Q: What does Original Medicare cost the beneficiary?
A: Medicare Part A (hospital insurance) is free for most seniors. If you or your spouse worked at least 10 years in a job where you paid Medicare taxes, you’re eligible for free Medicare Part A when you turn 65.
Medicare A is also free for people under 65 who have been on Social Security disability for at least two years, or who have end-stage renal disease.
Medicare Part B has a premium for all enrollees (unless you’re dual-eligible for Medicare and Medicaid, in which case the Part B premium can be paid by your state’s Medicaid program). The premiums are higher in 2022 for people who earned at least $91,000 in 2020 (this threshold is indexed annually, and the determination is always based on income from two years earlier).
Medicare Parts A and B both have deductibles and coinsurance that are charged if and when the beneficiary receives medical services. Most people who have Original Medicare also have some sort of supplemental coverage — either from an employer or retiree plan or Medicaid, or from privately purchased Medigap plans — which help to pay some or all of the out-of-pocket deductible and coinsurance costs.
Most Medicare beneficiaries also have private Medicare Part D coverage for prescription drugs, either as a stand-alone plan or as part of a Medicare Advantage plan. Employer-sponsored coverage for current employees or retirees can also provide supplemental drug coverage for Medicare beneficiaries. If you purchase supplemental coverage, the premiums will be in addition to the Part B premiums (and if applicable, the Part A premiums).
Part A costs
Although most Medicare beneficiaries receive Part A with no premium, if you do have to pay for it, the premium in 2022 is $499 per month if you worked less than 7.5 years, and $274 per month if you worked between 7.5 and 10 years.
If you’re hospitalized, Medicare Part A has a deductible of $1,556 in 2022 (per benefit period). There is also a coinsurance amount that is charged on a per-day basis after a patient has spent 60 days in the hospital during a single benefit period. In 2022, it’s $389 per day for days 61-90. Each beneficiary has 60 “lifetime reserve days” which can be used if the person still needs to be hospitalized after 90 days in a single benefit period. In 2022, the lifetime reserve coinsurance is $778 per day. All Medigap plans cover these coinsurance charges, plus up to another 365 days of inpatient care after Medicare benefits are exhausted.
(Medicare Advantage plans can have different plan designs in terms of cost-sharing, so the deductible and coinsurance for Medicare Part A isn’t the same as the out-of-pocket costs that a beneficiary pays if they’re hospitalized while enrolled in a Medicare Advantage plan.)
Part B costs
Medicare Part B has a standard monthly premium of $170.10 in 2020, for people who earn up to $91,000 a year ($182,000 for a married couple; note that this is based on income reflected on 2020 tax returns). The premiums are higher if your income exceeds that amount. Part B enrollees pay an annual deductible of $233 in 2020. Although the Part B premium increase is substantial for 2022, the Social Security Cost of Living Adjustment (COLA) is also historically large, and is sufficient to cover the full amount of the Part B premium increase for beneficiaries who receive Social Security retirement benefits (and who aren’t subject to the high-income surcharge).
Some Medigap plans pay the Part B deductible. For people who become eligible for Medicare on or after January 1, 2020, Medigap plans that cover the Part B deductible are no longer available, but people who became eligible for Medicare before that date can continue to have coverage under Medigap Plans C or F, both of which cover the Part B deductible (these beneficiaries can keep those plans if they already have them, or they can apply for coverage under them if they want to change their plan, keeping in mind that medical underwriting is used in most states if you’re applying for a Medigap plan after your initial enrollment period ends).
(As noted above, Medicare Advantage plans can have different plan designs in terms of cost-sharing, so the out-of-pocket costs that an enrollee will pay for outpatient care will be different if they’re enrolled in a Medicare Advantage plan.)