Medicare isn't free. The amount you'll pay depends on the coverage you choose, the health care services and benefits you use during the year, and if your insurance plan has rules about network vs out-of-network costs.
Costs you may pay with Medicare
Medicare Part B and most Medicare Part C, Part D and Medigap plans charge monthly premiums. In some cases, you may also have to pay a premium for Part A. A premium is a fixed amount you pay for coverage to either Medicare or a private insurance company, or both.
You'll also pay a share of the cost for your care, while your Medicare or Medigap coverage will pay the rest. There are three methods of cost sharing:
A set amount you pay out of pocket for covered services before Medicare or your plan begins to pay.
A fixed amount you pay at the time you receive a covered service or benefit. For example, you might pay $20 when you visit the doctor or $12 when you fill a prescription.
The amount you may be required to pay as your share for the cost of a covered service. For example, Medicare Part B pays about 80% of the cost of a covered medical service and you would pay the rest.
What are my costs for Original Medicare (Parts A and B)?
With Medicare Part A, most people don't pay a premium, though you may if you or your spouse worked and paid Medicare taxes for less than 10 years. Medicare Part B has a monthly premium you pay directly to Medicare, and the amount you pay can vary based on your income level. Other costs you may pay with Medicare Part A and Part B include deductibles, coinsurance and copays.
What are my costs with Medicare Advantage, Medicare Supplement (Medigap) or Part D plans?
Each Medicare Advantage (Part C) plan sets its own specific costs, but the types of costs you may pay include premiums, deductibles, copays and coinsurance. Not all plans will have deductibles, copays or coinsurance, so check each plan's cost-sharing rules carefully.
Medicare Advantage plans also limit how much you'll pay out of pocket every year. This is called the out-of-pocket maximum, and each year the limit is set by Medicare. Medicare Advantage plans choose their own out-of-pocket maximums that are less than or equal to the one set by Medicare for the year. For 2022, the annual out-of-pocket maximum limit is $7,050. After you reach the annual out-of-pocket maximum, your plan will pay all your costs for Medicare-covered services for the rest of the period (usually a calendar year). Costs that don't apply to your annual out-of-pocket maximum include premiums, Part D prescription drugs, and extra benefits your plan might have that aren't covered by Original Medicare.
Medicare supplement plans are designed to help limit out-of-pocket costs by helping to pay for some of the costs Original Medicare doesn't pay. There are Medigap plan options available with low to no copays. For example, the only out-of-pocket costs associated with Plan G would be your monthly premium and the annual Part B deductible ($233 in 2022). Medigap plans offer peace of mind with predictable out-of-pocket costs. Benefits and costs vary depending on the plan you choose.
Two Medigap plans do have a yearly out-of-pocket limit. These plans, Plans K and L, offer a lower monthly premium than other Medicare supplement plans because they pay a percentage of the coinsurance and you pay the rest. Once you meet the annual out-of-pocket limit, the plans pay 100% of covered services for the rest of the calendar year. Please note that the benefits, if covered, are covered 100% by most plans.
Note: In Massachusetts, Minnesota and Wisconsin, there are different plan options available.
Stand-alone Medicare Part D drug plans (PDP) and Medicare Advantage plans with drug coverage (MAPD plans) set their own costs, but the types of costs they can include are similar—premiums, deductibles, copays and coinsurance.
Stand-alone Part D plans don't have an out-of-pocket maximum, and the amount you'll pay for your prescription drugs depends on the drug payment stage you're in, as well as the tier a drug is organized if (if your plan has a tiered formulary). Part D plan costs can vary widely, even for similar coverage. Therefore, you need to review plan details carefully.
Stage 1: Annual Deductible
Part D plans with a deductible:
You pay full price for your prescription drugs until you reach the deductible amount.
Part D plans without a deductible:
This doesn't apply. You start with Stage 2: Initial Coverage with the first prescription you fill.
$480 is the maximum deductible amount Part D plans can charge in 2022.
Stage 2: Initial Coverage
You pay a copay or coinsurance. Your plan pays the rest.
In 2022, you stay in the Initial Coverage stage until your total drug costs reach $4,430.
Stage 3: Coverage Gap (also called "Donut Hole")
In 2022, you pay:
25% of the costs for brand name drugs
25% of the costs for generic drugs
In 2022, you stay in the Coverage Gap stage until your total out-of-pocket costs reach $7,050.
Stage 4: Catastrophic Coverage
You pay a small copay or coinsurance amount.
You stay in the Catastrophic Coverage stage for the rest of the plan year.
If you have limited income and assets, you may qualify for help with your Medicare costs, including those that you pay for care you receive. There are several programs that help pay Medicare costs. Many people who could qualify never sign up, so be sure to apply if you think you might qualify. Don't hesitate to apply. Income and resource limits vary by program.
Extra Help program:
Helps pay some or all Medicare Part D premiums, deductibles, copays and coinsurance for those who qualify.
Provides health care coverage for individuals and families with limited incomes. It may also include some services not covered by Medicare, like prescription drugs, eye care or long-term care—at no or low cost. If you have both Medicaid and Medicare, you may be eligible for a Dual Special Needs Plan (D-SNP).
Medicare Savings Programs help pay Original Medicare (Parts A and B) premiums, deductibles, and coinsurance. You automatically qualify for the Extra Help program (see above) if you qualify for a Medicare Savings Program.
It's easy to focus on just premiums when looking at how much a plan can cost. Premiums are regular monthly expenses that must fit into a budget, and most of us are keenly aware of our monthly expenses. But it's a better idea to look at the big picture—to look at all of your Medicare costs together—aka, premiums and all out-of-pocket costs. Why? Because sometimes a plan may look like a good choice with a low premium but may actually cost you more with high out-of-pocket costs. For example, a plan with a low monthly premium might end up costing you more. You may have to pay a large deductible, or you might have high co-payments for doctor visits or prescriptions. The reverse could be true, too—a seemingly high premium but low out-of-pocket costs.
Think about how you will use your benefits and consider all the costs of Medicare. Also, you may be able to reduce your health care costs if you take steps to:
Understand Medicare cost sharing
Use health care services wisely
Adopt healthy lifestyle behaviors
Medicare late enrollment penalties
Missing your Initial Enrollment Period can be costly. Medicare Part A, Part B and Part D may charge premium penalties if you miss your initial enrollment dates, unless you qualify for a Medicare Special Enrollment Period.
Medicare Part A
Part A is premium free if you or your spouse worked and paid taxes for at least 10 years. If you have to pay a premium, the penalty for late enrollment is 10%.
The Part A premium penalty is charged for twice the number of years you delay enrollment. If you wait 2 years, for example, you would pay the additional 10% for 4 years (2 x 2 years). The penalty applies no matter how long you delay Part A enrollment.
Medicare Part B
The penalty for late enrollment in Part B is an additional 10% for each 12-month period that you delay it.
In most cases, you have to pay the penalty every month for as long as you have Part B.
If you're under 65 and disabled, any Part B penalty ends once you turn 65 because you'll have another Initial Enrollment Period based on your age.
Medicare Part D
The penalty for late enrollment in a Part D plan is 1% of the average Part D premium for each month you delay enrollment. You pay the penalty for as long as have Part D.
Working past 65? You may be able to delay enrolling in Part B without penalty.
Medicare Advantage Plans combine Part A (hospital insurance) and Part B (medical insurance) in one plan and usually include prescription drug coverage. These plans offer additional benefits beyond Original Medicare.
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AARP® Medicare Supplement Insurance Plans
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Medicare Advantage plans and Medicare Prescription Drug plans
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