There are folks who felt just like you, who went and did the research themselves, and who are here to help you navigate the ins and outs of Medicare with confidence. The good people at Chapter are licensed advisors. They’ll walk you through your options and help you pick the right Medicare plan for your needs—not the one that will line an agent’s pockets the best. But they don’t stop there. After you’ve enrolled, they’ll help you use your benefits and get the most out of Medicare.