Plan Costs

The following will give you a very rough idea of the money you can expect to spend on Medicare health insurance coverage:

  • Part A – Hospitalization: Coverage is usually free of charge for people who paid Social Security taxes while working. Those who did not pay enough into the Social Security tax system may be able to buy Part A coverage.
  • Part B – Medical: Premiums must be paid for Part B coverage. Charges for monthly premiums are based upon income, and in 2010, the premium for a new, single Medicare enrollee with a household annual income under $85,000 is $110.50. That is also the monthly premium for a newly enrolled married couple with an income of $170,000 or less.
  • Part C – Medicare Advantage: The income-based premium charges due for Part B coverage also apply to Part C. Most Medicare Advantage plans charge a fee over and above the Part B premium amount because they provide more services than Part B, like prescription drug coverage, and sometimes vision and dental benefits. There will also be out-of-pocket costs such as premiums, deductibles, co-payments and co-insurance. These costs can vary widely as the plans are privately administered. Many Medicare Advantage plans may have “networks” of healthcare providers, and if your providers are not in the network for the plan you are interested in, you will have to find new providers or risk not taking full advantage of your insurance coverage. It is a good practice to check with your providers prior to committing to a plan to see if they are in the network for your plan of interest.
  • Part D – Drugs: The national average for Part D premiums is $28.00 per month. Only those enrolling in traditional Medicare, Parts A and B, who do not have a Medigap policy that includes prescription drug benefits will enroll in Part D.
  • Medigap for Parts A and B: Typically, monthly premiums for Medigap plans are higher than those for Medicare Advantage plans. Costs may fluctuate with the type of coverage chosen. There are 12 standard Medicare supplemental (Medigap) insurance plans that help pay some of the uncovered costs, or “gaps” in coverage that come with a traditional Medicare plan. All Medigap plans must cover certain basic benefits.
  • Each standard plan, labeled "A" through "L," offers a different set of benefits, fills different "gaps" in Medicare coverage, and varies in price. The basic benefits for Medigap Plans K and L are similar to the basic benefits offered in Plans A through J, but these plans have lower monthly premiums and higher out-of-pocket costs.
  • Insurance companies may offer a "high-deductible option" on Medigap Plans F and J. If you choose this option, you will first have to pay a deductible before the plans pay anything. The deductible amount can go up every year. Premiums for high-deductible-option policies often cost less, but if you get sick, your total costs will be higher.
  • If you are in a Medicare Advantage, Part C, plan, such as a Medicare Health Maintenance Organization (HMO), you won't need a Medigap policy.

CAUTION: Your ability to obtain Medigap coverage may be limited if you are under 65 years of age and receiving Social Security due to disability. This is especially true if a policy has an exclusion for pre-existing conditions. Medicare Advantage plans, however, do not generally impose such an exclusion and are more accommodating to those with disabilities.

If you elect Medicare Parts A and B benefits and are unable to purchase a Medigap plan, you will still need prescription drug coverage. You will need to enroll in a Part D, prescription drug plan. If you miss the deadline for enrollment in Part D, you will have to pay a late enrollment penalty.

The bottom line: Be sure to check on all of your coverage options before opting to enroll in Medicare Parts A and B.


Content for this section provided by Allsup, Inc. and Mark Rubin, J.D.


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