Medicare may be a government health insurance program, but that doesn’t mean it’s free. While it’s true that most people do not pay a premium for Medicare Part A (hospital insurance), there are other components of Medicare that do require a premium.
Below is a look at 2018 Medicare premiums, along with some information about how those premiums have increased over the years and different ways they can be paid.
Medicare gets some of its funding from payroll taxes that Americans pay while working. But a small contribution from each working American’s paycheck is not enough to support the program on its own, which is why Medicare beneficiaries are responsible for paying some premiums.
There are four parts of Medicare (Part A, Part B, Part C and Part D), as well as Medicare Supplement Insurance. The 2018 premiums required by each Medicare coverage area are listed below.
Medicare Part is hospital insurance. It provides coverage for inpatient hospital care, skilled nursing facility care, hospice care and limited home health services.
Most people do not pay a premium for Part A. These include people who are over 65 years of age and meet at least one of the following eligibility requirements:
People under the age of 65 can also receive premium-free Part A if they meet one of the following requirements:
If you do not meet any of the above requirements, your 2018 premiums for Medicare Part A can cost up to $422 per month but will depend on how much you have worked and paid into Social Security.
If you have paid Social Security taxes for fewer than 30 quarters (7.5 years), you will owe the maximum of $422 per month for Part A.
If you have paid Social Security taxes for between 30 and 39 quarters (7.5 years to 9.75 years), you will pay $232 per month for your Part A premium.
Additionally, most people who are required to pay a premium for Part A are also required to enroll in and pay a premium for Part B. For those not required to pay a premium for Part A, Part B enrollment remains optional.
Medicare Part B comes with a standard premium of $134 per month in 2018 that most enrollees pay. But while Part A premiums are based off the amount of Social Security taxes paid, Part B premiums are dependent on how much income you reported to the IRS two years prior. So for 2018, your Medicare Part B premiums will be based off of your reported 2016 income.
The breakdown is as follows:
You’ll pay the standard premium amount of $134 if your reported income in 2016 was:
You’ll also pay the standard premium if you:
A Part B premium of $187.50 is required of anyone who’s reported income in 2016 was:
The Part B premium climbs to $267.90 per month in the event that your 2016 income was:
The monthly Part B premium increases to $348.30 when 2016 income levels reach:
The 2018 Part B premium maxes out at $428.60 per month for anyone’s 2016 income that exceeded:
If you receive Social Security benefits, you may pay less for your Part B premium due to a cost of living adjustment. This does not apply to people enrolling in Part B for the first time in 2018.
Part A and Part B of Medicare are provided by the federal government and come with standardized premiums. Medicare Part C, Part D and Medicare Supplement Insurance plans are sold by private insurance companies. Therefore, plan premiums are determined by the individual insurance carriers.
Part C of Medicare is also commonly known as Medicare Advantage. A Medicare Advantage plan can work much like a traditional health insurance plan and by law, must provide at least the same basic coverage as Medicare Part A and B. The difference is that Medicare Advantage plans can offer additional benefits. These can include dental, vision and hearing care, as well as prescription drugs.
Premiums for Medicare Advantage plans can be as low as $0, though you still must pay your Medicare Part B premium. $0 premium plans may not be available in all areas.
The average monthly premium for a Medicare Advantage plan that includes prescription drug coverage in 2019 will be around $40.1
Like Medicare Advantage plans, Medicare Part D plans are sold by private insurance companies. Medicare Part D plans provide coverage for prescription drugs, which is something not well-covered by Original Medicare and that may or may not be covered by a Medicare Advantage plan.
The average cost of a Part D plan in 2018 is $34 per month.2 However, premiums can vary greatly depending on the type of drugs being covered and how much coverage is offered.
Medicare Supplement Insurance, also called Medigap, can be used to supplement Original Medicare coverage. But instead of covering specific services, these plans can help cover costs such as Medicare deductibles and coinsurance. It cannot be used with a Medicare Advantage plan.
Medicare Supplement Insurance plans are also sold by private insurers, which means that there are no standardized premiums. The cost of premiums for these plans can vary greatly due to the range of coverage options and regional market prices. For example, the 2016 National Medicare Supplement Price Index reported that a 65-year old male could pay anywhere from $126 to $444 per month for a Medigap plan.3
Medicare Part A, Part B and Part D include late enrollment penalties that can be applied in certain situations.
For Part A, the late enrollment penalty is applied to anyone who did not sign up for Medicare during their Initial Enrollment Period and must buy Medicare Part A coverage. The Part A late enrollment penalty is 10 percent of any owed premium, which must be paid for twice the number of years for which you were eligible but did not enroll.
Part B beneficiaries may also have to pay a late enrollment penalty for every year they were eligible for Part B but did not sign up for it. The penalty is also 10 percent and is owed every year for as long as you continue to be enrolled in Medicare Part B.
For Part D, the late enrollment penalty is dependent on how long you went without a Part D plan or other creditable prescription drug coverage (such as a Medicare Advantage plan offering prescription drug coverage or certain employer-provided prescription drug plans).
To calculate the Part D late enrollment penalty, Medicare multiples 1 percent of the “national base beneficiary premium” (which is $35.02 in 2018) by the number of months you went without coverage. And because the national base beneficiary premium can increase each year, so too can the penalty.
As you’re learned in this article, not all Medicare premiums are alike. And neither are the ways in which they can be paid.
If a premium is owed for Medicare Part A, a monthly bill is typically sent to the beneficiary.
If you receive Social Security benefits, you can generally have your Part B, Medicare Advantage, Part D or Medicare Supplement Insurance premiums deducted directly from your Social Security check. Those who do not receive Social Security benefits are directly billed for their premiums. Payment arrangements may include mailing a check, an electronic transfer from a bank account or charging a credit or debit card.
Just like there are various methods of paying Medicare premiums, there are also some different ways to get help paying them.
In addition, because Medicare Advantage, Part D and Medigap plans are sold by private insurers, companies may offer various discounts and cost-saving incentives to customers. Some of the offers that can be found may include discounts for households or married partners, non-smokers and more, but these will vary based on the plan provider.
Deductibles, coinsurance and other out-of-pocket costs may not always be predictable expenses, but premiums will be there month after month.
When analyzing the cost of premiums for various parts of Medicare and plans associated with Medicare, consider what that premium affords you in terms of coverage and additional costs.
A licensed insurance agent can help you examine the 2018 premium costs of your Medicare options as you find a health insurance plan that suits your budget. CallTTY Users: 711 today to learn more and to find the plan that fits your needs.
1 What Are Medicare Part C Costs? MyMedicareMatters.org. Retrieved from https://www.mymedicarematters.org/costs/part-c.
2 How Much Does Medicare Part D Cost? MyMedicareMatters.org. Retrieved from https://www.mymedicarematters.org/costs/part-d.
3 Medicare Supplement Insurance Policy Costs Vary By Up To 68 Percent. March 31, 2016. American Association for Long-Term Care Insurance. Retrieved from http://www.aaltci.org/news/long-term-care-insurance-news/medicare-supplement-insurance-policy-costs-vary-by-up-to-68-percent.