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Medicare is a government funded and run health insurance program for eligible individuals. To be eligible you must be: 65+ years old; have collected SSDI more than 24 months; or have been diagnosed with end stage renal disease (ESRD) or ALS. There are currently about 62 million Americans enrolled in Medicare.

The Parts of Medicare

Medicare Part A + Medicare Part B = Original MedicarePart A: Hospital Insurance. Includes hospital care, skilled nursing facilities, nursing homes, hospice, and home health services.

Part B: Medical Insurance. Includes services from doctors, preventive care, outpatient care, lab tests, mental health care, ambulance services, and durable medical equipment.

Part C: Advantage Plans. Part C is an alternative to Parts A & B and it includes the benefits and services covered under Parts A & B, and usually Part D. You can select a PPO or HMO plan that is run by a Medicare-approved private insurance company. Make sure to select a plan that covers your health care providers.

Part D: Prescription Drug Coverage. You have different plans to choose from depending on where you live, with different premiums and formularies. Make sure to select a plan that covers the drugs you take.

Medicare Costs in 2023

  • Part A: If you have paid into Medicare while working over your lifetime, the monthly premium is free. If you didn’t pay into the system, the Part A monthly premium will be up to $506. The annual deductible is $1,600. You may also be responsible for paying a cost share amount depending on the number of days spent in a hospital.
  • Part B: The Part B monthly premium is generally $164.90 (see chart below for exceptions) and there is a deductible of $226 per year. The cost share for Part B coverage is 80/20, which means that once you have paid your deductible, Medicare will cover 80% of your health care costs and you will be responsible for 20%. With Part B coverage, there is NO out-of-pocket maximum. If you enroll in Part B late, there will be a 10% penalty for each year you wait to enroll. (Example: Phil’s Initial Enrollment Period ended December 1, 2019, but he waited until December 1, 2021 to sign up for Part B. So, his Part B penalty is 20%). You may also have to wait until open enrollment to sign up.

If Your Yearly Income in 2021 (for what you pay in 2023) was:

File Individual Tax ReturnFile Joint Tax ReturnFile Married & Separate Tax ReturnYou Pay in 2023
$97,000 or less$194,000 or less$97,000 or less$164.90
above $97,000 up to $123,000above $194,000 up to $246,000Not applicable$230.80
above $123,000 up to $153,000above $246,000 up to $306,000Not applicable$329.70
above $153,000 up to $183,000above $306,000 up to $366,000Not applicable$428.60
above $183,000 and less than $500,000above $366,000 and less than $750,000above $97,000 and less than $403,000$527.50
$500,000 or above$750,000 and above$403,000 and above$560.50
  • Part C: As an alternative to Parts A and B, and sometimes D; the premiums for this plan are usually at least the same as Part B ($164.90) or more, but vary based on the plan you chose. The deductibles, cost share, and out-of-pocket maximums will vary.
  • Part D: The premiums for prescription drug coverage vary by plan (average cost = $33.37/month). Premiums are also higher for those with higher income levels. In 2023, the maximum deductible for a Part D plan is $505. After paying the deductible, Medicare pays 75% of your brand and generic drugs and you pay 25%, until you reach $7,400 in total out-of-pocket drug costs. Then, you enter “catastrophic coverage,” and Medicare pays 95% of your drug costs. You pay the greater of 5% of the retail cost or $10.35 for brand-name drugs ($4.15 for generics). If you do not sign up for a Part D plan when first eligible, you will pay a late enrollment penalty for life.

How a Standard Medicare Part D Plan Works in 2023

Prescription Drug ExpensesYou PayMedicare Pays
$1-$505$505 deductible$0
$505-$7,400 (total out-of-pocket costs)25% brand name and generic75% brand name and generic
$7,400+greater of 5% or $4.15 for generic; $10.35 for brand name95%

Medigap Plans

A Medigap plan is a supplemental insurance plan that will help pay for your deductibles, co-payments, and cost share amounts. Plans are labeled as A through N, and each plan with the same letter must offer the same basic benefits. The premiums and deductibles vary with each plan. If you have chosen original Medicare (Parts A & B), there is a 20% cost share amount, so a Medigap plan can help pay for that expense.

Information on comparing Medigap plans

How to Enroll

Most people are automatically enrolled in Medicare Parts A and B when they become eligible. In some cases, you may need to sign up for Medicare during a 7-month initial enrollment period, which begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65. If you didn’t sign up during your Initial Enrollment period, there is a General Enrollment period that runs from January 1 to March 31, but your coverage will not begin until the month after you enroll, and you may face late enrollment penalties. You can also make changes to your coverage every year during an Open Enrollment period that runs from October 15 to December 7.

EnrollmentPeriodCoverage Begins
Open Enrollment10/15 to 12/7January 1
General Enrollment A/B1/1 to 3/31Month after you enroll
General Enrollment C/D4/1 to 6/30July 1

The Affordable Care Act's Impact on Medicare

Medicare beneficiaries are now entitled to a free annual wellness visit, free preventive care, and lower costs for prescription drugs.

Medicare’s Limits

Medicare does NOT cover some services (e.g., long-term care, most dental care, eye exams related to prescription glasses, dentures, cosmetic surgery, acupuncture, hearing aids, and routine foot care. These services may be covered by a Medicare Advantage (Part C) plan.

Last updated: 11/22

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