Healthcare Educators


Understanding Your Out-of-Pocket Costs with Medicare

by | Jul 14, 2023

Whether you are new to Medicare or have been enrolled for a while, you might be surprised by some of the out-of-pocket costs you encounter. Medicare covers a lot, but it does not cover everything. Out-of-pocket expenses can vary greatly depending on your income, the type of coverage you have, the doctors you see, and the services you receive. It also matters if you enroll on time and avoid late penalties. Understanding what Medicare expects you to pay will help you avoid an unexpected financial burden.

Original Medicare Part A and B

Premiums, deductibles, and coinsurances for Original Medicare change every year.

Medicare Part A (Hospital Insurance) 2023

Premium: If you or your spouse worked 10 years or more, Part A is free. If you don’t qualify for premium-free Part A, you will have to pay $278 or $506 per month, depending on the amount of time you worked.

Deductible: $1600 for each inpatient hospital benefit period. There is no limit to the number of benefit periods you can have in a year.

Coinsurance: Varies with location and length of stay. For a hospital stay:

  • Days 1 to 60: $0 after you pay your Part A deductible
  • Days 61 to 90: $400 per day
  • Days 91 to 150*: $800 per day – *Known as “lifetime reserve days” because Medicare will only pay for these extra days once in your lifetime
  • Out-of-pocket maximum: None

Medicare Part B (Medical Insurance) 2023

Premium: The standard Part B premium for most beneficiaries is $169.40 per month, but it may be higher, depending on your income. It may also be higher if you did not enroll on time and are paying a late penalty.

Deductible: $226 per year

Coinsurance: 20% of the cost of covered services, after you meet the deductible. This includes Part B drugs, which are typically administered by injection or infusion in a doctor’s office or outpatient setting.

To use their coverage, Medicare beneficiaries with Original Medicare must see healthcare providers that accept Medicare.

Medicare Supplement Plans

Also known as Medigap, these plans cover expenses not paid by Original Medicare A and B. They are sold by private insurance carriers. There are 10 different plans, plus two high-deductible plans, each offering a different level of coverage.

Premiums: Monthly premiums vary greatly depending on the plan you choose, the insurance carrier, and your location. Some plans are only available in certain areas. If you did not enroll in a Medigap plan when you became eligible in the six months after turning 65, you may need to pay more or you may be denied coverage altogether.

Medicare Advantage Part C Plans

Medicare Advantage (MA) plans are sold by private insurers and must cover everything Original Medicare covers. Many plans offer extra benefits, such as dental, hearing, vision, and wellness benefits. Most MA plans also include Part D drug coverage. You still need to pay your Part B premium when you have an MA plan.

Cost Sharing: MA plans have cost sharing that includes monthly premiums, deductibles, copays, and coinsurance. Cost sharing varies by insurer and the type of plan. It’s important to understand how your plan works and know its specific benefits.

Out-of-Pocket Maximum: Each year, the government puts a cap on out-of-pocket spending. In 2023, the out-of-pocket maximum was capped at $8,300. Part D cost sharing does not count toward this amount.

Part D Prescription Drug Coverage

If you have a Medicare Advantage plan with Part D, your coverage is included in your monthly premium. If you have Original Medicare, you need a standalone Part D plan. These plans are sold by private insurers.

For standalone plans:

Premiums: Vary by plan. There are late enrollment penalties for those who did not enroll during their Initial Enrollment Period.

Deductible: Varies by plan but is no more than $505 per year in 2023.

Coinsurance: Varies by plan.

Regardless of what type of Part D coverage you have, you need to be aware that every insurer has its own unique drug formulary and tiers that determine which drugs the plan covers and what you will pay. Depending on your medications, you may be at risk of entering the coverage gap – or donut hole. This is when insurers place a temporary limit on what they will pay, requiring you to pay more until you hit the Catastrophic Coverage phase. Once you hit this phase, your copays and coinsurance are significantly reduced for the rest of the year. Not everyone enters the coverage gap, but it could be costly if you do.

There Are Programs to Help with Costs

There are several programs available to help people with limited income and resources pay for their health care costs. These include Medicare Savings Programs, Extra Help, and your state’s pharmacy assistance program.

Medicare Educators can help if you are struggling with costs and need help finding affordable healthcare coverage. Contact us today.