The cost of Medicare depends on the type of plan. Medicare Advantage plans also vary based on plan design, premiums, deductibles and out-of-pocket costs.
You’ll want to take all of that into account when choosing a Medicare plan.
People become eligible for Medicare when they reach 65. Also, people who collect Social Security disability payments for a period and people with end-stage renal disease are eligible for Medicare.
Eligible Medicare beneficiaries choose between Original Medicare and Medicare Advantage. Original Medicare is Parts A and B. Medicare Advantage is Part C.
Original Medicare covers you for hospital and physician costs, but it doesn’t have prescription drug benefits. You can add on a Part D prescription drug plan to help with those costs.
Medicare Advantage, meanwhile, covers hospitals and physicians services and usually provides prescription drug benefits. Offered by private insurance companies, Medicare Advantage additionally provides supplemental benefits, such as vision, dental and adult care. When comparing Medicare Advantage plans, check to see the plans’ additional benefits to see which one makes more sense for you.
Let’s look at the different Medicare premiums and deductibles for Medicare plans:
Medicare premium for 2021
| Type of plan | What it covers | Average Medicare premiums | Deductible |
|---|---|---|---|
| Part A | Hospitals and skilled nursing facilities | Usually $0 | $1,484 |
| Part B | Physicians, outpatient care, medical supplies and preventive services | at least $148.50 | $203 |
| Part C | Medicare Advantage coverage | $21 | varies |
| Part D | Prescription drugs | $30.50 | $445 |
Source: Centers for Medicare and Medicaid Services
Some caveats to mention:
- Part A -- Most Americans are eligible for premium-free Part A coverage when they reach 65. However, people who haven’t worked and paid Social Security taxes may have to pay premiums. Medicare provides premium-free Part for Americans who paid at least 40 quarters of Social Security taxes. Those who paid taxes for fewer than 30 quarters must pay $458 monthly; people who paid taxes between 30 and 39 quarters must pay $252 monthly.
- Part B -- People with incomes more than $87,000 or $174,000 for joint filers pay higher Part B premiums. Once you reach your deductible, you pay 20% of Part B costs; Medicare picks up the rest.
- Part D -- Once you reach the deductible, you pay 25% of the costs until you reach $4,020 in prescription drug costs and then 37% for generics and 25% on brand-name drugs until $6,350 in out-of-pocket costs. After you reach $6,350, you pay 5% of the prescription drug costs.
What is the Medicare Part B premium for 2021?
| Individual filers | Joint filers | Monthly premium |
|---|---|---|
| Up to $87,000 | Up to $174,000 | $148.50 |
| $87,000-$109,000 | $174,000-$218,000 | $202.40 |
| $109,000-$136,000 | $218,000-$272,000 | $289.20 |
| $136,000-$163,000 | $272,000-$326,000 | $376 |
| $163,000-$500,000 | $326,000-$750,000 | $462.70 |
| Over $500,000 | Over $700,000 | $491.60 |
Source: Centers for Medicare and Medicaid Services
Medigap can help with Medicare costs
People with an Original Medicare plan can purchase a Medigap plan. These plans aren’t insurance. Instead, the 10 standard Medigap plans offered by private insurers help pay for co-pays, deductibles and coinsurance.
The cost of Medigap plans differs. High-deductible plans usually cost less than $100 monthly, but lower-deductible plans cost more than $300 a month.
Medigap isn’t available for people with Medicare Advantage plans.
How to shop for a Medicare plan?
What’s the right Medicare plan for you depends on multiple factors, including the plans offered in your state, which plans your providers accept, co-payments, deductibles, coinsurance, out-of-pocket costs, quality of plans and supplemental offerings.
You’ll want to first make sure your providers accept the Medicare plan before joining. Otherwise, that provider could be considered out-of-network and you’ll have to pay more or even all of the costs. Health maintenance organization (HMO) plans usually don’t allow you to get out-of-network care, so you’ll wind up paying for all of that care.
If you’re comparing Original Medicare vs. Medicare Advantage, review all costs -- not just copays. You want to especially look into out-of-pocket costs like deductibles and coinsurance costs. Coinsurance is your portion of the bill after you reach your deductible.
Also, dig into the information from multiple Medicare Advantage plans -- not only one or two.
If you’re comparing Medicare Advantage plans, you’ll additionally want to consider a plan’s design. An HMO is cheaper than a preferred provider organization (PPO) plan, but you also have more restrictions with an HMO. HMOs require a primary care provider referral to see a specialist and you won’t be able to get covered for out-of-network care.
A PPO gives you more flexibility, but that also comes with higher premiums. PPOs and HMOs often have similar deductibles and coinsurance.
If you’re looking for a Medicare plan with supplemental benefits like dental and vision, a Medicare Advantage plan might be better for you. Medicare allows private insurance companies to offer expanded supplemental benefits not found in Original Medicare plans.
You’ll also want to think about how much health care you need:
- Do you have a health condition that requires regular doctor visits?
- Do you have multiple prescriptions?
- Do you expect to need more health care services in the coming years?
By answering these questions, you can decide whether you should get a plan with a higher premium but lower deductibles or a plan with a lower premium and higher deductibles.
High-deductible health plans come with lower premiums, but you’ll pay more when you need health care services. You’ll want to weigh premiums vs. out-of-pocket costs when you’re deciding on a plan.
You can also use the Medicare Plan Finder tool. The tool assigns star ratings for each plan based on membership surveys, quality and performance.
The costs of a Medicare plan are an important piece of finding the best plan for you, but make sure you’re also taken into account the plan’s network, quality and supplemental benefits.