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How Much Should I Budget for Medical Expenses if I have Medicare?

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Summary: Medicare may cover many medical expenses, but it doesn’t cover everything. Your Medicare costs depend on the type of Medicare coverage you have. You might pay premiums, deductibles, and coinsurance/copayments for each type of Medicare coverage you have.

There are different types of Medicare coverage that may help you manage medical expenses. Here’s an overview of the types of medical expenses that different parts of Medicare may cover. We’ll also discuss other types of Medicare coverage.

Medical expenses under Medicare Part A

Medicare Part A provides coverage for inpatient hospital care. It may also cover inpatient rehabilitation services, skilled nursing facility care, hospice care, and limited home health services. Your medical expenses for Medicare Part A covered services might include:

  • Deductible: $1,408 in 2020 for each benefit period. A benefit period begins the day you are admitted to a hospital or skilled nursing facility. It ends when you haven’t received inpatient hospital care (or skilled care in an SNF) for 60 days in a row.
  • Part A coinsurance in 2020
    • Days 61-90: $352/day
    • Days 91 and beyond: $704/day per lifetime reserve day
    • After lifetime reserve days are used up: all costs
  • Skilled nursing facility coinsurance in 2020
    • Day 21-100: $176/day
    • Day 101 and beyond: all costs.
  • Hospice copayment/coinsurance
    • Up to $5 for each prescription drug
    • 5% of the Medicare-approved amount for respite care, if applicable
  • Home health services
    • 20% of the Medicare-approved amount for durable medical equipment

Medical expenses under Medicare Part B

Medicare Part B generally covers a wide range of medical expenses. There are rules and restrictions for each, Here’s just a sample of covered services:

  • Doctor visits
  • Ambulance services
  • Outpatient therapy
  • Diagnostic tests
  • Durable medical equipment
  • Preventive services, like certain vaccines

Generally, you pay 20% of the Medicare-approved amount for most Part B covered services after you have paid an annual deductible. (The standard deductible is $198 for 2020.)

Prescription drug expenses under Medicare Part D

If you enroll in a prescription drug plan under Medicare Part D, your expenses will depend on your medications and the plan you choose. Medicare prescription drug coverage is optional, but it can come in handy when you’re taking medications to treat health conditions. Private insurance companies contracted with Medicare provide these plans. Your Medicare Part D expenses might include:

  • Copayments/coinsurance: how much you pay will depend on the prescription drugs you take and whether they are included in the plan’s formulary (list of covered medications).
  • Annual deductible: this is the amount you might pay per year before the plan covers your medicines. The maximum annual deductible is $435 in 2020. Some Medicare prescription drug plans may have a lower deductible—or even $0 deductible.

Medicare coverage options that may help with your medical expenses

Here are a couple of coverage options that may be good to know about. Perhaps one of them could help with your medical expenses under Medicare.

Medicare Supplement (Medigap) insurance plans are designed to work alongside Medicare Part A and Part B. They may help pay some of your medical expenses for covered services that Medicare doesn’t pay. These out-of-pocket costs may include deductibles, coinsurance, copayments, and other costs.

For example, if you spend a lot of time as a hospital inpatient, you might want to know that Medicare Supplement insurance plans typically cover your inpatient costs under Part A for an additional 365 days after your Medicare benefits expire.

Offered by private insurers, Medicare Supplement insurance plans provide standardized plans with lettered names in most states, which makes these Medicare Supplement insurance plans easy to compare.

Medicare Advantage (Medicare Part C) provides an alternative way to receive your Medicare Part A and Part B benefits. They’re offered by private insurance companies contracted with Medicare. Medicare Advantage plans may offer additional benefits that might reduce your medical expenses.

Many Medicare Advantage plans provide coverage for routine dental care, routine vision care and eyewear, hearing aids, and/or other benefits. Often Medicare Advantage plans include prescription drug coverage. Medicare Advantage plans may offer other supplemental benefits that Medicare does not cover, such as standard gym memberships, transportation to doctor’s offices, over-the-counter drugs and supplies, safety devices for the home, and acupuncture or other alternative therapies.

Each Medicare Advantage plan must limit the annual out-of-pocket medical expenses you pay for covered services. The limit might change from year to year. After you reach that limit, the plan may pay 100% for covered medical services for the rest of the year.

It’s common for Medicare Advantage plans to have networks of participating providers you must use to minimize your medical expenses for covered services. Deductibles, copayments, and coinsurance vary among Medicare Advantage plans, as do any extra benefits they may offer.

Premiums—the cost of coverage that helps pay your medical expenses

Most types of health-care coverage come with monthly premiums, and this is often true with Medicare.

  • Most people receive Medicare Part A premium-free. If you haven’t worked and paid Medicare taxes for at least 10 years, either through your own or your spouse’s work, you may pay a Part A premium. The amount could be as much as $458 per month in 2020.
  • Nearly everyone pays a Medicare Part B monthly premium. The standard Part B premium in 2020 is $144.60. You might pay more if your income is higher than a certain amount.
  • If you enroll in a Medicare Advantage plan, you’ll need to pay the plan’s monthly premium if it charges one. Some plans charge premiums as low as $0. However, you continue to pay your Part B premium.
  • Stand-alone Medicare Part D prescription drug plans might charge a premium, which may differ between plans.
  • Medicare Supplement insurance plan premiums can vary among insurance companies, even if the plan benefits are identical.

When comparing premium costs, you might want to resist the temptation to select the least expensive plan right away. It may help you to choose a plan with a higher premium if it provides better coverage for medical expenses you’re likely to have.

Medicare premiums and cost-sharing requirements can change from year to year. It’s a good idea to review your Medicare coverage each year so you to decide if your current plan meets your health needs and if the projected medical expenses are still within your budget.

Ways you might reduce your medical expenses

If you stay with Medicare Part A and Part B, make sure he or your doctor accepts Medicare assignment. That’s the Medicare-approved amount for covered services.

If you have a Medicare Advantage plan or a stand-alone Medicare Part D prescription drug plan, here’s a way you might keep your medical expenses as low as possible. Use the plan’s in-network providers and pharmacies. Sometimes you can save money on prescriptions if the plan has a mail-order discount.

You may be eligible for financial help for:

Are you interested in finding out more about Medicare plans that might help you manage your medical expenses? You can enter your zip code and click the button on this page to start comparing Medicare Supplement insurance plans, stand-alone Medicare Part D prescription drug plans, and Medicare Advantage plans.

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