Many people mistakenly believe that Medicare is free for retirees and people with disabilities. After all, during all of the years that we work we paid Medicare taxes, right? So, why isn’t it free? In this MedicareWire article, we’ll explain how much Medicare costs and what you can do to prepare.
- Medicare is an 80/20 cost-sharing system. Medicare pays about 80% of all medically necessary health care services and the beneficiary pays the rest.
- Medicare covers medically necessary services, which do not include routine dental, vision, hearing, or prescriptions. For these services, the beneficiary pays out of pocket or buys additional coverage.
- If the beneficiary or their spouse worked the necessary 10 years they will receive premium-free Medicare Part A is hospital inpatient coverage for people with Original Medicare, whereas Part B is medical coverage for doctor visits, tests, etc.... coverage.
- All beneficiaries pay a Medicare Part B is medical coverage for people with Original Medicare. It covers doctor visits, specialists, lab tests and diagnostics, and durable medical equipment. Part A is for hospital inpatient care.... premium. Most people pay the standard rate set by CMS, which adjusts annually. If your income is above the standard threshold you will pay an Income Related Monthly Adjustment Amount (IRMAA).
- Beneficiaries may enroll in a private health plan, called Medicare Advantage, that offers additional services that Original Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage.... does not cover.
- To help cover some of the shared costs (e.g., A deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share...., A copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service...., and Coinsurance is a percentage of the total you are required to pay for a medical service. ...), beneficiaries may purchase a Medigap policy.
Is Medicare Free at Age 65?
You might be surprised how many people Google that question. So, it must be on a lot of people’s minds when their 65th birthday is approaching.
The short answer to the question is, no, Medicare is not free at age 65 or at any other age. It is not free for anyone. However, some people may qualify for additional government assistance depending on their financial, health, or institutional situation.
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. In other words, Medicare health insurance is not one-size-fits-all coverage.
Medicare has four parts (A, B, C, and D). There are also additional private insurance plans called Medigap.
Original Medicare (A & B)
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 medical care, which includes doctor visits, specialists, tests, diagnostics, and medical equipment.
Your Medicare 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 a monthly premium for hospital coverage. How much you pay is based on the number of years you worked. To receive premium-free Part A coverage for inpatient care you need to have paid Medicare taxes for 40 quarters (10 years).
The Medicare taxes you paid do not help pay for your Part B medical coverage. When you enroll to receive Part B benefits you will pay a monthly premium for this coverage. If you are receiving Social Security benefits, the Social Security Administration will take your Part B premium directly out of your monthly payment. Otherwise, you can pay the premium through your online account.
Medicare Advantage (Part C)
Medicare Part C, more commonly known as Medicare Advantage, is a private health insurance option to Original Medicare. Some Medicare Advantage 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.
Medicare Prescription Drug Plans (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 Original Medicare benefits or a Medicare Advantage plan (if it does not include Medicare Part D is Medicare's prescription drug plan program. Plans are offered by private insurance companies and cover outpatient prescriptions....). Monthly premiums for these plans start at around $20.
Does Medicare Cover All Health Care Expenses?
Above we walked through monthly costs (i.e., the A premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. ...). But that’s just the cost to have coverage, which does not include what you pay when you see your doctor or use other health care services.
From the beginning, the Medicare health insurance program was designed to be an 80/20 system, where your Medicare coverage pays about 80 percent of your major medical costs and you pay the remaining 20 percent. It remains that way today, including Medicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B).....
Your 20 percent share is collected through deductibles, copayments, and coinsurance when you see your doctors, use the emergency room, have a hospital stay, have lab tests done, etc. With Original Medicare, these costs are standardized and well-defined. With Medicare Advantage, each plan is allowed to set its own deductibles, copays, and coinsurance. 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 (aka, out-of-pocket medical expenses) are costs that a beneficiary must pay because their health insurance does not cover them. Out-of-pocket costs are found in the deductibles, copayments, and coinsurance outlined in each health....
To control your out-of-pocket costs in Original Medicare you purchase a Medigap plan from a private insurance company. Also known as Medicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage...., 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.
It is also important to understand that Original Medicare only covers Medicare-approved major medical costs from approved healthcare providers. 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.
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.
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 SSDI benefits start, Medicare benefits also begin. If you have end-stage renal disease (ESRD) your Medicare benefits start as soon as your SSDI begins.
As with all Social Security and Medicare beneficiaries, Medicare health insurance is not free. People with SSDI pay for their benefits the same way as everyone else. They can choose Original Medicare or Medicare Advantage. Medicare prescription drug plans are also available.
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.
What If You Can’t Afford Your 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.
People who qualify for both Medicare and Medicaid is a public health insurance program that provides health care coverage to low-income families and individuals in the United States...., so-called dual-eligible individuals, have a range of options available to them, including monthly premium assistance and assistance with copayments. 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.
Low-income individuals may also qualify for the Social Security Administration’s Extra Help program. This program helps people afford their prescription drug coverage.
We’ll cover more options in Part 10 of this series.
What About Retirees and People with VA Benefits?
Many retirees and veterans qualify for healthcare benefits that assist with Medicare premiums or offset healthcare costs. For example, 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.
The Railroad Retirement Board handles Medicare benefits for its retirees. If you earned railroad benefits, call the RRB for details.
Most state, federal, and union retirees also have additional retirement benefits that assist with Medicare premiums and doctor visits. Call your benefits administrator for details.
Is There Any Free Medicare?
The Centers for Medicare & Medicaid Services mandates that most preventive services be provided to beneficiaries at no cost. Medicare Part B (medical insurance) covers:
- Abdominal aortic aneurysm screening
- Alcohol misuse screenings & counseling
- Bone mass measurements (bone density)
- Cardiovascular disease screenings
- Cardiovascular disease (behavioral therapy)
- Cervical & vaginal cancer screening
- Colorectal cancer screenings
- Depression screenings
- Diabetes screenings
- Diabetes self-management training
- Flu shots
- Glaucoma tests
- Hepatitis B shots
- Hepatitis B Virus (HBV) infection screening
- Hepatitis C screening test
- HIV screening
- Lung cancer screening
- Mammograms (screening)
- Nutrition therapy services
- Obesity screenings & counseling
- One-time “Welcome to Medicare” preventive visit
- Pneumococcal shots
- Prostate cancer screenings
- Sexually transmitted infections screening & counseling
- COVID-19 vaccines
- Flu shots
- Hepatitis B shots
- Pneumococcal shots
- Tobacco use cessation counseling
- Yearly “Wellness” visit
Hospice care is covered under Medicare Part A benefits and has minimal costs.
How To Prepare for the Cost of Medicare
With a general belief that Medicare is free in retirement, most Americans don’t plan ahead for the true cost of their healthcare in retirement. So, what can you do now?
The most important step is to make an accurate assessment of your health and financial situation. They are tightly linked in our retirement years.
Many people mistakenly take a cursory look at Medicare Advantage plans and believe that they cost less and deliver more care. For some people this is true. For others, it isn’t. It all depends on your health.
Healthy people generally get their annual wellness exam and keep up with their routine dental, vision, and hearing care. They may even have a prescription or two to handle minor health issues. For these people, Medicare Advantage plans work great. Premiums are low and they rarely make a doctor visit copayment.
For many people with chronic health issues, Medicare Advantage plans actually cost them more than Original Medicare without supplemental insurance. The reason this is true has to do with the copayment structure of most Medicare Advantage plans.
Need help deciding? We have licensed Medicare 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.
Are You Ready to Enroll?
For some people, Medicare Part A and Part B enrollment happen automatically through Social Security. However, it isn’t safe to assume that your enrollment will be automatic. You don’t want to miss your initial enrollment period. Visit or call your local Social Security office to verify your eligibility and enrollment and options. You may also visit Medicare.gov to get started.