If you’re on Medicare and planning your annual budget, you’ll have to factor in higher out-of-pocket expenses. Some costs associated with each Medicare part, such as copays, deductibles, and premiums, are increased annually by the federal government.
These are the dollar amounts you can expect to spend in 2020 for Medicare parts A, B, C, D, and Medigap.
There are premium costs associated with each part of Medicare:
Medicare Part A is the part of original Medicare that covers in-patient hospital services, hospice care, and skilled nursing facility care. It is free for most Medicare recipients.
If you or your spouse have paid enough payroll tax to qualify for free Medicare Part A, you will not incur a monthly premium. Usually, this correlates to around 10 years of work.
If you do not meet the requirements for free Part A, you can expect to pay up to $458 monthly. This is an increase of $21 a month over 2019.
Medicare Part B is the part of original Medicare that covers outpatient care, including wellness visits and preventive treatments, such as the flu vaccine. It also covers emergency room visits and services, even though emergency rooms are in hospitals. Part B pays for 80 percent of the Medicare-approved cost for these services.
Part B has a standard monthly premium that most beneficiaries are responsible for. In 2020, this monthly cost is $144.60. This is an increase of $9.10 over 2019.
You may pay less than the standard monthly premium if it is higher than your Social Security cost of living adjustment.
You will pay more than the standard monthly premium if your income, or your combined income with your spouse, exceeds $174,000 annually. Your 2018 tax return will be used to determine these costs, which range, based on income.
Medicare Part C is also known as Medicare Advantage. People who are eligible for original Medicare can purchase Part C plans from private insurers. These plans cover at least what original Medicare does, plus extra services, which vary by plan. These services can include prescription drugs, dental coverage, and vision care.
Part C costs and premiums vary significantly from plan to plan. Some plans offer a $0 monthly premium. Others provide a richer array of services but cost multiple hundreds of dollars monthly. It’s important to shop around for Part C, making sure to look at the plans and providers that are available in your zip code. You can check out Medicare Advantage plans and their costs at Medicare.gov.
Keep in mind that you must pay the Part B premium monthly, even if you buy a Part C plan.
Average premium costs for Medicare Part C in several cities
|Plan Name||Coverage Area||Monthly Premium|
Senior Advantage (HMO)
|Los Angeles, CA||$0|
|SCAN Health Plan|
Classic II (HMO)
|Los Angeles, CA||$39|
|WellCare Preferred |
|Aetna Medicare Value (PPO)||Chicago, IL||$0|
|AARP Medicare Advantage Choice (PPO)||Chicago, IL||$38|
Medicare Part D is an optional part of Medicare that covers 75 percent of the cost of prescription drugs. If you decide to go with original Medicare (parts A and B), you should strongly consider also signing up for Part D. Medicare Advantage subscribers cannot purchase Part D.
Part D premiums vary by plan. In 2020, you can expect to pay around $32.74 each month. If you made more than $87,000 in 2018, or, your combined income with your spouse exceeded $174,000 in 2018, you can expect to pay higher additional premiums. You can see a chart of incomes and rates for Part D premiums based on income at Medicare.gov.
Medigap is also known as Medicare supplemental insurance. It is sold by private insurers. Medigap helps cover some of the out-of-pocket costs you may incur, such as premiums, copays, and coinsurance. As of 2020, Medigap plans can no longer cover the cost of Part B monthly premiums for new beneficiaries. If you already have a Medigap plan, this new rule will not affect your current coverage. You cannot purchase Medigap if you have Medicare Advantage.
The monthly range of Medigap plans varies by location and by the type of plan. Not every plan is available everywhere. A range of rates includes:
Average premium costs for Medigap in several cities
|City||Monthly premium range|
|Los Angeles, CA||$21–$372|
In addition to monthly premiums, you can expect to pay additional, out-of-pocket costs. These include:
Copays are the costs you may be required to pay at each doctor’s visit, or for prescription drugs. Copays can range from $0 and up.
A deductible is the out-of-pocket amount you must meet before your expenses are covered.
- In 2020 for Part A, the deductible is $1,408 per benefit period.
- In 2020 for Part B, it is $198 for the year.
- In 2020 the Part D deductible varies by plan, but maxes out at $435 for the year.
Coinsurance is the portion of each medical bill that you are responsible for.
For 2020, Part A coinsurance for hospital stays starts at Day 61. From Day 61 to Day 90, your coinsurance is $352 per day of each benefit period. From Day 91 and up, your coinsurance is $704 per each lifetime reserve day (up to 60 days over the course of your lifetime). You are responsible for all costs after your lifetime reserve days have been used up.
For 2020, Part B coinsurance will remain at 20 percent of the Medicare-approved costs of most outpatient medical services.
Medicare premium costs have gone up slightly for 2020. Even though these amounts are small, they can add up, taking a significant portion of your annual budget.
Premium costs may vary based upon the plan you are on. Other out-of-pocket costs you may incur include copays, deductibles, and coinsurance.
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