Medicare cost basics
Medicare isn’t free. The amount you pay depends on the coverage you choose, the health care services and benefits you use during the year, and if your insurance plan has rules about in and out-of-network costs.
Costs you may pay with Medicare
Medicare Part B and most Medicare Part C, Part D and Medigap plans charge monthly premiums. In some cases, you may also have to pay a premium for Part A. A premium is a fixed amount you pay for coverage to either Medicare or a private insurance company, or both.
You’ll also pay a share of the cost for your care, while your Medicare or Medigap coverage will pay the rest. There are three methods of cost sharing:
Deductible
A set amount you pay out of pocket for covered services before Medicare or your plan begins to pay.
Copay
A fixed amount you pay at the time you receive a covered service or benefit. For example, you might pay $20 when you visit the doctor or $12 when you fill a prescription.
Coinsurance
Your share of the total cost of a covered service or prescription, calculated as a percentage of the cost. For example, if your coinsurance is 25% and the total cost for the service or prescription is $100, you would pay $25. Your insurance would pay the remaining $75.
How much does Medicare Part A and Part B (Original Medicare) cost?
With Medicare Part A, most people don’t pay a premium, though you may if you or your spouse worked and paid Medicare taxes for less than 10 years. Medicare Part B has a monthly premium you pay directly to Medicare, and the amount you pay can vary based on your income level. Other costs you may pay with Medicare Part A and Part B include deductibles, coinsurance and copays.
Learn more about the specific costs for Medicare Part A and Part B
Drug payment stages:
Annual Deductible
• For Part D plans with a deductible, you pay the full cost for drugs until you reach the deductible amount. Then you move to the Initial Coverage stage.
• For Part D plans without a deductible, you start at the Initial Coverage stage with the first prescription you fill.
Initial Coverage
In this stage, the plan pays its share of the cost and you pay your copay or coinsurance. In 2026, you stay in the Initial Coverage stage until your total drug costs reach $2,100.
Catastrophic Coverage
Once you (or others on your behalf) reach $2,100 in out-of-pocket drug costs, you’ll enter the Catastrophic Coverage stage and pay $0 for Medicare-covered Part D drugs for the rest of the plan year.
What if I need help paying Medicare costs?
If you have limited income and assets, you may qualify for help with your Medicare costs, including those that you pay for care you receive. There are several programs that help pay Medicare costs. Many people who could qualify never sign up, so be sure to apply if you think you might qualify. Don't hesitate to apply. Income and resource limits vary by program.
Extra Help program from Medicare
Helps pay some or all Medicare Part D premiums, deductibles, copays and coinsurance for those who qualify.
Medicaid
Medicaid provides health care coverage for individuals and families with limited incomes. It may also include some services not covered by Medicare, like prescription drugs, eye care or long-term care — at no or low cost. If you have both Medicaid and Medicare, you may be eligible for a Dual Special Needs plan (D-SNP).
Medicare savings programs
Medicare savings programs help pay Original Medicare (Part A and Part B) premiums, deductibles and coinsurance. You automatically qualify for Extra Help (see above) if you qualify for a Medicare savings program.
Programs of All-Inclusive Care for the Elderly (PACE)
Combine medical, social and long-term care services for people over the age of 55 who qualify. This program is not available in all states.
Other programs may be available in your state, such as State Pharmaceutical Assistance Programs.
Each program will have its own rules for qualifying so be sure to read about each carefully.
Medicare cost-sharing considerations
It’s easy to focus on just premiums when looking at how much a plan can cost. Premiums are regular monthly expenses that must fit into a budget, and most of us are aware of our monthly expenses. But it’s a better idea to look at all of your Medicare costs together — including your premiums and all out-of-pocket costs.
Sometimes a plan may look like a good choice with a low premium but may actually cost you more with high out-of-pocket costs. For example, a plan with a low monthly premium might have a high deductible, or you might have high copayments for doctor visits or prescriptions. The reverse could be true too — a high premium but low out-of-pocket costs.
Think about how you will use your benefits and consider all the costs of Medicare. Also, you may be able to reduce your health care costs if you take steps to:
- Understand Medicare cost sharing
- Use health care services wisely
- Adopt healthy lifestyle behaviors
Medicare late enrollment penalties
Missing your Initial Enrollment Period can be costly. Medicare Part A, Part B and Part D may charge premium penalties if you miss your initial enrollment dates, unless you qualify for a Medicare Special Enrollment Period.
Plan type
Penalties
Medicare Part A
You won’t pay a Part A premium if you or your spouse worked and paid taxes for at least 10 years. If you have to pay a premium, the penalty for late enrollment is 10%.
The Part A premium penalty is charged for twice the number of years you delay enrollment. If you wait 2 years, for example, you would pay the additional 10% for 4 years (2 x 2 years). The penalty applies no matter how long you delay Part A enrollment.
Medicare Part B
The penalty for late enrollment in Part B is an additional 10% for each 12-month period that you delay it.
In most cases, you have to pay the penalty every month for as long as you have Part B.
If you’re under 65 and disabled, any Part B penalty ends once you turn 65 because you’ll have another Initial Enrollment Period based on your age.
Medicare Part D
The penalty for late enrollment in a Part D plan is 1% of the average Part D premium for each month you delay enrollment. You pay the penalty for as long as you have Part D coverage.
Read next: Medicare Advantage plans
Medicare Advantage Plans combine Part A (hospital insurance) and Part B (medical insurance) in one plan and usually include prescription drug coverage. These plans offer additional benefits beyond Original Medicare.
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AARP® Medicare Supplement Insurance Plans
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AARP endorses the AARP Medicare Supplement Plans insured by UnitedHealthcare Insurance Company, 185 Asylum Street, Hartford, CT 06103 (available in all states/territories except ND, NY) or UnitedHealthcare Insurance Company of America, 1600 McConnor Parkway, Floor 2, Schaumburg, IL 60173 (available in AR, AZ, IL, IN, KS, MS, NC, ND, NJ, OH, OK, PA, SC, TN) or UnitedHealthcare Insurance Company of New York 2950 Expressway Drive South, Suite 240, Islandia, NY 11749 (for NY residents). Policy Form No. GRP 79171 GPS-1 (G-36000-4).
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Medicare Advantage plans and Medicare prescription drug plans
Plans are insured through UnitedHealthcare Insurance Company or one of its affiliated companies, a Medicare Advantage organization with a Medicare contract and a Medicare-approved Part D sponsor. Enrollment in these plans depends on the plan's contract renewal with Medicare. You do not need to be an AARP member to enroll in a Medicare Advantage plan or Medicare Prescription Drug plan.
This information is not a complete description of benefits. Contact the plan for more information. Limitations, co-payments, and restrictions may apply. Benefits, premium and/or co-payments/co-insurance may change on January 1 of each year.
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