What Does Medicare Cost?

Finding the bottom line cost for Medicare isn't simple.  The amount you'll spend can vary depending on the type of coverage you have, your income and assets, and many other factors.  But to give you a rough idea, here's an outline of Medicare's costs -- both the obvious and hidden costs.

Medicare Part A:

For most people Medicare Part A is free.  That's because they -- or their spouses -- were paying Medicare taxes while they worked. 

You might have to pay for Medicare Part A if you were self-employed or didn't work during much when you were younger.  If you or your spouse paid Medicare taxes for less than 10 years total, you will have to pay a monthly fee for Part A coverage.  In 2008, this Medicare premium is either $233 or $423 per month, depending on your work history. 

Medicare Part B:

Part B isn't free.  You have to pay a monthly Medicare premium, which is usually taken right out of your Social Security check. In 2008, this fee is $96.40 per month for most people.

If you have higher than average personal income (over $82,000) or household income ($164,000), you must pay a higher monthly Medicare premium.  The exact monthly fee will vary depending on your income, ranging from $122.20 to a maximum of $238.40. 

Then, you have to pay a yearly deductible.  In 2008, the deductible is $135. After you pay $135 yourself, your benefits kick in.

Part B is optional.  If you don't want it -- because you have other coverage through an employer, for instance -- you don't have to pay for it.  But you have to ask to opt out.  Otherwise, the Medicare premium is subtracted from your Social Security check automatically.

There's a penalty for signing up late. If you don't sign up for Part B when you first become eligible, your monthly Medicare premium may be higher than $96.40.

Medicare Advantage (Part C):

Medicare Advantage are health plans sold by insurance companies, but overseen by Medicare. They are alternatives to Original Medicare, and usually offer more services than Original Medicare, at a higher price.

To qualify for Medicare Advantage, you need to have Medicare Parts A and B.  So that means that you'll need to at least pay the Part B monthly fee.  For most people, that's $96.40 per month in 2008.

On top of that fee, you may need to pay a monthly premium for the Medicare Advantage plan itself.  The prices vary a great deal depending on the plan you've chosen.  Some may have further charges, like deductibles and premiums for additional coverage for things like prescription drugs.

Medicare Prescription Drug Plans (Part D):

You must pay a monthly premium and annual deductible to get prescription drug coverage from Medicare. Since there are many different plans, the costs can vary widely.