As a cornerstone of the American healthcare system, Medicare provides coverage to more than 65 million Americans, a significant majority of whom are aged 65 and above. Since a substantial portion of Medicare beneficiaries rely on fixed income sources such as Social Security benefits, Railroad Retirement benefits, or pensions, understanding the financial implications of comprehensive coverage is essential for overall financial stability. There are certain costs associated with Medicare that all beneficiaries will be required to pay, so it is important to know about these costs upfront.
Each year, the Centers for Medicare and Medicaid Services (CMS) adjust costs associated with Original Medicare, or Governmental Medicare, more commonly known as Medicare Parts A and B, as well as for certain costs related to Part D Prescription Drug Coverage. CMS establishes these adjustments toward the end of each calendar year, equipping both new and existing Medicare beneficiaries with the tools necessary to make a choice tailored to their individual financial and medical needs.
What costs are associated with Medicare coverage?
Before beneficiaries start reviewing Medicare plan options, it is important they familiarize themselves with certain costs relevant to each plan. These costs can play a pivotal role in shaping overall healthcare expenses, so it is crucial beneficiaries understand the implications they have on each plan. By taking the time to learn about these costs, beneficiaries can feel empowered to make an informed decision.
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- Premium: A fixed monthly amount a beneficiary pays to have Medicare coverage, whether they utilize services or not.
The 2024 Medicare Part B monthly premium amount is $174.40.
- Deductible: The amount a beneficiary must pay for Medicare-covered items or services before Medicare will begin its share of the cost.
The 2024 Medicare Part A inpatient hospital stay deductible is $1,632.00 for each hospital benefit period.
- Coinsurance: The percentage of the cost of a Medicare-covered item or service the beneficiary is responsible for after the deductible is met.
Medicare Part B beneficiaries typically pay 20% of a Medicare-covered service or item.
- Copayment: A fixed amount the beneficiary must pay for a Medicare-covered item or service.
In 2024, Medicare Part A beneficiaries will pay a $408.00 daily copayment if admitted as a hospital inpatient for more than 60 days.
- Premium: A fixed monthly amount a beneficiary pays to have Medicare coverage, whether they utilize services or not.
Medicare provides coverage for several different care and treatment options, each with its own associated costs and expenses. Knowing the differences between these care and treatment options is important, as it can play a role in determining the best possible coverage.
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- Inpatient Hospital Stay: Admittance to the hospital based on a doctor’s order to treat an injury or illness. Benefits provided for an inpatient hospital stay can include either short-term or long-term stays at acute care, critical access, or long-term care hospitals, as well as inpatient rehabilitation and psychiatric facilities.
- Skilled Nursing Facility Stay: Admittance to an inpatient facility where care is provided by trained registered nurses in a medical setting under a doctor’s supervision. Sometimes referred to as transitional care between hospital and home, skilled nursing care is typically necessary to help improve a patient’s condition after an inpatient hospital stay due to an illness, injury, or surgery.
- Outpatient Hospital Care: Diagnostic and treatment services received through a hospital, not during an admission period. Outpatient care can include emergency room services, same-day surgeries, mental health care, laboratory tests, x-rays and imaging services, and the administration of certain medical supplies or drugs.
Medicare Part A (“Hospital Insurance”)
Typical Monthly Premium: $0.00
Most beneficiaries receive Medicare Part A at no cost due to having completed (or being married to a spouse who has completed) at least 40 calendar quarters of covered work.
30-39 Calendar Quarters: $278.00 monthly premium
0-29 Calendar Quarters: $506.00 monthly premium
Inpatient Hospital Stay
Deductible (Day 0 – 60): $1,632.00
The deductible is applicable for each inpatient hospital benefit period.
Daily Copayment (Days 61 – 90): $408.00
Daily Copayment (Days 91 – 150): $816.00
Only applicable if within lifetime reserve days
Daily Copayment (Days 151+): No Medicare coverage; the beneficiary must meet all costs. Becomes applicable when lifetime reserve days run out.
Skilled Nursing Facility Stay
Daily Copayment (Day 0 – 20): $0.00
Daily Copayment (Days 21 – 100): $204.00
Daily Copayment (Days 100+): No Medicare coverage; the beneficiary must meet all costs.
Medicare Part B (“Medical Insurance”)
Monthly Premium: $174.40
Annual Deductible: $240.00
Coinsurance: 20% of the cost of each Medicare-covered service or item
Inpatient Hospital Stay: 20% of the Medicare-approved amount for most doctor services while a hospital inpatient.
Outpatient Hospital Care: 20% of the Medicare-approved for doctor and other health care providers’ services. An additional copayment for each service may apply.
Medicare Part D (“Medicare Drug Coverage”) Donut Hole
Stage 1: Annual Deductible: $545.00
At this stage, beneficiaries pay 100% of prescription costs until the deductible is met before the drug plan will begin to cover its share. Deductibles will vary among plans, but each year, the CMS establishes a cap that cannot be exceeded. For 2024, the deductible cannot exceed $545.00.
Stage 2: Initial Coverage Maximum: $5,030.00
After the deductible is met, the drug plan begins to share the cost. If the plan utilizes copays, the beneficiary may expect to pay a standard amount per drug based on the tier the prescription falls into. For beneficiaries with coinsurance, the amount they pay may vary throughout the year depending on the cost of the drug. Once the beneficiary and the plan have paid the CMS established maximum, the beneficiary will move into the donut hole. In 2024, the maximum is $5,030.00, which includes the deductible.
Stage 3: The Coverage Gap (“The Donut Hole”) Maximum: $8,000.00
Once beneficiaries reach this stage, a limit is placed on what the drug plan will pay for covered prescriptions. Once in the gap, beneficiaries pay no more than 25% of the cost of brand-name and generic prescription drugs covered by the drug plan, with the plan paying the rest. In addition, the beneficiary is required to pay 25% of the dispensing fee associated with brand-name drugs. Beneficiaries will remain within the donut hole until the CMS-designated out-of-pocket cost is met. For 2024, this limit is $8,000.00 and includes the deductible, coinsurance, copayments, and the cost of covered prescriptions, not including any dispensing fees.
Stage 4: Catastrophic Coverage
After the out-of-pocket-cost threshold is met, beneficiaries move to the catastrophic coverage stage. In 2024, once out-of-pocket spending reaches $8,000.00, including certain payments made by other people or entities on behalf of the beneficiary, including Medicare’s Extra Help program, beneficiaries move to the catastrophic coverage stage. Once at this stage, beneficiaries will pay nothing for covered Part D drugs and remain here until the following calendar year.
Medicare Part C (“Medicare Advantage”) and Medicare Supplemental Insurance (“Medigap”)
Original Medicare serves as the foundation of healthcare coverage for millions of Americans, and many beneficiaries opt for additional coverage through Medicare Advantage and Medicare Supplemental Insurance plans. As the costs associated with both Medicare Advantage and Medigap plans are independent of CMS-set costs, it is essential for beneficiaries to thoroughly evaluate each option against their unique medical and financial needs. In addition to any premiums associated with a Medicare Advantage or Medigap plan, both plan types require beneficiaries to be enrolled in and paying for, if applicable, Medicare Parts A and B. In some instances, beneficiaries may have low or no additional monthly costs, but if they are interested in a plan with more comprehensive coverage, they may be subject to additional premium payments.
Medicare Advantage
Medicare Advantage monthly premiums vary based on the plan joined and can even change each year. Applicable deductibles, coinsurance, and copayments will also vary by plan. Unlike Original Medicare, Medicare Advantage plans have an established out-of-pocket maximum that, once reached, means the beneficiary will have a 0% cost share for any remaining covered health services for the rest of the calendar year.
Medicare Supplemental Insurance (Medigap)
As with an Advantage plan, Medigap monthly premiums vary based on the purchased policy and typically increase each year. Additionally, premium costs can vary based on the beneficiary’s location, the age of the beneficiary when the policy was acquired, or the beneficiary’s current age. The purpose of a Supplemental Plan is to lower a beneficiary’s cost share for covered services under Medicare Parts A and B, helping to keep out-of-pocket expenses down.
Understanding the costs and your options
Staying informed and regularly reviewing Medicare plan options is vital to choosing coverage that best meets your unique medical and financial needs. Contact Aevo Insurance Services, a division of Brown & Brown Absence Services Group, to speak with an experienced licensed insurance agent about your Medicare options. Our guidance extends through every step of the enrollment process, starting with helping select a Medicare plan that meets your unique medical and financial needs.
At Aevo Insurance Services, we monitor and report on changes that beneficiaries and their caregivers should be aware of. Should you have any questions or require additional support, reach out to one of the Licensed Insurance Agents at Aevo Insurance Services or to Medicare directly.
This information is up-to-date as of January 2024 based on information made public at that time. For the most recent information, please visit the source links.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all your options.
