Mistake #1: Thinking It’s Free!

by David Bynon, last updated

Many people mistakenly believe that Medicare is free for everyone, including when you turn age 65. After all, we pay Medicare taxes during our work years, right?

Medicare is not free for everybody. Medicare is not free at age 65. And Medicare is not free for the disabled. Our taxes pay for our hospital insurance.

In this Medicare Mistakes article, we’ll explain how much Medicare costs and what you can do to prepare. We’ll also guide you to a Medicare Savings Program that can assist you if you can’t afford your Medicare.1Medicare.gov, ”Medicare costs at a glance”, Accessed January 11, 2022

Key Takeaways

  • Medicare is an 80/20 cost-sharing system. Medicare pays about 80% and the beneficiary pays the rest.
  • Medicare covers medically necessary services, which do not include routine dental, vision, hearing, or prescriptions.
  • If you or your spouse worked the necessary 10 years, your Medicare Part A coverage is free.
  • All beneficiaries pay a Medicare Part B premium. Most people pay the standard rate. High-income earners pay an IRMAA surcharge.
  • Optionally, you can get a Medicare Advantage plan that offers additional services that Medicare does not cover.
  • To help cover some out-of-pocket costs, beneficiaries may purchase a Medigap policy.
  • If you can’t afford Medicare or your prescriptions, there are Medicare Savings Programs and Extra Help programs available.

Is Medicare Free at Age 65?

The short answer is, no, Medicare is not free at age 65.

Some people qualify for additional government assistance. Assistance is based on an individual’s financial, health, or institutional situation.2SSA.gov, ”Medicare Benefits”, Accessed January 11, 2022

How Much Does Medicare Cost Per Month?

In order to understand how much Medicare costs, it’s first important to understand that Medicare is not a single thing. Medicare health insurance is not one-size-fits-all coverage.1Medicare.gov, ”Medicare costs at a glance”, Accessed January 11, 2022

Medicare has four parts (A, B, C, and D). And, there are private insurance plans called Medigap. Each part has its own costs.3Medicare.gov, ”What’s Medicare Supplement Insurance (Medigap)?”, Accessed January 11, 2022

Medicare Part A and Medicare Part B, often called Original Medicare, are your hospital insurance and medical insurance, respectively.

Part A covers inpatient costs when you are hospitalized. Part B covers your medical care, which includes doctor visits, specialists, tests, diagnostics, and medical equipment.2SSA.gov, ”Medicare Benefits”, Accessed January 11, 2022

Both Medicare Part A and B have a monthly premium. How much you pay is based on your work history and how much you earn.

Who is Eligible for Free Medicare Part A?

How much you pay for Part A is based on the number of years you worked. If you paid Medicare taxes for 40 quarters (10 years), you qualify for premium-free Part A coverage.1Medicare.gov, ”Medicare costs at a glance”, Accessed January 11, 2022

Who is Eligible for Free Medicare Part B?

The Medicare taxes you paid do not pay for your Part B medical coverage. Part B has its own monthly premium. And, if you are a high-income earner, you will pay more than the standard amount. Based on your modified adjusted gross income, Medicare will assess an Income Related Monthly Adjustment Amount (IRMAA) tax.1Medicare.gov, “Costs“, Accessed January 4, 2023

That said, there are government programs that assist low-income individuals with their Part B premiums. If you qualify for both Medicare and Medicaid, you qualify for Part B premium assistance.

The income limit for free Medicare Part B (premium assistance) is based on the Federal Poverty Level (FPL). An individual earning up to $13,590 per year qualifies for full premium assistance. The FPL levels in Alaska and Hawaii are slightly higher ($16,990 and $15,630 respectively)

What if I Paid Medicare Taxes?

Your payroll taxes contributed towards your Medicare Part A coverage only. If you or your spouse did not work enough to fully fund your account, you will pay monthly premiums for hospital coverage. The taxes you paid do not apply to your Part B coverage. We all pay a monthly premium for Part B medical insurance coverage.

When you enroll, you will pay a monthly premium for Medicare Part B coverage. If you are receiving Social Security benefits, the Social Security Administration will take your premium for Medicare Part B out of your monthly payment. Otherwise, you can pay through your online account.4Medicare.gov, ”Part B costs”, Accessed January 11, 2022

Medicare Advantage Plan (Part C)

Medicare Part C, more commonly known as Medicare Advantage, is a private health insurance option to Medicare. Some plans may appear to be free, because they have a zero-dollar premium, but they are not.

If you join a Medicare Advantage plan you must continue paying your Part B premium. If the Part B premium is not enough to cover the cost of the plan’s benefits, then it will have an additional premium.5Medicare.gov, ”Costs for Medicare Advantage Plans”, Accessed January 11, 2022

Medicare Prescription Drug Plan (Part D)

Medicare Part D is Medicare’s prescription drug program. Medicare Part D plans are stand-alone prescription drug plans that you can enroll in to add prescription coverage to your Part A and Part B coverage.6Medicare.gov, ”How to get prescription drug coverage”, Accessed January 11, 2022

If you join a Part C plan that does not include a prescription drug plan, you can add a Part D plan, as well. Monthly premiums for a prescription drug plan start at less than $20 in most areas.

Medicare Supplement Insurance (Medigap)

Medicare Supplement insurance, while not technically part of the Medicare program, is a policy sold by private insurance companies. There are 10 standardized plans (A through N) that cover different cost gaps in Medicare.

Each Medigap plan offers supplemental coverage for some of the out-of-pocket costs in Medicare. The best way to compare Medigap plan coverage is with a chart:

Medicare Supplement Plans Comparison Chart for 2024

All Medicare Supplement plans pay out-of-pocket costs in Part A and Part B covered services. However, these Medicare plans do not cover prescription drugs or provide other health coverage that’s not medicare-approved.

Does Medicare Cover Costs?

Monthly premiums are what we pay for access to coverage. It does not include what you pay for doctor visits, inpatient hospital care, skilled nursing care, durable medical equipment, medical supplies, and other healthcare services.1Medicare.gov, ”Medicare costs at a glance”, Accessed January 11, 2022

Medicare health insurance is an 80/20 system. Medicare pays about 80 percent of your major medical costs and you pay the remaining 20 percent. Medicare Part C plans are designed the same way.7CMS.gov, ”The 80/20 Rule: Providing Value and Rebates to Millions of Consumers”, Accessed January 11, 2022

Your 20 percent share is collected through deductibles, copayments, and coinsurance when you see your doctors, use the emergency room or have an inpatient hospital stay. These are costs you pay out-of-pocket.

With Medicare, these costs are standardized and well-defined. With Medicare Advantage, each plan is allowed to set its own monthly premium, deductibles, copays, and coinsurance.1Medicare.gov, ”Medicare costs at a glance”, Accessed January 11, 2022

The big difference is that Medicare Advantage plans have an annual out-of-pocket maximum (MOOP), which protects members from excessive out-of-pocket costs. Medicare does not have a yearly limit.

To control your out-of-pocket costs in Medicare you can purchase a Medigap plan from a private insurance company. Also known as Medicare supplement insurance, a Medigap policy will help cover some of the deductibles and coinsurance costs. The largest of these costs is the benefit period deductible and coinsurance for inpatient care and skilled nursing facility care. Most supplemental policies cover these Part A costs.8Medicare.gov, ”How to compare Medigap policies”, Accessed January 11, 2022

It is also important to understand that Original Medicare only covers Medicare-approved major medical costs from approved healthcare providers9Medicare.gov, ”How Original Medicare works”, Accessed January 11, 2022. That means any health care service that is not related to primary care, such as routine dental, vision, and hearing, is not covered. You must pay for these health services out-of-pocket or purchase additional coverage.10Medicare.gov, ”What’s not covered by Part A & Part B?”, Accessed January 11, 2022

Fortunately, many Medicare Advantage plans now offer many of the additional health services people want. Some plans even include beneficial extras such as non-emergency transportation, telehealth services, certain home-care services, and other outpatient care.11Medicare.gov, ”Medicare Advantage Plans cover all Medicare services”, Accessed January 11, 2022

Find Plans in your area with your ZIP Code

Is Medicare Free If You Have Disability?

Social Security Disability Insurance (SSDI) allows people who are unable to work, due to certain disabilities, to get Social Security benefits before their normal retirement age.

In most cases, on the 25th month after disability benefits start, Medicare coverage also begin. If you have end-stage renal disease (ESRD) your Medicare benefits start as soon as your SSDI begins.12CMS.gov, ”Top 5 things you need to know about Medicare Enrollment”, Accessed January 11, 2022

As with all Social Security and Medicare beneficiaries, Medicare health insurance is not free. People with SSDI pay for their disability benefits the same way as all other Medicare enrollees. They can choose Medicare or Medicare Advantage. Medicare prescription drug plans are also available.12CMS.gov, ”Top 5 things you need to know about Medicare Enrollment”, Accessed January 11, 2022

One big difference is that some states do not have the same protections in place when it comes to Medicare Supplements. And, many states that require insurance carriers to sell policies to people under the age of 65 do not require equal rates, so carriers raise rates exorbitantly to make them unaffordable.13KFF.org, ”Medigap Enrollment and Consumer Protections Vary Across States”, Accessed January 11, 2022

What If I Can’t Afford Medicare?

There are a number of federal and state options to assist people who can’t afford the cost of their Medicare insurance. If you feel you are in this situation, your first step should be to call your local state Medicaid office.14Medicare.gov, ”Medicaid”, Accessed January 11, 2022

People who qualify for both Medicare and Medicaid, so-called dual-eligible individuals, have a range of options available to them, including monthly premium assistance and assistance with copayments. These benefits are available through the Medicare Savings Program. Once you qualify, your local Medicaid office will assist you with enrollment in the Qualified Medicare Beneficiary (QMB) program to get assistance with premiums and out-of-pocket costs.

One great option if you are dual-eligible, where available, is a Special Needs Plan. These health plans are designed for people with special financial, health, and institutional needs. Plans may also help with home health needs.14Medicare.gov, ”Medicaid”, Accessed January 11, 2022

Low-income individuals may also qualify for the Social Security Administration’s Extra Help program.  This program helps people afford their prescription drug coverage.15SSA.gov, ”Extra Help with Medicare Prescription Drug Plan Costs”, Accessed January 11, 2022

Is Medicare Free for Veterans with VA Benefits?

Many veterans qualify for healthcare benefits. These benefits do not go away at age 65. But, the VA does not pay for a veteran’s Medicare, either.

Medicare is not free for veterans.

However, veterans who qualify for the Veteran Administration’s (VA) health benefits may choose to use a VA facility to receive care.  When they do, the VA bills Medicare directly and the VA pays the remainder. In some cases, the veteran may pay a small copay.16VA.gov, ”VA health care and other insurance”, Accessed January 11, 2022

Is Medicare Free for Railroad Retirees?

The Railroad Retirement Board handles Medicare benefits for its retirees. If you earned railroad benefits, call the RRB for details.17RRB.gov, ”Medicare for Railroad Workers and Their Families”, Accessed January 11, 2022

Is Medicare Free for State and Federal Retirees?

Most state, federal, and union retirees also have additional retirement benefits that assist with Medicare premiums and doctor visits. Call your benefits https://medicarewire.com/wp-content/uploads/2024/06/Geisinger-logo-1.svgistrator for details.

Is There Any Free Medicare?

The Centers for Medicare & Medicaid Services mandates that most preventive services be provided to beneficiaries at no cost18CMS.gov, ”Background: The Affordable Care Act’s New Rules on Preventive Care”, Accessed January 11, 2022. Medicare Part B (medical insurance) covers:19Medicare.gov, ”Preventive & screening services”, Accessed January 11, 2022

The most commonly used free services include screenings, counseling, vaccines, and the annual wellness exam.

We should also note that Hospice care is covered under Medicare Part A benefits and has minimal costs.20Medicare.gov, ”Hospice care”, Accessed January 11, 2022

How To Prepare for the Cost of Medicare

With a general belief that Medicare is free, most Americans don’t plan ahead for the true cost of their healthcare. So, what can you do now?

The most important step is to accurately assess your health and financial situation. They are tightly linked.

Some people look at Medicare Advantage plans and believe they cost less and deliver more care. For some people this is true. For others, it isn’t.5Medicare.gov, ”Costs for Medicare Advantage Plans”, Accessed January 11, 2022

Healthy people generally get their annual wellness exams and keep up with their routine care. They may even have a prescription or two. For these people, Medicare Advantage plans work great. Premiums are low and they rarely make a doctor visit copayment.11Medicare.gov, ”Medicare Advantage Plans cover all Medicare services”, Accessed January 11, 2022

For many people with chronic health issues, Medicare Advantage costs more than Original Medicare alone. The reason has to do with Medicare Advantage copayments.21KFF.org, ”A Dozen Facts About Medicare Advantage in 2020”, Accessed January 11, 2022

Need help deciding? We have licensed insurance agents available at 1-855-728-0510 (TTY 711) who can answer your questions and help you figure out which type of Medicare coverage is right for you.


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