A very common question we get, “What will Medicare Cost Me?” This is probably the single most important question a new enrollee into Medicare can ask; especially one who is retiring and planning to live off a fixed income.
What will Medicare Cost Me?
Part A – Hospital Insurance
Over your working years, via payroll taxes, you’ve been paying into your Medicare Part A. You usually don’t pay a monthly premium for Medicare Part A (Hospital Insurance) coverage if you or your spouse paid Medicare taxes for a certain amount of time while working (40 quarters).
- Most people get premium-free Part A.
- Medicare Part A has a fee for those who do not qualify for “premium free” of up to $423 a month for 2018. However, you more than likely will not have to pay this fee.
Part B – Doctor’s Insurance
Once you enroll into Medicare Part B, there will be a monthly premium of $134. You do not pay Part B like you do Part A. There are some people who will pay less than the standard rate of $134, because they qualify under a lower income rule.
- Medicare Part B has a monthly premium of $134 a month.
- Unlike Part A, you do not pay into your Part B insurance via payroll taxes.
- If you don’t sign up for Part B when you’re first eligible, you may have to pay a late enrollment penalty.
If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium.
IRMAA (Income Related Monthly Adjust Amount)
Based on the IRMAA determination, you could face extra fees with Part B and Part D plans if you make too much money.
- Medicare looks two years back and if you file taxes with an adjusted income of $85,000 or higher as an individual or over $170,000 as a couple, you will have to pay extra when it comes to Medicare Part B (and also Part D).
- The amount you will owe for Part B and Part D will increase the more money you make.
If you fall into the category of paying more for Medicare, there are two things to be aware of:
- Often, these IRMAA fees can be appealed; especially if you are no longer working so your income will be decreasing.
- As long as you know about the rules, you can think strategically about certain spikes in income that can affect these. The more you are aware of the rules, the more you can do with your financial advisor to minimize the impact of these extra fees.
In addition to Medicare Part A and B, there are often times additional costs depending on if you have an Advantage Plan, a Supplement Plan, or a Part D Plan.
Part C – Doctor’s Insurance
Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare. You’ll get your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage from the Medicare Advantage Plan and not Original Medicare.
- Plans start with monthly premiums as low as $0 per month
- Premiums vary by state and plan
Part D – Doctor’s Insurance
Medicare Prescription Drug Plan (Part D). These plans (sometimes called “PDPs”) add drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) Plans, and Medicare Medical Savings Account (MSA) Plans.
- The average nationwide monthly premium for 2018 is $34
- Premiums vary by state and plan
Make sure you understand your Medicare Cost as you plan your enrollment into Medicare. Especially be prepared if you are retiring and living on a fixed income. You want to make sure you have as few surprises as you can.
If you’re not sure what fees or costs you’ll be facing when it comes to Medicare, you’re not alone. You can call Medicare directly at 1-800-MEDICARE or call us, with nearly 15 years experience we can help you make sure that you know what costs you’ll be facing.
- Part A – https://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-costs.html
- Part B – https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html
- More on IRMMA – https://www.ssa.gov/pubs/EN-05-10536.pdf