Medicare costs can add up, including a monthly premium, deductibles and copayments. You can find help with these costs.

Traditional Medicare is financed mainly through payroll taxes and other receipts. Beneficiaries without supplemental coverage spend more out of pocket on average than those with supplemental coverage. Spending growth reflects aging of the population and increased use of health care services.

Part A

Traditional Medicare consists of Part A (hospital insurance) and Part B (medical insurance). It is free to people who worked and paid Social Security taxes for 40 calendar quarters (10 years) or more. Some individuals also pay a monthly premium for Part A coverage. They may have to pay a deductible, copayment or coinsurance for some services. Those who want supplemental coverage can purchase a Medigap plan.

Part B is a monthly premium for medical insurance covering doctor and outpatient hospital services, home health care and preventive services. The average Part B premium is \$34 a month in 2022. Most Medicare Advantage plans have limits on enrollees’ out-of-pocket spending, which are \$4,835 for in-network services and \$8,659 for in- and out-of-network services combined in 2022. Some Medicare Advantage plans offer supplemental benefits such as eyeglasses and dental care. Individuals who miss their IEP can still sign up during a Special Enrollment Period. They must prove that conditions beyond their control caused them to miss the IEP.

Part B

Medicare Part B pays for doctors' visits, laboratory tests at doctors' offices, and other outpatient care. It also covers some medical equipment, and a portion of your annual physical costs.

Traditional Medicare has no out-of-pocket maximum, so most beneficiaries purchase a supplemental policy, known as Medigap, to help pay for copays and premiums. The average monthly premium in 2022 for a stand-alone Medigap plan was \$138.

Individuals who miss a Part B SEP may be able to enroll using an SEP for individuals who have lost their group coverage (SEP for people who lose group coverage). This SEP can only be used when an individual receives notice that their Medicaid coverage will end and they agree to pay the Medicare Part B monthly premium. Individuals may choose a retroactive start date up to six months from the day they sign up for Medicare, but benefits do not begin until the month after enrollment. The cost-sharing rules for this SEP are the same as for other SEPs.

Part D

Unlike Parts A and B, which are administered by Medicare, Part D is "privatized." This means that private insurance companies sell plans, which are regulated and subsidized by the government. Beneficiaries choose which plan to enroll in.

Part D plans have a formulary (list of covered drugs) and tools to manage costs and utilization, including drug tiers that set lower patient cost-sharing amounts for preferred drugs. Most plans also offer a monthly premium.

Medicare pays for Part D drug costs that exceed a beneficiary's catastrophic limit (up to \$4,950 in 2023). This is called reinsurance.

Medicare beneficiaries can change their Part D plan during the annual open enrollment period or special enrollment periods (SEPs) that are available for certain events, like moving to a new area or losing eligibility for Extra Help. Beneficiaries may also request a reconsideration of a Part D late enrollment penalty. For people with low incomes and modest assets, the Part D Low-Income Subsidy program provides assistance with plan premiums and cost sharing.

Medicare Advantage

In 2023, most Medicare Advantage enrollees are in HMOs (58%), local PPOs (24%), or regional PPOs (2%). Most MA-PD plans provide extra benefits, like vision and hearing exams, fitness programs, meals, transportation and in-home support services. These are largely paid on a global risk basis and give providers incentives to keep patients healthy and out of the hospital.

Medicare Advantage plans also pay rebates, on average, \$2,350 per beneficiary above their estimated costs of providing Medicare-covered services to an enrollee. These rebates have increased substantially in the last several years, doubling since 2018. These rebates are used by plan providers to lower beneficiary cost sharing and/or reduce premiums or offer additional benefits not available under traditional Medicare. Annual premiums vary from plan to plan and from county to county, and many plans have provider networks that restrict care to in-network providers. The deductible, Initial Coverage Limit and TrOOP and Catastrophic Coverage limits are set by Medicare each year, but plan costs can change from year to year.