Understanding Medicare premiums
Medicare isn’t a single insurance program. It’s more like a bundle of different programs that each cover a separate aspect of your healthcare. Thus, the Medicare premiums you pay will vary depending on which parts of Medicare you choose to use.
Medicare Part A
You get premium-free Medicare Part A if you worked 40 quarters of qualified employment. That means you paid FICA taxes on your wages during that time (approximately 10 years). Medicare Part A provides coverage for:
Inpatient hospital services
Skilled nursing facilities (such as nursing homes)
Some aspects of home healthcare
If you don’t have 40 quarters in your work history, you can still get Medicare Part A, but you’ll need to pay a monthly premium.
In 2021, the Medicare Part A premium is $259 for people with at least 30 quarters of Medicare-covered employment. If you have fewer than 30 quarters, you’ll pay $471 a month.
Medicare Part B
The second half of Original Medicare, Medicare Part B covers:
You’ll need to pay a monthly premium for said coverage—the standard Medicare Part B premium for 2021 is $148.50. Some people pay a higher monthly premium for Part B if their income is above a certain amount on the prior year’s tax return.
If you receive Social Security benefits, you’ll pay premiums from your Social Security check. In other words, your premium will be deducted before you’re paid.
Medicare Part C
Most Medicare enrollees add extra coverage to Medicare Parts A and B.Medicare Part C, also known as Medicare Advantage, is one extra coverage option. Part C is a health insurance plan from a private insurer. It must cover everything covered under Original Medicare. A Part C plan can also offer additional coverage.
The exact coverage will vary from one provider and plan to another. Many Medicare Advantage plans also cover prescriptions. That means you won’t need a Medicare Part D plan (more on those below).
If you get a Medicare Part C policy, you still need to pay your Part B premium. That’s in addition to the premium for your Medicare Advantage policy. You can have your Medicare Part C premium deducted from your Social Security check.
The alternative to a Medicare Advantage plan is Medicare Supplement Insurance, a.k.a. Medigap. Like Medicare Part C, Medigap policies come from private insurers. However, all Medigap policies are designed to fit a very specific template.
For example, any one Medigap Plan L policy offers virtually identical coverage to any other Medigap Plan L. No matter which insurer offers it.
And yet, different insurers will charge different monthly premiums for identical Medigap policies! That’s why it’s so important to compare Medigap plans to find the lowest monthly premium.
Medicare Part D
Medicare Part D policies cover prescription drug costs. Part D policies are provided by private insurance companies, not the U.S. government. If you get a Medicare Part C policy that includes qualified drug coverage, you won’t need a Part D policy at all.
If you do choose to get a Part D policy, you’ll pay the insurer a monthly premium. As with Medicare Part C, you may have the Part D premiums paid out of your Social Security benefits.