Ask the average person about Medicare, and they can tell you that it’s the government’s health insurance program for people 65 and over, but they probably don’t know the costs involved with coverage.
“A lot of people think that because they have been contributing to Social Security and paying their taxes over the years, that when they turn 65, Medicare is free,” says Medicare expert Diane Daniels, author of The Medicare Survival Guide and host of the podcast Medicare Nation. But Medicare is definitely not free.
In fact, according to the healthcare software company Health View Services, the average 65-year-old couple who will retire this year and receive Medicare, can expect to pay $363,946 (excluding long-term care) in lifetime Medicare and supplemental insurance premiums and out-of-pocket costs.
Before diving into costs, know that you have two options when choosing Medicare coverage:
1. Medicare offered by the federal government, known as Medicare Part A (hospitalization) and Medicare Part B (doctor visits and outpatient services). Part A & Part B are commonly referred to as “Original Medicare” and are adminstered by the Centers for Medicare & Medicaid Services
If you sign up for Original Medicare, you can optionally enroll in Medicare Part D, which is a prescription drug plan and requires you to pay a monthly premium.
Additionally, you have the opportunity to get Medicare Supplement (Medigap) insurance, which covers most or all of the costs that Original Medicare doesn’t cover and charges a monthly premium.
2. Medicare Part C, also called Medicare Advantage. Medicare Advantage plans are offered by private insurance companies and cover at least the same services covered by Medicare Part A & Part B, but often include other services such as prescription drug coverage. With Medicare Advantage plans you are usually part of a healthcare network.
To learn more about your Medicare choices, click here.
Original Medicare costs
Here is what you can expect to pay for Original Medicare in 2019:
Medicare Part A costs – hospitalization
Monthly premium: $0
Benefit period deductible: $1,364
The good news is that for Medicare Part A, which covers hospitalization, hospice, and skilled nursing, there is no premium. However there is a yearly $1,364 deductible and coinsurance after a 60 day hospital stay.
Once your deductible is met, days 1-60 of hospitalization are covered 100%. After 60 days, however, you must pay $341 per day. After 90 days, you can use an additional 60 days of coverage, called lifetime reserve days.
As the name suggests, you only have 60 lifetime reserve days. Once you use them, you lose them. In addition, you’ll still be on the hook for $682 per day during each lifetime reserve day.
Only a Medicare Supplement Plan (which is a plan you can get in addition to Original) will cover your hospital costs if you are hospitalized for more than 60 days.
Keep in mind: instead of a traditional annual deductible, Medicare Part A uses a benefit period deductible. Instead of resetting annually, you Part A deductible resets when the benefit period ends. A benefit period begins when you enter the hospital and ends when you have not received inpatient hospital for 60 days in a row.
Medicare Part B costs – doctor visits
Monthly premium: Part B requires you to pay a monthly premium of $135.50 if you are turning 65 in 2018 and make less than $85,000 a year. If your income is higher, you’ll pay more—up to $460.50 a month
Annual deductible: $185
The monthly Medicare Part B premium, which covers doctor visits, lab tests, and some preventative services, is $135.50. The annual deductible is $185. Once your deductible is met, Part B generally pays 80% of the Medicare-approved amount for covered services.
You are responsible for the remaining 20%—and there is no maximum amount for out-of-pocket expenses. That means you could end up paying hundreds or even thousands of dollars if you need medical care. Also keep in mind that Medicare Part B does not pay for dental services, hearing, and vision.
Prescription Drug Plans – Medicare Part D
Monthly premium: Anywhere from $0 to $200+
Annual deductible: $400
Prescription Drug Plans are offered by private insurance companies, and each plan has a list, or formulary, that tiers medications by cost, with the lower-tiered medications being cheaper.
Every plan is different, so you have to shop around to make sure your medication and your pharmacy are on the plan you’re considering.”You can get a drug plan that costs $17 a month, or you can get one for $170 a month,” says Daniels. “The more you pay out of pocket, the lower the cost for different tiers of drugs.”
In terms of plan deductibles, she says, some are triggered no matter what medication you buy, but other plans allow you to use generic drugs without triggering your deductible. The easiest way to compare plans and pick one is to go to the Considerable plan finder and enter your zip code. And once you pick a plan, “the most important thing to do is bring your formulary to your doctor so the doctor knows what’s covered when prescribing medication for you,” says Daniels.
Medicare Supplement Insurance
Monthly premium: Cost varies, ~$100-$400
Annual deductible: Varies
Medicare Supplement Plans are offered by private insurance companies and cover the 20% that Original Medicare doesn’t cover for services. Medicare Supplement plans often cover copays, deductibles, skilled nursing care premiums, and excess hospitalization.
Shop for Medicare Supplement Plans
“Buying a Medicare Supplement plan can give you peace of mind and is like leasing a car for the rest of your life,” says Daniels. “The dealer pays for it if anything goes wrong.” The cost of Medicare Supplement plans varies depending on the plan, where you live, your gender and age.
Monthly premium: $0 to $200+
Annual deductible: Varies
Medicare Advantage Plans are offered by private insurance companies and are an alternative to Original Medicare. Medicare Advantage plans cover all of the services Original Medicare covers, and often cover additional services like prescription drugs, vision, and dental. With Medicare Advantage Plans you are generally part of a network, and use the doctors and services included in that network.
Medicare Advantage plan premiums can range from $0 to several hundred dollars a month, depending on the plan. Yearly deductible costs also vary and can be hundreds or thousands of dollars.
It’s important to note that unlike Original Medicare, all Medicare Advantage plans have an out-of-pocket limit of $6,700 as long as you visit in-network doctors. Once you reach that limit, the plan covers all your medical costs for in-network services. For out-of-network services, you are responsible for the full amount.
The best thing you can do when choosing a Medicare plan is talk to a Medicare or health insurance expert to help you compare plans and costs.