Understanding Your Medicare Costs

understanding medicare costs

Did you know that Original Medicare was only designed to pay 80% of your medical costs? While many seniors have been paying toward Medicare their entire life, they’re surprised to find that their out-of-pocket Medicare costs are more than expected. Make sure you understand what health care expenses you may be responsible for paying when you retire. Medicare is the health insurance provided through the federal government for adults ages 65 and older. It is made up of four parts, with each part covering costs for certain types of health care services.

The four parts of Medicare are Part A, Part B, Part C and Part D.

Original Medicare, which is provided by the federal government, is made up of the first two parts – A and B:

  • Medicare Part A is your hospital insurance and includes coverage for inpatient care, inpatient nursing care and the services and supplies during your time at a medical facility.
  • Medicare Part B is your medical insurance, which includes doctor services, outpatient care and preventive services.

What are Your Medicare Costs?

You’ve worked hard for years, and part of each paycheck has been put toward your Medicare coverage. This goes toward your Original Medicare benefits and is for anyone over 65 and for individuals with certain disabilities or end stage renal disease. However, the amount you have paid over the years does not cover all of your Medicare costs. You will still have expenses, including deductibles, coinsurance and copayments.

For a more detailed look at Original Medicare, this breakdown of Parts A and B will help you understand the benefits and costs of each part.

Medicare Part A Costs

For 2022, Part A Medicare Costs and Benefits include:

  • Your Premium
    • Most Americans who have paid into Medicare during their working career will not pay a premium for Part A coverage.
    • If you do pay a premium, it could be up to $499 per month.
  • Your Deductible
    • Your Part A deductible is $1,556 for each benefit period.
  • Hospital Inpatient Care
    • Medicare will cover 100% of the first 60 days of your hospital stay.
    • After the first 60 days, your costs will increase based on the length of your hospital stay.
      • 61-90 days: you will cover costs up to $389/day and Medicare will pay the rest.
      • 91 days and beyond: you will cover costs up to $778 per each “lifetime reserve day” (up to 60 days over your lifetime) and Medicare will pay the rest.
      • Beyond lifetime reserve days: you will cover all costs and Medicare will pay nothing.
  • Skilled Nursing Care
    • Medicare will cover your inpatient costs for the first 20 days.
    • After the first 20 days, your costs will increase based upon the number of days.
      • 21-100 days: you will cover costs up to $194.50/day and Medicare will pay the rest.
      • 101+ days: you will cover all expenses and Medicare will pay nothing.

Medicare Part B Costs

For 2022, Part B Medicare Costs and Benefits include:

  • Your Premium
    • You will pay a monthly premium for Part B. The standard amount is $170.10, but this can increase depending on your income. There are also instances where you may pay less if you pay your premium from your Social Security benefit.
    • To learn what your premium amount will be, visit medicare.gov.
  • Your Deductible
    • Your deductible is $233.
  • Coinsurance
    • Medicare will pay 80% of Medicare approved expenses, leaving you to pay the remaining 20%.
  • Excess Benefits
    • Medicare will not cover the costs of any excess benefits, i.e. services that exceed Medicare-eligible expenses.

To find out if a test, item or service is covered under Medicare, visit medicare.gov.

Other Costs

Medicare will not cover costs for emergency care received outside of the United States. If you’re living out your dream retirement vacation in Europe and have a medical emergency, you will need additional insurance coverage or pay the entire amount out of your pocket.

What are Your Options?

As you can see, there is potential for out of pocket Medicare costs. Remember, Original Medicare was only designed to cover 80% of your medical costs. The remaining 20% is up to you. So, what can you do to prevent yourself from receiving a large Medicare bill?

  • One option is to add additional coverage with a Medicare Supplement (or Medigap) plan.
  • You can also choose a Part D plan, which is a prescription drug plan that can be added as an addition to your Original Medicare coverage.
  • Or, you can choose a Medicare Advantage Plan, also known as Part C.

A Medicare Supplement plan from Mutual of Omaha (or Medigap), is one option to cover certain Medicare-approved costs that Original Medicare doesn’t cover. To be eligible for a Medicare Supplement plan, you must be enrolled in Original Medicare. This type of plan covers Medicare-approved costs that Original Medicare does not, such as copayments, deductibles and the 20 percent coinsurance you are responsible for under Original Medicare.

Medicare Advantage (Part C) plans cover all the services Original Medicare covers, and may also offer additional benefits for things like vision, dental or wellness programs. Most Part C plans include Part D prescription drug coverage. These Part C plans do not eliminate the out-of-pocket expenses of Medicare. However, they do have an out-of-pocket maximum you pay per year. That amount will differ by plan.

Learn more about the parts of Medicare and compare plans to find the option that is right for you.


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