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Medicare Costs in 2021

How much your Medicare coverage will cost you depends on which type of plan you choose, when you enroll, the medications that you are taking, and more. 

Medicare costs change on an annual basis, so your expenses can change from year to year. To get a better understanding of how much Medicare will likely cost you, speak with a licensed insurance agent specializing in Medicare.


How much does Medicare cost?

You have plenty of options when it comes to choosing a health care plan, and your choice will affect your Medicare costs.

Original Medicare-Premiums, Deductibles, and More

Original Medicare is divided into Part A (hospital coverage) and Part B (medical coverage), both of which come at different prices. How much they will each cost you depends on your specific circumstances, as the different parts of Medicare come with their own premiums, deductibles, coinsurance, and copayments.

Medicare Part A

Medicare Part A hospital insurance is free for the majority of people with Medicare. When you turn 65 years old you can get premium-free Part A if you or your spouse has worked and paid Medicare taxes for a total of at least 40 quarters (10 years). 

This means that you don’t have to pay a monthly premium for coverage. People under the age of 65 who have been receiving disability benefits for 24 months or suffer from ESRD or ALS also qualify for premium-free part A. 

If you don’t qualify for premium-free Part A, you have the option to buy Part A. In this case, you will have to pay a Part A premium of either $259 or $471 per month. This amount will depend on how long you or your spouse worked and paid Medicare taxes.  

You are also responsible for paying a Part A deductible. In 2021, the Part A deductible has been set at $1,484, and you have to cover the deductible for each benefit period. Your benefit period resets 60 days after you have been discharged from the hospital.

Your Part A coinsurance costs depend on how long your hospital stay is. Up until your 60th day in the hospital, you have $0 Part A coinsurance. But once those 60 days have passed, you will be responsible for paying a $371 coinsure per day during each benefit period. And if you are in the hospital for more than 90 days, you must pay a $742 coinsurance per day, tapping into your Part A “lifetime reserve days”.

Medicare Part B

There are various Part B costs that Medicare beneficiaries should be aware of. If you want Medicare Part B coverage, you will have to pay a monthly premium. The standard Part B premium in 2021, which is the amount that most people pay, is $148.50 per month

If you earned above a certain threshold as reported on your tax return from 2 years prior, you may have to pay an Income Related Monthly Adjustment Amount (IRMAA). This means that your Part B premium will range between $207.90 and $504.90 per month, depending on your income. 

If you receive Social Security, RRB, or Office of Personnel Management benefits, your Part B premiums may be deducted directly from your monthly benefit payment. If not, you will be billed the amount of your monthly Part B premium.  

Additionally, you will need to pay a Medicare Part B deductible, which is $203 in 2021. After you reach your deductible amount for the year, you will have to pay 20% of the Medicare-approved amount for most doctor’s services, outpatient health care services, and durable medical equipment. This 20% amount is referred to as Part B coinsurance.

Medicare Part C (Medicare Advantage)

Your Medicare Part C, or Medicare Advantage, costs depend greatly on your health care needs and the plan you choose. 

Many Medicare Advantage plans have $0 premiums, though this doesn’t mean that you won’t have copays for your medical services and treatments. Your premium amount will depend on the plan that you enroll in, where you reside, and more.

In some areas, Medicare Advantage plans pay for some or all of your Part B premium, but if you choose a plan that doesn’t, you will have to pay that premium separately. 

Your policy may also have a deductible, along with other costs like coinsurance or copayments (a fee that you must pay every time you go to the doctor). Another thing to keep in mind is your plan’s yearly limits on out-of-pocket costs. 

Finally, an important consideration when it comes to calculating how much your Medicare Advantage policy will cost you is whether you will be able to stick to in-network providers (if your plan has a network). In many cases, only in-network providers will count towards a plan’s in-network deductible. If your plan allows you to go out-of-network, you may have a higher deductible which also includes out-of-network visits.

Medicare Part D Drug Coverage

If you choose to enroll in a Medicare Part D drug plan, you will likely have to pay a monthly premium, a deductible, and copayments/coinsurance

Your premium will vary based on the plan that you choose and your annual income. Just like with Medicare Part B premiums, an Income Related Monthly Adjustment Amount (IRMAA) applies. This means that if you make over $88,000 a year ($176,000 if you are married and filing jointly), you will have to pay more than just your plan’s standard premium. 

As with other parts of Medicare, if you fail to sign up for Part D on time, you may have to pay a late enrollment penalty fee. We’ll get into that in a little bit. 

Medicare Supplement Insurance

Medicare Supplement plans, or Medigap plans, can have monthly premiums that cost anywhere from less than $50 to over $300. Normally, a plan with a higher monthly premium will have a lower deductible and vice versa. 

In many cases, your Medigap plan will coordinate billing information with your healthcare providers, so your claims will be paid seamlessly. Depending on the Medigap plan that you choose, you may receive help paying copayments, coinsurance, deductibles, and more. 

Additionally, while Original Medicare doesn’t have an out-of-pocket limit, certain Medicare Supplement plans do. This means that you can have all of your qualifying medical costs covered for the rest of the year once you reach said limit.

What are Medicare late enrollment penalties?

If you don’t sign up for Medicare coverage when you are first eligible, you may be subject to late enrollment penalties. These fees apply to Medicare Part A, Part B, and Part D.

Part A Late Enrollment Penalty

Not everyone is automatically enrolled in premium-free Part A, and whether or not you are automatically enrolled usually depends on whether you are receiving Social Security benefits.  If you aren’t automatically enrolled in Medicare and don’t purchase premium Part A when you are first eligible, you may face an increase in your monthly premium

If this is the case, your monthly premium will go up 10%, which you will have to pay for twice the number of years that you could have had Part A but didn’t. For example, if you were eligible to sign up for Part A and waited three years to do so, you will have to pay a 10% higher premium for six years.

Part B Late Enrollment Penalty

If you didn’t sign up for Medicare Part B when you were first eligible, your monthly premium can increase 10% for each 12-month period that you could have had Part B but didn’t. You will usually have to pay this fee on top of your regular monthly premium for as long as you have Part B. 

Keep in mind that the longer that you are without Part B while you are eligible for it, the higher your late-enrollment penalty will be. 

For example, if you sign up for Part B 38 months after you were first eligible for it, you will have to pay 30% higher monthly premiums for as long as you have Part B. Even though you were without Part B for 38 months, this time only spans three full 12-month periods.

Part D Late Enrollment Penalty

The Part D late enrollment penalty is permanently added to your Part D coverage. Much like with Part A and Part B, if you don’t get Part D when you are first eligible, you will be subject to this fee. 

The Part D penalty is calculated by multiplying 1% of the “national base beneficiary premium”, which in 2021 is $33.06, by the number of full months that you could have been enrolled in Part D but weren’t. 

For example, if you went 10 months and 2 days without Part D coverage while you were eligible for it, you will have to pay a monthly fee of $3.30 (10 multiplied by 1% of $33.06) on top of your monthly Part D premium. Note that the Part D late enrollment penalty is always rounded to the nearest $0.10. 

But this doesn’t just apply to when you first sign up for Medicare. You are subject to this late enrollment penalty if there is any period of 63 days or more during which you are eligible for Medicare but aren’t enrolled in Part D or another accredited prescription medication coverage plan. 

Are all of these late fees and complicated rules giving you a headache? We know, it’s confusing, and we want to make Medicare as easy and painless as possible for you. Reach out to us to set up a free call about Medicare options, plans, and guidelines.

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