Have you ever wondered how much Medicare is going to cost you? Why are there separate parts of Medicare and separate costs of each part of Medicare?
What is the total cost of my Medicare and how do I pay each premium for Medicare?
These questions are important to everyone as they begin their search for the best Medicare insurance plans and how to begin understanding Medicare costs. Many people enrolling into Medicare are also retiring, which means your income may be changing, sometimes substantially, so it is important to know your cost upfront so you can plan for the future. When it comes to paying for Medicare, it can be easy to get the estimate of total cost of Medicare as well as how to pay for each part of Medicare.
It could be quite a surprise, when you turn 65, or come off Employer Group coverage, and realize that not all your Medicare will be free. Understanding the cost of Medicare for Part B, Part D, and any supplemental coverage, along with getting estimates for each part of Medicare can be easy.
Medicare Part A Cost – Hospital Coverage
Part A is the free part of Medicare! Kind of. For most people, the cost of Medicare Part A will be zero. If you’ve worked, or are married/divorced and your spouse worked at least ten plus years while in the United States, your Medicare Part A will be no cost; these costs were paid with your taxes that have come out of your paycheck. So, although Medicare Part A seems free on the surface, you have actually been paying for it most of your life.
If you have to buy this part of Medicare Part A, you will be charged a monthly premium based on the amount of work credits you have earned. In 2022, if you worked between 30-39 quarters, you will pay $274 per month, and if you worked 29 or fewer quarters, you will pay $499 per month. To be considered eligible to buy into Medicare part A, you will have to have been a legal resident or have a green card for at least five years in the United States.
Part A, known as Hospital coverage, will cover your inpatient medically necessary care (excluding doctor charges) after your Part A per benefit period deductible. In 2022, this deductible is going to be $1,556.
If you are hospitalized, in a skilled nursing facility, or hospice care, you will also have a coinsurance for the amount of time you spend in these facilities. While hospitalized, you will have $0 coinsurance for days 1-60, $389 per day for days 61-90, and $778 per day for days 91-150. Anything beyond 150 days you will pay all costs of your hospitalization. If in a skilled nursing facility, you will have a $0 coinsurance for days 1-20, but a $194.50 per day coinsurance for days 21-100.
The cost-share under Medicare Part A (deductible and coinsurances) may increase each year. Many Medicare Supplement plans cover these cost-shares under Medicare Part A.
Medicare Part B Cost – Medical Coverage
Unfortunately, most everyone pays a monthly premium for Medicare Centers for Medicare and Medicaid Services. Also known as CMS.
Both Medicare Part A and Part B. The standard Part B, known as Medical coverage, premium amount in 2022 is $170.10 per month. Most people pay the standard amount for Medicare Part B, however if your modified adjusted gross income (MAGI) exceeds a certain amount, you will end up paying more for your Medicare Part B. Your MAGI is determined by your most recent tax return filed with the IRS, typically from two years prior to enrolling. If your MAGI exceeds the standard amount, you will pay what is known as Income Related Monthly Adjustment Amount – IRMAA. IRMAA will be discussed more in depth below.
The premium is not the only cost under Medicare Part B. You are also responsible for certain cost-shares. The first aspect is the Medicare Part B annual deductible, which is $233. Luckily, unlike the Medicare Part A deductible, you will only pay this once per year. Once you have met the Part B annual deductible, you essentially enter an 80/20 split for your Medicare outpatient coverage, with Medicare Part B paying 80%, and you paying 20%. Although 20% really doesn’t sound like a lot, it is important to remember that there is no limit to this 20%. The lack of an out-of-pocket maximum on Medicare cost-sharing is why it is essential to look into additional coverage, such as a Medicare Supplement plan.
Give us a call at 877-88KEITH (53484) we can review the benefits of MediGap plans in your area!
Example of Total Medicare Monthly Cost
To get an idea of how much you’re going to pay every month for your Medicare, you’ll have to understand that it will be based on your income and will vary per individual. It is also going to depend on any coverage that you choose to supplement your Medicare.
Here is an example to help clarify the process. Take into consideration that your additional expenses are going to be out of pocket is going to be minimal, as any supplement plans that you have may pick up the majority of any of your costs that would typically be out of pocket. There are different Medicare plans available for you to choose so that you will have a monthly premium that will work within your budget.
For example, let’s say your Part B premium of $170.10 per month, your Medigap Plan G monthly premium is also $125 per month and you enrolled in a Part D plan, which increases your premium another $13.50 per month. Your total cost is going to be $308.60 every month for your premiums. You will have an annual deductible of $233 under Medicare Part B, but then, that’s it! You will have no other deductibles, copayments or coinsurances for the year on your hospitalization or outpatient procedures! You will know each month what your cost is without any surprises.
How Do I Determine IRMAA
What is IRMAA and what does it have to do with the cost of Medicare?
If you think you may fall into the bracket of a higher-income earner when you are applying for Medicare, it is important to determine if you will pay an Income Related Monthly Adjustment Amount, and exactly what that amount will be.
While this may seem too confusing, you will not have to do all this math for yourself. Social Security reviews your Tax Return information you will be notified by mail if you happen to exceed any of the income limits and if there is a higher amount that you were going to have to pay.
IRMMA is determined by Medicare and based on Income Tax records. These premiums are going to be based on your adjusted household income. To do this, the Social Security office will use your IRS taxes from two years prior. This means they will use your tax returns to figure out what you were going to pay for Parts B and D. Keep in mind that Part D will also be based on your income. If you and your spouse file jointly, Social Security will base all your premiums for each of you based on your total married income, whether you file your tax returns jointly or not. Premiums for any Part B plan is going to be individual and never combined.
Now, as we mentioned before, many people enrolling into Medicare are retiring from work. If you are retiring, it is likely that your income today is not going to be at the same level it was at two years ago, which is the report that Social Security is using. How can we fix this? Luckily, you may Appeal the cost of Medicare Part B, and Part D, cost is if there are changes to your income. There is an appeal form that you can submit to Social Security to request a reassessment of your income level. Typically, Social Security will ask for some documentation, such as a letter of termination, to verify the change in income. It is important to remember that salary is not the only factor that is looked at for your MAGI-
What is considered income when calculating my Medicare Part B costs:
- Minimum dividends from any of your investments
- Capital gains
- Social Security Benefits
- Tax-deferred Pensions
What won’t be contributed to your premium cost
- Your Roth IRAs and your Roth 401k
- Your life insurance policies
- Reverse mortgages
- Any of your health savings accounts
If your MAGI is above the standard income level, you will pay an increased premium for Medicare Part B and Medicare Part D. These increases work in steps based on your tax bracket:
|Tax Filing Status||2022 MAGI||2022 Part B Premium Adjustment||2022 Part D Premium Adjustment|
|Single||$91,000 or Less||= $170.10||–|
|$91,000.01 – $114,000||+ $68.00 = $238.10||+ $12.340|
|$114,000.01 – $142,000||+ $170.10 = $340.20||+ $32.10|
|$142,000.01 – $170,000||+ $272.20 = $442.30||+ $51.70|
|$170,000.01 – $499,999||+ $374.20 = $544.30||+ $71.30|
|More than $500,000||+ $408.20 = $578.30||+ $77.90|
|Married||$182,000 or Less||= $170.10||–|
|$182,000.01 – $228,000||+ $68.00 = $238.10||+ $12.40|
|$228,000.01 – $284,000||+ $170.10 = $340.20||+ $32.10|
|$284,000.01 – $340,000||+ $272.20 = $442.30||+ $51.70|
|$340,000.01 – $750,000||+ $374.20 = $544.30||+ $71.30|
|More than $750,000||+ $408.20 = $578.30||+ $77.90|
Medicare Part D – Prescription Drug Plan Cost
Your Part D, known as Prescription Drug coverage, cost is going to vary depending on your prescription, and could also include a Part D IRMAA amount. Your premiums for Part D in 2022 are going to be based on which plan you choose. This means that unlike Medicare Part A and Medicare Part B, there is not a set standard premium for each person enrolling. Since Part D plans are offered by private insurance companies, the premiums can range in price for inexpensive to expensive. Remember that each state will have at least twenty, if not more, plans for you to choose from, so you have many options. Every year there is an Annual Open Enrollment, October 15th – December 7th, wherein you can reevaluate your Part D plan and choose the best plan for you.
If you are within the higher income bracket, you will be paying a little more on top of the base premium. Usually, those with higher incomes will pay a bit more for any part D plan that they choose. However, it is essential to factor in this extra cost if you compare the potential price for all Medicare Part D plans against other insurances that you may have, such as your current employer.
Part D Premium IRMAA Levels:
If you’re looking to get an idea of what your Part D costs will be, the following information will help out.
- If you make $91k or less individually/Married and Separate Tax Return or $182k or less jointly, you will pay the plan premium.
- If you make $91k – $114k individually or above $182k – $228k jointly, there will be an extra cost of $12.40 plus your plan premium.
- If you make above $114k – $142k individually or above $228k – $284k jointly, you will pay $32.10 plus your plan premium.
- If you make above $142k – $170k individually or above $284k – $340k jointly, you will pay $51.70 plus your plan premium.
- If you make above $170k but less than $500k individually or above $340k but less than $750k jointly or above $91k and less than $409k but file married and separate tax returns, then you’ll pay $71.30 plus your plan premium.
- If you make $500k or more individually, $750k, and more jointly or $409k and more but file married and separate tax returns, then you’ll pay $77.90 plus your plan premium.
If there is a cost for Medicare Part D, why is it mandatory if I do not take any medications?
Now, if you do not take any prescriptions you may be thinking of not enrolling in a Medicare Part D plan. It is important to remember that although it is not mandatory to enroll in Medicare Part D, if you do not enroll when you are first eligible, you will face a late penalty in the future if you do decide to enroll. This penalty is not a one-time penalty either, it is a lifetime penalty for as long as your are enrolled in a Part D plan. The Part D penalty accumulates from year to year and increases the longer you delay your enrollment. The penalty is 1% for every month you delay, multiplied by that year’s national base beneficiary premium, which changes each year. In 2022, the national base beneficiary premium is $33.37.
You also can’t just enroll into a Medicare Part D plan right when you need one. If you do not enroll into one when first eligible, you will need to wait until the Annual Election Period, which is every year from October 15th– December 7th, with coverage beginning on January 1st. Basically, Medicare Part D is the most non-mandatory but really mandatory part of your Medicare enrollment.
Give us a call at 877-88KEITH (53484) we can help make sure you don’t miss your enrollment timeline for Part D and end up paying more than you need to!
How do I pay for Medicare?
When it comes to Medicare and paying for it if you are taking your Social Security the monthly cost for Part B will be deducted from your Social Security check; you can also choose to have your monthly Part D cost deducted your Social Security benefits.
If you enroll into Medicare Part B and Part D and currently not receiving your Social Security benefits, you will be billed by Medicare for premiums once every quarter; which may result in a confusing first billing for Part B cost. If you are going to pay directly for your Medicare costs you may be able to use your credit card or HSA monies to pay for Medicare Part B and Part D, as well as set up a monthly deduction with Medicare for Part B and with your Part D carrier these costs.
Check with your plan to see if there is a set copayment or coinsurance for your prescription drugs. If there is a fixed amount, you usually would want to pick the plan with the lowest overall annual cost per year.
Can I Deduct These Premiums from My Taxes?
All your premiums for Medicare are considered part of your medical expenses and are therefore tax-deductible. If any of your medical expenses exceed 10% of your adjusted gross income for the year, you will be able to deduct them on your taxes. This will then probably exclude a portion of your total income from being taxed. As with anything involving your taxes, it’s best to consult a professional in the industry for extra guidance for any questions you may have or concerns when it comes time to do your taxes.