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Medicare is the federal health insurance program for people aged 65 and older and certain younger people with disabilities. Deciding when to enroll and understanding the costs can be confusing. Here’s what you need to know about Medicare premiums, deductibles, and other out-of-pocket expenses.

Medicare Part A and Part B premium in 2023

The Original Medicare program has two parts — Part A and Part B. Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Part B covers doctor visits, outpatient care, preventive services, ambulance transportation, and durable medical equipment.

Most people don’t pay a premium for Part A. You can get Part A premium-free if you or your spouse paid Medicare taxes while working for at least 10 years. People who aren’t eligible for premium-free Part A may be able to buy it.

Everyone pays a monthly premium for Part B. The standard Part B premium for 2023 is $164.90 per month. Some people pay more based on their income.

Medicare Part B Premiums in 2023

Your Medicare Part B premium for 2023 depends on your annual income from two years ago (your 2021 income as reported on your 2021 tax return). So your monthly Part B payment in 2023 will be based on how much income you had in 2021.

Here are the Part B premium amounts for 2023:

– Individuals with income up to $97,000 and couples with income up to $194,000 pay the standard premium of $164.90 per month.
– Individuals with income between $97,000–$123,000 and couples with income between $194,000–$246,000 pay $230.80 per month.
– Individuals with income between $123,000–$153,000 and couples with income between $246,000–$306,000 pay $297.00 per month.
– Individuals with income between $153,000–$500,000 and couples with income between $306,000–$750,000 pay $386.10 per month.
– Individuals with income above $500,000 and couples with income above $750,000 pay $506.00 per month.

As you can see, higher income earners pay progressively pay a higher monthly Medicare premiums. The Social Security Administration uses your reported income to determine if you’ll pay higher premiums. They look at your modified adjusted gross income plus any tax-exempt interest income you have.

If your income has gone down, you can appeal the decision and possibly pay a lower premium. You’ll need to provide documentation such as pay stubs or tax returns showing reduced income.

When to Enroll in Medicare Part B

You have a 7-month Initial Enrollment Period to sign up for Medicare Part B. It starts 3 months before you turn 65, includes the month you turn 65, and ends 3 months after you turn 65. Most people enroll in Medicare Part B during their Initial Enrollment Period to avoid paying a late enrollment penalty.

If you’re eligible for Medicare at 65 but still working and have health coverage through your employer, you can delay Part B enrollment without penalty in most cases. Once you lose your employer coverage, you can enroll in Part B within 8 months with no penalty.

People who wait to enroll in Part B outside of these special enrollment periods will pay a 10% late enrollment penalty for each full 12-month period they were eligible but didn’t enroll. You’ll have to pay this penalty for as long as you have Part B coverage.

Some choose to enroll in Medicare Part B during the General Enrollment Period from January 1 – March 31 each year. But their coverage won’t start until July 1, and they may have to pay a late enrollment penalty.

Paying Medicare Part B Premiums with Social Security

For most people, Medicare Part B premiums are automatically deducted from your monthly Social Security checks. If you don’t get Social Security, you’ll get a bill quarterly for your Part B premium. You can choose to pay these bills monthly if you prefer.

If you have trouble paying your Part B premiums, ask Social Security about assistance programs like the Medicare Savings Programs. Based on your income, these programs may help cover all or part of your Medicare premiums and other out-of-pocket costs.

You may also qualify for assistance with Medicare costs if you have limited income and resources and meet your state’s Medicaid eligibility rules. The Medicaid program helps pay Medicare premiums and deductibles for those who qualify.

Medicare Cost in 2023

In addition to the monthly Part B premiums, you’ll also have to pay Medicare deductibles and coinsurance when you get care. Here are the standard deductibles for 2023:

  • Medicare Part A deductible: $1,600 per benefit period. This covers your first 60 days in the hospital.
  • Medicare Part B deductible: $226 per year. You must pay the Part B deductible before Medicare coverage kicks in.
  • Medicare Part A and Part B annual deductible: $226. This is if you only have Part B coverage and not Part A.

The Part A deductible covers up to 60 days of inpatient hospital care per benefit period. The benefit period renews when you’ve been out of the hospital for 60 days in a row.

Skilled nursing facility care has no deductible for the first 20 days each benefit period. But you pay a daily coinsurance for days 21-100.

The Part B deductible is an annual deductible before Medicare pays its share for Part B services like doctor visits and outpatient surgeries.

Medicare Coinsurance and Copays in 2023

In addition to the monthly premiums and yearly deductibles, you’ll also have to pay coinsurance or copays for Medicare services:

  • Part A coinsurance: $400 per day for days 61-90 of a hospital stay, and $800 per day for days 91-150 per benefit period.
  • Part B coinsurance: 20% of the Medicare-approved amount after you meet the $226 deductible. Some preventive services have no coinsurance.
  • Part A and B copays: Copays for services vary. For example, the copay in 2023 for an outpatient hospital visit can’t exceed $405.

Coinsurance is the percentage you pay of the total allowed cost of a covered health care service. Copays are fixed dollar amounts you pay for some services. These costs are on top of the Part B premium.

The way coinsurance and copays work with Medicare can be confusing. That’s why supplement plans like Medigap or Medicare Advantage Plans are popular to limit out-of-pocket costs.

Medicare Part C (Medicare Advantage)

Instead of Original Medicare, you can choose to get your Part A and Part B benefits through a Medicare Advantage Plan. These are also called Medicare Part C plans. They’re offered by private insurers who contract with Medicare.

Medicare Advantage Plans have set copays and out-of-pocket maximums that make health care costs more predictable. Plans may have $0 premiums beyond your Part B premium in some cases.

Medicare Advantage Plans must cover everything Original Medicare covers. But costs and coverage rules can vary. Each plan can charge different copays and coinsurance amounts for services.

Every Medicare Advantage Plan must have an annual out-of-pocket maximum. Once you reach that amount, the plan pays 100% of your covered medical services for the rest of the year. This protects you from high, unexpected medical costs.

Medicare Part D for Prescription Drugs

Original Medicare does not cover most prescription drugs. To get Medicare drug coverage, you need to join a stand-alone Part D prescription plan or a Medicare Advantage Plan that includes drug coverage.

Monthly premiums for Part D Plans vary based on the plan, but average around $32 per month in 2023. Part D Plans also have yearly deductibles and coinsurance. Your costs will vary based on what tier your prescribed drugs are in.

Higher earners pay more for Part D coverage just like with Part B premiums. If your income exceeds $97,000 as an individual or $194,000 as a couple, you’ll pay an extra amount each month directly to Medicare for your Part D coverage.

Paying Medicare Premiums, Deductibles, and Copays

In summary, here are the main costs to understand with Medicare:

  • Part B premium: The standard monthly amount is $164.90 per person in 2023. Higher earners pay progressive income-adjusted amounts.
  • Part A premium: Most people get premium-free Part A if they or their spouse paid Medicare taxes for 10 years. Others can buy Part A.
  • Part A deductible: $1,600 per benefit period in 2023 for hospital stays.
  • Part B deductible: $226 per year in 2023 before coverage begins.
  • Coinsurance: Percent you pay of the Medicare approved service cost.
  • Copays: Fixed amounts you pay for doctor and outpatient services.
  • Part D premium: Varies by plan. Higher earners pay an income-adjusted amount.
  • Part D deductible/coinsurance: Varies based on thedrug tier. You pay less once you reach the donut hole.

Medicare Advantage premium: $0 or a monthly amount on top of your Part B premium depending on the plan.

Medicare Advantage copays/coinsurance: Set amounts that vary by plan but are more predictable than Original Medicare.

Medigap premium: Policy premium that varies by plan to supplement Medicare gaps.

Late Enrollment Penalty: 10% added for each 12-month period you delayed signing up for Part B or Part D outside of your enrollment period.

Understanding these Medicare costs and eligibility rules can be complex. Get help evaluating your Medicare options and enrolling on time to avoid late penalties.

There are Medicare counselors available who can walk you through the basics, explain the costs, and assist you with enrollment. Don’t hesitate to reach out with questions.

Filing your taxes on time and accurately is also essential so that Medicare has the income data needed to calculate your correct Part B and Part D premiums. Work with a tax professional to ensure your return is complete.

While Medicare costs can add up, there are ways to get help through Medicaid, Medicare Savings Programs, or Part D subsidies if you have limited income and resources. Explore all options to make Medicare affordable on any budget.

With the right supplemental coverage like Medigap or Medicare Advantage and help with premiums and drug costs if you qualify, getting Medicare benefits doesn’t have to break the bank. Do your homework so you can get the most out of Medicare at the lowest cost.

We’re Here to Help

You do not have to spend hours reading articles on the internet to get answers to your Medicare questions. Give the licensed insurance agents at Glidden Group a Call at (208) 962-0077. You will get the answers you seek in a matter of minutes, with no pressure and no sales pitch. We are truly here to help.

FAQS

How are Medicare premiums determined each year?

Medicare Part B and Part D premiums are based on income from the modified adjusted gross income reported on your recent federal tax return filed in 2022 for tax year 2021. For most people, the standard Part B premium they will pay each month in 2023 is $164.90. But those with higher income may face an Income-Related Monthly Adjustment Amount to their premiums.

What tax information does Medicare use to calculate my premiums?

Medicare looks at your total adjusted gross income as shown on the IRS tax return you filed in 2022 for tax year 2021 to determine if any monthly Income-Related Monthly Adjustment Amount will apply for 2023 in addition to your basic Part B premium, which is $164.90 for most enrollees. Retirement income like pensions or annuities also factor into these calculations.

How can I find out if I’ll pay a higher premium?

To estimate if you will pay the standard premium or a higher amount in 2023, you can apply the income thresholds set by Medicare based on your modified adjusted gross income from your most recent federal tax return filed in 2022. The Centers for Medicare & Medicaid Services determines your income-related monthly adjustment amount based on this tax information.

What if my income has increased since my last tax return?

Even if your income has gone up since the tax return filed in 2022, Medicare is required to use the adjusted gross income from that return, filed for tax year 2021, to set your Part B and Part D premiums for 2023. The premium adjustment amount won’t typically be reassessed until next year when the following year’s tax return is processed, but contacting Medicare can help address specific filing status changes.