We get this questions about yearly cost a lot from clients. The cost of Medicare is hard to sum up because it is so different for every person. While some parts of Medicare everyone has, there are other parts of Medicare that individuals get to choose. Due to this, the final cost is going to be dependent on the Medicare route you choose. There are two routes: Original medicare (with the possibility of an added supplement) or a Medicare Advantage plan. We will go over the costs of all of these below!
Cost of Medicare Part A and Part B
Signing up for Part A and Part B, commonly called Original Medicare, are the first steps you take when starting Medicare. No matter which route you go, you will end up signing up for these. Part A covers hospital costs while Part B covers doctor and outpatient costs.
Most people are not going to pay a monthly premium for Part A as you or your spouse has worked enough quarters (40 quarters, or 10 years) to qualify for premium-free Part A. If you do not qualify for this, you have the option of purchasing this coverage. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $437 in 2019. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $240. There are some costs that come along with Part A, including a $1,364 deductible for a hospital stay in each benefit period and coinsurance payments once you pass a certain number of days of stay in a hospital. Most People do not have to pay this because they have a Supplement or Advantage plan. The yearly cost of Part A is $0 for most people.
Part B has a yearly deductible of $185 plus a monthly premium of $135.50 in 2019. Both these numbers can change every year; most years they go up. This monthly premium is regularly only paid by new enrollees to Medicare due to Social Security’s “hold harmless” provision. This provision states that Medicare Part B premiums cannot be raised higher than Social Security’s Cost of Living Adjustment each year, so it is possible you might be paying a little less every month. Even if you had to buy Part A, you pay the same prices for Part B. After the deductible is met for the year, the beneficiary is responsible for 20% of the costs for services covered under Part B. Once again, Supplements and Advantage plans are going to cover these costs differently. The yearly cost for Part B is $1,811 (monthly premiums + yearly deductible) for most people.
Cost of going the Medicare Supplement Route
Medicare Supplements were created to cover the 20% cost that Medicare Part B does not cover. There are 10 Medicare Supplement plans you can choose from. While they all offer different benefits, each plan is standardized. This means that every company offering, lets say a Plan F, is offering the same Plan F. The only difference in this Plan F between companies is price. Medicare Supplement prices also vary by age, gender, location, and smoking status. All of this means that your Medicare Supplement price is probably going to differ a lot from your friends, families, and even souse’s supplement. It is important to look at your Supplement every year or two to see if you can get a better price. While you do have to answer health questions, if you are relatively healthy, it can be an easy way to save a little money every month.
When calculating the average price of a Medicare Supplement, it is really dependent on what plan you choose. The most common plans are F, G, and N, with F being the most popular, as it is the only plan that covers the Part B deductible. Plan G is usually the best value, even though you have to pay the Part B deductible out of pocket. As we mentioned, Supplement plans also vary by age, location, gender, and smoking status, so getting an average price is hard. Below we have made our best estimate, but you can see your exact Medicare Supplement price without giving away any personal information on Cardinals site. The yearly price for a supplement is going to vary a lot, for these purposes though, we will put it in a range of $100 – $200/month, which puts the yearly price at $1,200 – $2,400 for a Plan G. It can be higher or lower than this depending on all the factors we mentioned earlier.
Cost of a Part D plan with a Medicare Supplement
If you choose a Medicare Supplement, you will also need a Part D Prescription Drug Plan. Even if you are not on any drugs, it is important to still sign up for it to avoid the penalty. If you do not get drug coverage and then decide you need it later, you will pay a penalty for every month you did not have it for life. Drug plans can be relatively inexpensive, with premiums as low as $20/month if you are not on any drugs. Drug plans are not standardized like Medicare Supplement plans though, so you do really need to shop around to find the best plan for you. Some plans can have no monthly premiums but high copays and vice versa. You can compare Part D plans offered in your area on Medicare.gov. The price of drugs is going to vary from person to person, due to factors like which drugs you are taking and location. At Cardinal, we can get a list of your drugs, find you the lowest overall priced plan, and give you a good estimate of your cost for the entire year, including premiums, deductibles, and copays. The average basic premium for a drug plan is projected to be $32.50/month in 2019, which is $390/year. This does not include the copays and such you must pay when you actually pick up prescriptions.
Cost of Dental and Vision coverage with a Medicare Supplement
Lastly, if you have a Supplement, many people will add dental and vision coverage as Original Medicare does not cover this cost. Like everything else, this is going to vary based on location and amount of coverage you want. The average cost for a dental plan in 2018 was around $29 a month, while the average for a vision plan was $13/month. This is not going to include any out-of-pocket costs you will have at the doctor. The yearly average cost of a dental plan premium is going to be around $348, while a vision plan premium will be around $156 yearly.
Cost of going the Medicare Advantage route
Medicare Advantage, also referred to as Part C, is usually a cheaper route than a Medicare Supplement, but it does have a few more limitations. Medicare Advantage plans take Original Medicare and give it to a private insurance company. These companies limit you to networks of doctors and hospitals. They do not travel well for this reason. These plans also are not available in some zip code, meaning not everyone even has this option.
There are Advantage plans that have a $0 premium, but you will pay co-pays and/or coinsurance everytime you go to the doctor. There are also plans with higher premiums that have lower copays and deductibles. All plans must have a yearly out-of-pocket limit that caps your healthcare costs. The predicted average premium for a Medicare Advantage plan in 2019 is $28 a month.
Medicare Advantage plans costs can vary by deductibles, copays, coinsurance, type of health care services you need, how often you go to the doctor, network doctors or out of network, yearly out-of packed-limit, and if it pays for Part B premium. These will all be individual to the specific plan.
Most Advantage plans are going to include drug coverage, and some even include dental and vision coverage, meaning you might not have to buy these separately if you go the Advantage plan route. You do still have to pay the Part B monthly premium and possibly the deductible. While the yearly cost of a Medicare Advantage plan premium is going to be around $336, the amount you pay at the doctor and for your drugs are going to vary greatly by plan and individual.
Cost of IRMAA
IRMAA, or the Income Related Monthly Adjustment Amount, could raise what you are paying yearly for Medicare if you are a high earner. IRMAA is a surcharge on the premiums of Part B and Part D that are paid separate from your plan premiums. Your modified adjusted gross income as reported on your tax return from 2 years ago is what determines if you are in one of these groups. You will receive a letter from Social Security around December or January each year which will tell you what your new premiums will be in the upcoming year. In the chart, the amount that will be added to your Part B premium according to your income is shown to give you an idea of how much you might pay. If you do not feel as your income from 2 years ago is indicative of your current income, possibly due to retirement, reduced your work hours or income, divorce, marriage, loss of a spouse or some other life-changing event, you can complete Form SSA-44 requesting a reduction of IRMAA. Your yearly Medicare price will rise significantly with IRMAA.
Cost of Medicare with Extra Help or Medicaid
Extra Help is a federal program that helps pay for some to most of the out-of-pocket costs of Medicare prescription drug coverage. It can pay for your Part D premium up to a certain amount, lower the cost of your prescription drugs, and eliminate the late enrollment penalty you might have incurred if you did not sign up for Part D when you were initially eligible.
Medicaid is a joint federal and state program which pays health costs for certain people and families with limited income and resources. More than one in five Medicare beneficiaries receives Medicaid benefits; this is referred to as “dual eligibility”. In order to be eligible for this, you must qualify and enroll in both programs. Medicare is designed to cover 80% of beneficiaries health care costs, leaving them with the other 20%. With dual eligibility, both programs can work together to cover most of the health care costs.
With Extra Help or Medicaid, your yearly cost for Medicare could decrease, but you do have to qualify and meet certain asset and income levels.
As you can see, Medicare yearly costs are going to vary greatly from individual to individual depending on many factors. Hopefully we were able to give you at least a rough estimate of what your total costs might be. If you would like to find out in more detail what exactly your personal costs might be, Cardinal can lay this out for you before you even start Medicare. Fill out the form below and we will get a little information from you to draw up your personalized yearly costs.
