Medicare costs you money in four main ways: monthly premiums, yearly deductibles, copayments when you use care, and coinsurance (a percentage of the bill). The amount you pay depends on which parts of Medicare you choose, your income, and whether you buy additional coverage. Most people pay something every month, and costs rise each year.

Key Takeaways

  • Part A (hospital insurance) is free for most people at 65, but Part B (doctor visits) costs a monthly premium that increases if you sign up late.
  • Part D (prescription drugs) and Medigap (supplemental coverage) have separate monthly premiums and are optional but can save you money if you use medications or see doctors regularly.
  • Your out-of-pocket costs for Part A and Part B combined have an annual limit, but Medigap and Part D work differently and may offer better protection if you have high medical expenses.
  • Income affects what you pay for Part B and Part D through a surcharge called IRMAA, which can add $70 to $560 per month depending on your income level.
  • Costs change every January, so reviewing your coverage each fall during open enrollment can lower what you pay in the coming year.

Part A and Part B: The Core Costs

Part A covers hospital stays, skilled nursing care, hospice, and some home health services. Most people who worked 10 years or longer in jobs where they paid Medicare taxes pay no monthly premium for Part A. If you did not work that long, you can buy Part A for roughly $280 to $500 per month, depending on your work history — the exact amount changes yearly.

When you use Part A services, you pay a deductible — a flat amount you must cover before Medicare starts paying. For a hospital stay in 2024, that deductible is $1,632 for the first 60 days. If you stay longer, you pay coinsurance (a daily amount) for days 61 through 90, and a higher daily amount for days 91 and beyond. Skilled nursing facilities have their own deductible structure. These numbers change each January.

Part B covers doctor visits, outpatient care, lab tests, and medical equipment. Part B costs a monthly premium — the standard amount in 2024 is $164.90, but it varies based on your income. If you delay signing up for Part B after you turn 65 and are not covered by an employer plan, you pay a permanent penalty of 10 percent more per year you waited. That penalty stays with you for life.

Part B also has an annual deductible (currently $240) and then you pay 20 percent coinsurance for most services after that. There is an annual out-of-pocket limit for Part A and Part B combined — in 2024 it is $8,150 — meaning once you hit that number, Medicare covers 100 percent of your Part A and Part B costs for the rest of the year.

Part D: Prescription Drug Coverage

Part D is optional coverage for prescription medications. You choose a plan from private insurance companies, and each plan has its own monthly premium, deductible, and list of covered drugs. Premiums range widely — from under $10 to over $100 per month depending on the plan and your location.

Like Part B, if you go without Part D when you first become may be able to access and later sign up, you pay a permanent penalty of about 1 percent per month for every month you were uninsured. That penalty is added to your premium for as long as you have Part D.

Part D has a coverage gap (sometimes called the "donut hole") where you pay more out of pocket after you and your plan spend a certain amount on drugs. The gap structure changes yearly, but in general, once you reach the gap, you pay a higher percentage of drug costs until you hit a catastrophic coverage threshold, at which point you pay only a small copayment per drug.

Medigap: Supplemental Coverage That Reduces Your Costs

Medigap (also called Supplement insurance) is sold by private insurers and covers some of the costs that Original Medicare does not — like copayments, coinsurance, and deductibles. It is optional but popular among people who see doctors regularly or have chronic conditions.

Medigap plans are labeled A through N, and each plan covers a different combination of costs. Plan G, for example, covers your Part B deductible and 20 percent coinsurance. Plan N covers most coinsurance but not the Part B deductible. Monthly premiums for Medigap range from roughly $100 to $300 or more, depending on the plan, your age, your location, and the insurance company.

Medigap does not cover prescription drugs, so you still need Part D if you take medications. Medigap also does not have an annual out-of-pocket limit the way Original Medicare does — you pay the premium every month regardless of how much care you use.

Income-Related Surcharges (IRMAA)

If your income is above a certain level, you pay extra for Part B and Part D. This surcharge is called the Income-Related Monthly Adjustment Amount (IRMAA). The income threshold changes yearly, but in 2024 it starts at $97,000 for single filers and $194,000 for married couples filing jointly.

The surcharge is based on your income from two years ago (called "modified adjusted gross income"), so if you had a large one-time income event — like selling a home or taking an early retirement distribution — you may owe IRMAA even if your current income is lower. You can request a recalculation if your income dropped due to retirement, death of a spouse, or loss of income-producing property.

IRMAA adds $70 to $560 per month to your Part B premium and $12 to $77 per month to your Part D premium, depending on your income level. These amounts increase yearly.

Medicare Advantage (Part C): A Different Cost Structure

Medicare Advantage is an alternative to Original Medicare. Instead of paying Part A and Part B premiums separately, you enroll in a private plan that covers both. Many Medicare Advantage plans charge no monthly premium (beyond your Part B premium), but they typically have lower deductibles and copayments than Original Medicare.

The tradeoff is that Medicare Advantage plans usually require you to use doctors and hospitals in their network, and they often require prior authorization for certain services. Out-of-pocket limits are typically lower than Original Medicare — often $5,000 to $7,000 annually — but you must use in-network providers to get that protection.

Medicare Advantage plans often include Part D (prescription drug coverage) built in, so you do not buy a separate Part D plan. Some plans also cover dental, vision, or hearing aids, which Original Medicare does not.

How Costs Change Year to Year

Medicare premiums, deductibles, and coinsurance amounts change every January 1st. The changes are tied to inflation and the cost of care, so they usually go up. Part B premiums can increase significantly in years when Medicare spending is high.

You have a chance to review and change your coverage each year during the Annual Enrollment Period, which runs from October 15 to December 7. If you do not actively choose a plan, you stay in your current plan. Switching plans — especially from Original Medicare to Medicare Advantage or vice versa — can lower your costs if your health needs or income have changed.

Setting a calendar reminder in early October to review your coverage can save you hundreds of dollars per year. Compare your current plan's costs against other available plans in your area, especially if your medications, doctors, or income have changed.

Frequently Asked Questions

Do I have to pay for Part A?

Most people do not pay a monthly premium for Part A if they or their spouse worked at least 10 years in jobs where you paid Medicare taxes. If you did not work that long, you can buy Part A for a monthly premium. Everyone pays deductibles and coinsurance when they use Part A services.

What happens if I cannot afford my Medicare premiums?

If your income is low, you may be able to get help through Medicaid or through programs like the Medicare Savings Program, which pays some or all of your Part B premium. Contact your state Medicaid office or call 1-800-MEDICARE to learn what programs may be available in your state based on your income.

Can I change my Medicare plan if costs go up?

Yes. You can change plans during the Annual Enrollment Period (October 15 to December 7 each year). If you have a may have access to life event — like moving, losing employer coverage, or a significant drop in income — you may be able to change plans outside the enrollment period.

Why did my Part B premium increase so much?

Part B premiums are based on the cost of care and inflation. Large increases sometimes happen when Medicare spending rises unexpectedly. If your income also changed, your IRMAA surcharge may have increased. You can request a recalculation if your income dropped due to retirement or loss of income.

Is Medigap worth the extra cost?

Medigap makes sense if you see doctors regularly or have chronic conditions, because it covers coinsurance and deductibles that add up over time. If you rarely use medical care, the monthly premium may cost more than you would pay out of pocket. Compare your expected costs under Original Medicare plus Medigap versus a Medicare Advantage plan in your area.