Medicare is a government-sponsored healthcare program in the United States that provides coverage to those aged 65 or older, as well as those with certain disabilities or medical conditions. And while almost 1 in 5 Americans are covered by Medicare, the average understanding of how it works, how to use it, and how to pay for it is…underwhelming at best. (Parts A, B, C, and D? It’s enough to stump even a benefits expert.)
That means the aging workforce is likely confused about how much they’ll owe on healthcare this year—all while inflation soars, the cost of living rises, and wages are stagnant. Not exactly ideal, huh?
It’s time for benefits pros to step up to the plate and help beneficiaries navigate the murky Medicare waters. In this post, we’ll explore how much Medicare costs, and how to guide eligible folks through their payment options.
How much does Medicare cost?
Is Medicare free? While it is a government-sponsored program that can be more cost-effective than private insurance, Medicare is just like most things in this world—it comes with a price tag. However, there are a few different enrollment options when it comes to Medicare, which can help lower costs.
Medicare-eligible folks must simply decide which parts are the right fit for them and only pay for what they need. Here’s how to guide them through the different buckets:
Part A: Hospital Insurance
Medicare Part A is commonly referred to as “hospital insurance,” and provides coverage for inpatient hospital stays, skilled nursing facilities, hospice care, and some home health care. Most people do not pay a monthly premium for Part A, as they have already paid into the program through payroll taxes during their working years. However, there are some circumstances where individuals may have to pay a premium, such as if they did not work long enough to qualify for premium-free Part A or if they are not U.S. citizens or permanent residents.
For those who do have to pay a premium for Part A, the amount varies based on how long they worked and paid Medicare taxes. In 2023, the maximum monthly premium for Part A is $506 for those who worked and paid Medicare taxes for less than 30 quarters (7.5 years) and $0 for those who worked and paid Medicare taxes for 30 quarters or more.
Hospital Stay
In 2023, employees will pay:
- $1,600 deductible per benefit period
- $0 for the first 60 days of each benefit period
- $400 per day for days 61–90 of each benefit period
- $800 per “lifetime reserve day” after day 90 of each benefit period (up to a maximum of 60 days over your lifetime)
Skilled nursing facility stay
In 2023, employees will pay:
- $0 for the first 20 days of each benefit period
- $200 per day for days 21–100 of each benefit period
- All costs for each day after day 100 of the benefit period
Part B: Medical Insurance
Medicare Part B provides coverage for doctor visits, outpatient services, preventative care, and medical equipment. Unlike Part A, everyone who enrolls in Medicare must pay a monthly premium for Part B. The premium is based on income and can change from year to year.
In 2023, the standard monthly premium for Part B is $164.90. However, Social Security will tell you the exact amount you’ll owe. Beneficiaries will pay the standard premium if they:
- Enroll in Part B for the first time in 2023.
- Don’t get Social Security benefits.
- Are directly billed for Part B premiums.
- Have Medicare and Medicaid, and Medicaid pays their premiums. (The employee’s home state will pay the standard premium amount.)
Individuals with higher incomes may have to pay more. The amount is based on the modified adjusted gross income (MAGI) reported on their tax return from two years prior. The following table shows the 2023 Part B premiums based on income:
If an employee’s yearly income in 2021 was….
| File individual tax return | File joint tax return | File married & separate tax return | Employees pay (in 2023) |
|---|---|---|---|
| $97,000 or less | $194,000 or less | $97,000 or less | $164.90 |
| above $97,000 up to $123,000 | above $194,000 up to $246,000 | not applicable | $230.80 |
| above $123,000 up to $153,000 | above $246,000 up to $306,000 | not applicable | $329.70 |
| above $153,000 up to $183,000 | above $306,000 up to $366,000 | not applicable | $428.60 |
| above $183,000 and less than $500,000 | above $366,000 and less than $750,000 | above $97,000 and less than $403,000 | $527.50 |
| $500,000 or above | $750,000 or above | $403,000 or above | $560.50 |
Part C: Medicare Advantage
Medicare Advantage (also known as Part C) is an alternative to traditional Medicare that is offered by private insurance companies. These plans often provide additional benefits beyond what is covered by Parts A and B, such as prescription drug coverage, dental care, and vision care. However, they may also have more restrictions on which doctors and hospitals are in-network and require prior authorization for certain services.
The cost of Medicare Advantage varies depending on the specific plan and the area in which an individual lives. Many Medicare Advantage plans have a monthly premium in addition to the Part B premium, although some plans may have a $0 premium. Additionally, Medicare Advantage plans often have deductibles, copayments, and coinsurance for various services.
In 2023, the average monthly premium for a Medicare Advantage plan is $18, although this can vary widely depending on the specific plan, location, and what’s included. Some plans may have much higher premiums, while others may have no monthly premium at all.
It’s important to note that if an individual enrolls in a Medicare Advantage plan, they still must continue to pay their Part B premium in addition to any other costs associated with the plan.
Part D: Prescription Drug Coverage
Medicare Part D provides coverage for prescription drugs. Like Medicare Advantage, Part D plans are offered by private insurance companies, and the cost can vary depending on the specific plan and the area in which an individual lives.
Part D plans have a monthly premium, which varies depending on the plan. In 2023, the average monthly premium for a Part D plan is $43. However, premiums can range from under $10 per month to over $100 per month depending on the plan and the area in which an individual lives.
Part D plans also have a deductible, which is the amount an individual must pay out-of-pocket before the plan begins to cover their prescription drugs. In 2023, the Part D deductible can be no more than $505. After the deductible is met, the individual will usually pay a copayment or coinsurance for each prescription they fill.
Once an individual has spent a certain amount on prescription drugs (known as the “coverage gap” or “donut hole“), their Part D plan may provide additional coverage. In 2023, once an individual and their plan have spent a combined $4,660 on prescription drugs, they will enter the coverage gap.
While in the coverage gap, the individual will generally pay 25% of the cost of their prescription drugs, although some plans may have different copayment or coinsurance amounts. Once the individual has spent $7,400 out-of-pocket on prescription drugs for the year, they will exit the coverage gap and enter what is known as “catastrophic coverage.” During this phase, the individual will generally pay a small copayment or coinsurance amount for each prescription they fill for the rest of the year.
It’s important to note that not all Part D plans are created equal, and the cost of prescription drugs can vary widely depending on the plan. Additionally, some Medicare Advantage plans include prescription drug coverage, so individuals who enroll in one of these plans may not need to enroll in a separate Part D plan.
Does Medicare have a deductible?
Yes, Medicare has deductibles for certain services. While deductibles can vary depending on the person, here’s a general breakdown of 2023 costs that you can share with Medicare-eligible folks:
Medicare Deductibles in 2023
| Medicare Part | Deductible |
|---|---|
| Part A | $1,600 |
| Part B | $226 |
| Part C | Determined by private insurance carrier |
| Part D | Determined by private insurance carrier, No more than $505 |
How much is Medicare going up in 2023?
Drumroll, please…it’s the moment every beneficiary has been waiting for. Are they going to have to shell out more money than last year for health insurance?
While inflation is affecting just about every industry these days, there’s good news: some Medicare costs have actually gone down in 2023. Here’s a full side-by-side comparison to share:
Medicare Costs in 2022 vs. 2023
| Medicare Part | 2022 | 2023 |
|---|---|---|
| Part A | Premium: $0 Deductible: $1,556 Hospital stay: $389 per day Skilled nursing facility: $194.50 per day | Premium: $0 Deductible: $1,600 Hospital stay: $400 per day Skilled nursing facility: $200 per day |
| Part B | Premium: $170.10 Deductible: $233 | Premium: $164.90 ↓ Deductible: $226 ↓ |
| Part C | Determined by private insurance carrier | Determined by private insurance carrier |
| Part D | Determined by private insurance carrier | Determined by private insurance carrier |
How to make this all make sense
Figuring out how much Medicare costs can feel a bit like a math problem on the SAT exam. (We know, just look at all the tables in this blog post alone).
So if your brain is fried, we understand. But with more aging employees in the workforce than ever, it’s time to step up to the plate and help Medicare-eligible folks make sense of the madness.
Luckily, technology is making it easier than ever to guide folks through the Medicare process, without having to overhaul your tried and true benefits strategies. ALEX Medicare gets to know users through a one-on-one conversation, and guides them toward smarter, more personalized Medicare choices (without burdening your team). Available via ALEX Benefits Counselor or ALEX Go, Medicare-eligible folks can access guidance wherever they are, on whatever device they’re most comfortable using.
