Table of Contents:

  1. Original Medicare
  2. Medicare Advantage (Part C)
  3. Medicare Part D

In short, it depends. All Medicare beneficiaries incur some out-of-pocket expenses throughout the year, but their choice of plan can make a big difference.

Original Medicare

Part A

If you or your spouse has been employed for more than ten years and have had Social Security taxes withheld from your paychecks, you’ve been helping fund Original Medicare. You also qualify for premium-free Part A coverage.

Part A inpatient care is also premium-free for the following groups:

  • Americans who have received disability benefits through the Social Security Administration (SSA) or Railroad Retirement Board for at least two years.
  • Americans with end-stage renal disease (ESRD) who have paid (or whose spouse/parent has paid) into Medicare for at least ten years.
  • Americans with amyotrophic lateral sclerosis who have paid (or whose spouse/parent has paid) into Medicare for at least ten years.

If you don’t qualify for premium-free Part A coverage, you’ll pay a fee each month:

  • If you or your spouse has paid into Medicare for 7.5 or more years, you’ll pay $259/month in 2021.
  • If you or your spouse has paid into Medicare for fewer than 7.5 years, you’ll pay $471/month in 2021.

The Medicare Part A deductible works differently than the deductibles for other plans. Typically, a deductible is the amount of money you must spend on healthcare within a specific period to qualify for discounted coverage and care.

Part A’s deductible is a set amount that beneficiaries must pay each benefit period. A benefit period begins the day a beneficiary is admitted to a hospital or skilled nursing facility (SNF) as an inpatient. It ends after 60 days without inpatient care. There is no limit to the number of benefit periods you can accrue and each one presents a $1,484 fee.

After Day 60 of inpatient care, Part A beneficiaries are subject to daily coinsurance charges:

  • You’ll pay $371/day for Days 61 through 90 of treatment within a single benefit period.
  • After day 90, you’ll need to begin using your 60 lifetime reserve days and paying a copayment of $742 for each day. The term “lifetime reserve days” is very literal. You get 60 days of additional inpatient coverage to use throughout your entire lifetime. If you use all of them, it is possible that you will be responsible for all of your hospital costs after a certain date.
  • Days 1 through 20 of inpatient care in an SNF are typically covered if you first spent at least three days in a hospital. After Day 20, you’ll pay $185.50/day through Day 100. Original Medicare will no longer cover any costs after that date.

Many Medigap plans cover all or some of the Part A deductible. All ten of the standardized plans cover Part A coinsurance. They also each offer an additional 365 days of inpatient coverage after Original Medicare’s benefits have been depleted.

Part B

Most Part B beneficiaries will pay a standard premium of $148.50/month in 2021. High-income beneficiaries will pay a higher premium based on an income-related monthly adjustment amount (IRMAA) scale.

  • If you earn more than $88,000/year or you and your spouse earn more than a combined $176,000/year, you will pay between $207.90/month and $504.90/month.
  • If you neglected to enroll in Part B during your first period of eligibility, you may incur a late enrollment penalty. Keep in mind that this penalty will not apply if you neglected to enroll because of employer-sponsored coverage.

All enrollees must pay a standard deductible of $203 in 2021. Once they’ve reached this sum, they are responsible for a 20% coinsurance on all eligible healthcare services.

Every type of Medigap plan covers all or some of these coinsurance fees and two (Plans C and F) cover the entire Part B deductible. As of January 1st 2020, Medigap Plans C and F are no longer available to new enrollees. Anyone who enrolled in Medigap Plan C or F before this date can retain their coverage. The new, high-premium Part G plan is the only Medigap plan that helps beneficiaries pay their Part B premium.

Limits on Out-of-Pocket Costs

There is no limit on out-of-pocket costs for Original Medicare beneficiaries.

Medicare Advantage (Part C)

All Medicare Advantage beneficiaries are still responsible for their monthly Part B premium. This is in addition to the premium set by their plan. In 2021, the average premium across all types of Medicare Advantage plans is $21/month. This figure accounts for both zero-premium plans and Medicare Advantage plans with additional prescription drug coverage.

Limits on Out-of-Pocket Costs

Unlike Original Medicare, all Medicare Advantage plans place a cap on out-of-pocket expenses. The average out-of-pocket limit across all plans is $4,993. No plan can set an out-of-pocket limit greater than $6,700. This maximum limit has remained static since 2011.

Certain expenses do not count toward reaching the out-of-pocket limit. Most notably, these include prescription drug costs and monthly premiums. It’s important to read all the information related to your plan to ensure you understand the plan’s definition of “out-of-pocket.”

Medicare Part D

Like Medicare Advantage plans, Part D Prescription Drug Plans (PDPs) are provided by private insurance companies. As such, costs will vary based on a number of factors. In 2021, the average PDP charges a monthly premium of $41.

As with Medicare Part B, high-income Part D beneficiaries are subject to additional fees. Individuals who earn more than $88,000/year and joint-filing married couples who earn more than $176,000/year will pay between $12.30/month and $77.10/month in additional premiums.

Many PDPs do not include deductibles and no Medicare Advantage drug plan may have a deductible greater than $445. After reaching the deductible, your out-of-pocket costs will not exceed 25% of the cost of your prescription drugs (brand-name or generic). If you spend enough to reach the catastrophic coverage threshold ($6,550), you are entitled to additional support. After this threshold, you will not pay more than 5% of the cost of drugs or $3.70 for generics and $9.25 for brand-name drugs (whichever sum is greater). These are the same prices you’ll pay (regardless of annual expenses) if you qualify for Extra Help.

 

Information adapted from the Centers for Medicare & Medicaid Services