What Is Medicare and How Does It Work?

How much does Medicare cost?

Medicare may cover the bulk of your health care costs, but it’s not free. You’ll have to pay premiums, deductibles, and copayments or coinsurance for covered care.

Premiums

• Most people don’t pay premiums for Part A because they or their spouse worked and paid Medicare payroll taxes for at least 10 years.
• Part B premiums cost $174.70 a month per person in 2024. High earners pay more.

Cost sharing

• Before coverage kicks in, you’ll have to pay a set amount of money yourself, called a deductible, for both Parts A and B. In 2024, Part A is $1,632 per benefit period, different from the annual deductions of workplace health insurance. Part B is $240 a year.
• If you’re an inpatient in the hospital for more than 60 days per benefit period or at a skilled nursing center more than 20 days, you’ll pay daily coinsurance, a portion of the cost of services.
• Excluding free preventive care, Part B has a 20 percent coinsurance for most doctor services and outpatient care.

Costs for other coverage

• People with original Medicare often opt for a Medicare supplement policy, also known as Medigap, to help pay Medicare deductibles and copayments. Private insurers sell these policies.
• Unless you have other drug coverage, you’ll want to buy a Part D prescription plan, which has its own premiums and cost sharing. Otherwise, you may face a lifetime late enrollment penalty.
• If you choose Medicare Advantage, you’ll still pay Part B premiums and Part A if you aren’t eligible for premium-free coverage. Sometimes MA plans have additional premiums. They also have different deductibles and copayments than original Medicare.

The good news: Medicare has financial assistance programs to help people with limited incomes.

How do I apply for Medicare?

If you are receiving Social Security or Railroad Retirement Board benefits at least four months before your 65th birthday, you’ll be enrolled automatically in Medicare Parts A and B. The rules are different for residents of Puerto Rico.

You can expect your Medicare card to arrive by mail three months before your coverage starts, which is the first of the month you turn 65 or the beginning of the previous month if your birthday falls on the first.

Otherwise, you’ll need to take steps to sign up. The timetable is specific and important.

• If you or your spouse isn’t working at 65, sign up for Medicare during your initial enrollment period, which begins three months before the month you turn 65 and lasts three months after your birthday month, or shifted one month earlier if your birthday is on the first. If you miss that deadline, you may have to pay a late enrollment penalty for as long as you have Medicare.
• If you or your spouse still work at 65 and have employer health insurance, you may be able to wait to enroll. The rules typically depend on the business’s size. You’ll have a special enrollment period to sign up for Medicare while you have employer coverage and up to eight months after.

What Medicare decisions do I have to make?

After you sign up for Medicare Part A and Part B, next you’ll decide if you want coverage from original Medicare or Medicare Advantage.

• Original Medicare lets you use any provider who participates. Enrollees often buy a Medigap policy and Part D prescription coverage to supplement it. Our guide helps you use the Medicare Plan Finder to compare Medigap and Part D options.
• Medicare Advantage plans have provider networks and often charge more or don’t pay for outside providers. They also have prior authorization and referral requirements. Our guide on using the Medicare Plan Finder helps compare options in your area.
• Each year, you have an opportunity to switch Part D and Medicare Advantage plans during open enrollment , Oct. 15 to Dec. 7, for coverage starting Jan. 1. You also can reassess whether you want original Medicare or Medicare Advantage.

Just like your health, costs and coverage change, so look at all your options annually. This is especially true in 2025, when major changes to Medicare laws take effect.

This article, originally published July 1, 2020, was updated with new rules and out-of-pocket costs.