Medicare is free, right? For most people, not anymore.
Medicare is health insurance for those who are 65 and older, and also covers disabled individuals, and patients with end-stage kidney disease.
Medicare is now “means-tested”—your coverage will depend on how much you earn a year, and how much care you need. You pay a separate amount for each part of Medicare.
Medicare Part A: This is hospital coverage. If you or your spouse worked for at least 10 years and paid taxes, you won’t pay a monthly premium for Part A. If you or your spouse paid taxes for less than 10 years, you will have to pay a premium, which could be as much as $407 a month.
However, if you have a hospital stay, you will still pay a deductible for Part A. Currently, the deductible per hospital stay is $1,316.
There are also copays for Part A. The current co-pay for a hospital stay is $329 a day for hospital days 61-90; after that it is $658 per day.
Medicare Part B: This is outpatient care such as doctor office visits, tests, and other services. For Part B, there is a premium of $134 a month. However if your income is higher than $85,000, the premium can be up to $428 a month.
Medicare Part B also has a deducible of $183, and co-insurance fee, which is 20% of your medical costs.
If you don’t sign up for Part B when you become eligible, you have to pay a penalty of an additional 10% of the premium for each 12-month period you did not sign up.
Medicare Part C (also called Medicare Advantage): These are health plans sold by insurance companies (Kaiser, Providence, etc) but overseen by Medicare. This covers Part A, B, and D under one plan. If you sign up for Part C, then you can also get dental, health and vision covered, which are not covered under standard Medicare. Signing up for Part C can be cost-savings for most people.
Medicare Part D: This is prescription coverage. The monthly fee varies depending on the plan you chose. The average premium is $34 per month. However if your income is over $85,000 it could be up to $76 per month.
In addition with Medicare Part D, there is a deductible, which can be up to $400 per month cost share for your medications.
The “Donut Hole”: This refers to the fact that once you have spent $4,950 in out-of-pocket costs, you now only have to pay a small co-pay or co-insurance toward your prescription drug costs for the rest of the year. Currently you will pay 5% of the drug’s cost or $3.30 per drug, which ever is higher for generic drugs.
There is an income “look back” period of two years. So for example, even if you stopped working at age 64, the premiums would be based on your past income (which takes into account any income source) in the last two-year period.
Medicare premiums can be deducted from Social Security benefits. If you don’t enroll in Medicare at 65, you lose your Social Security benefits.