Many people believe Medicare is free and for good reasons. Every month people ask “Is Medicare Free?”, “Do I need to pay for Part B if I get a supplement plan?”, “Does the cost of Medicare get more expensive over time?”
Many Americans are under the impression that their payroll taxes will completely pay for Medicare once they turn 65. This is not entirely true, and for some this news can be very stressful and worrisome.
If Medicare is in your near future, here’s what you need to know to prepare for the cost of Medicare.
Is Medicare Part A Free
If you made payroll taxes in your life you probably know they set aside a trust fund to help fund Part A. If you or a spouse contribute to Medicare taxes while working a minimum of 40 quarters in the U.S., then Part A is free.
Beneficiaries that only contributed 30-39 quarters; your premium would be $240.
Those with fewer than 30 quarters of contributions would pay the full premium, which is $437.
Is Medicare Part B Free
Part B covers outpatient services. All normal outpatient services like doctor visits, lab work, therapy and more are under Part B.
Some services that happen in a hospital setting like surgeries, chemotherapy, dialysis, diagnostic imaging and more are generally under Part B.
If Medicare is your primary coverage provider, Part B is necessary to have.
Most Part B enrollees have a standard monthly premium that can change from year to year. For 2019, the monthly premium for those in the lower tax bracket is $135.50.
Premiums reflect income. Therefore, if you’re in a higher income bracket you will pay more for coverage.
Social Security determines Part B premium cost on AGI from the last 2 years prior to enrolling. You’ll pay an Income Related Monthly Adjustment Amount (IRMAA) if as an individual you made $85,000 or more; or, as a married couple $170,000 or more.
Premiums for those that must pay an IRMAA can expect monthly costs to be around $428.60.
Begin to think about your preparation years prior to when you plan on retiring. Speak with your Medicare agent to see what your Part B premium will be. Then, you can start planning for retirement without paying a premium you didn’t anticipate on health insurance coverage.
Why Are Some Medicare Advantage Plans Free?
This is a common misconception. Yes, some Part C plans don’t require a monthly premium, but that doesn’t make them entirely free. You will still need to pay your Part B premium.
Is Medicare Part D Free
In 2006, the creation of Part D under the Medicare Modernization Act made policy changes. Prior to this change Medicare beneficiaries were responsible to pay for their retail prescription drugs out of pocket.
As you could imagine, this could get very costly. Part D isn’t free; however, with a policy, some generics are $0.
You can think of your Part D plan as a pharmacy card that allows you to get your prescription medications by only paying a co-payment instead of the full retail price.
Part D plans are voluntary plans with premiums for that vary in cost per month from state to state. Cost for your medications will depend on the type of drug and usage; you may need to spend a lot or only a little bit for your medications.
Every Part D drug plan has a stage where it’s possible for copay costs to rise if you spend more than a certain amount annually on prescription drugs. Your Part D drug plan will have a drug list of what medications they cover; this list is called a formulary.
If a medication you take no longer has coverage by the plan, they will issue out a notice letter to inform you of the change.
Part D drug plans are like Part B in the sense of Income-Related Monthly Adjustment Amount (IRMAA). Your income can impact your Prescription drug premiums. Higher-income individuals will pay a higher amount and those with a low income could qualify for extra help.
Deductibles and Coinsurance Costs
Once you’re on Medicare there are some costs that may be a must “as you go”. Just like many other health insurance policies, Medicare has deductibles and coinsurances.
Medicare isn’t free and Part B only pays 80% of outpatient expenses; so, you’re responsible for the remaining 20%.
A great article we have that all those new to Medicare should read is Medicare for Dummies.
Get Coverage Because Medicare Isn’t Completely Free
A wide range of supplemental insurance options is still available to fill in these gaps in coverage. Each supplement plan will come with its own monthly costs; consider this while planning and looking for what option is best for you and your wallet.
In conclusion, Medicare is not free. However, Medicare will cover a decent portion of your healthcare expenses once you turn 65.
Proper planning can help you cover the costs of your future. The last thing we want once we retire is to find out were unable to pay for Medicare. Plan now and avoid the headache.
Give us a call at the number above to discover your Medicare options. If you can’t call now, fill out an online rate form and discover the best rates in your area.