Alert
Close

Help pack a million meals for struggling seniors on Sept. 11. Volunteer today

AARP Bulletin

Medicare Starter Kit

What Does Medicare Cost?

Learn about your potential out-of-pocket costs in Medicare

En español | Like most other kinds of insurance, Medicare has a variety of premiums, deductibles and copays that are required for coverage. (But you may be able to get help with the costs if your income is limited — see next section, "Help Paying Out-of-Pocket Expenses.")

Subscribe to the AARP Health Newsletter

Premiums: There's no premium for Part A if you paid enough in Medicare taxes while working. Part B requires a monthly premium — at the standard rate of $104.90 a month in 2015. Part D drug plans charge additional premiums, and so do most Medicare Advantage plans.

You pay higher premiums for Parts B and D if your modified adjusted gross income on your latest tax return is above $85,000 if you're single, or $170,000 if you're married and filing joint returns. (For details see "Medicare Premiums: Rules for Higher-Income Beneficiaries.")

Deductibles: You pay annual deductibles for Part B ($147 in 2015) and Part D (up to $320 in 2015) before coverage kicks in. Part A has a deductible ($1,260 in 2015) for hospital stays. Some Part D and Medicare Advantage plans reduce or waive deductibles.

Copays: In traditional Medicare (Parts A and B), you pay 20 percent of the Medicare-approved amounts for most Part B services. In Part A, after meeting the deductible you pay nothing more for up to 60 days in the hospital in any one benefit period, but additional days may require daily copays. In Part D and Medicare Advantage plans, you pay the copays required by your plan.

Part D drug coverage is uniquely designed. Depending on the cost of the drugs you use, you may move through four different phases of coverage during each calendar year:

  • Annual deductible: This is an amount you may pay out of pocket for your drugs before coverage kicks in. Many Part D plans charge no deductible or less than the maximum amount set by law — $320 in 2015.

  • Initial coverage period: You pay the copays required under your plan until the total cost of your drugs — what you've paid and what your plan has paid — reaches a certain amount ($2,960 in 2015) from the beginning of the year or, if you joined the program partway through the year, from when your coverage began.

  • Coverage gap (aka "the doughnut hole"): Once your drug costs exceed the initial coverage limit above, you're in the doughnut hole. Your plan then pays nothing, unless it provides some coverage in the gap. However, in 2015, you get discounts of 55 percent on brand-name drugs and a 28 percent discount on generic drugs in the gap, so what you pay is 45 percent (brands) or 35 percent (generics) of the cost. (These discounts were established under the 2010 Affordable Care Act ("Obamacare"), which will also gradually reduce your costs every year until by 2020 you'll pay no more than 25 percent of the price of any drug in the gap.)

  • Catastrophic coverage: If what you’ve paid out of pocket for drugs since the beginning of the calendar year (copays, deductibles, and also the value of 50 percent of your brand-name drugs that were discounted in the gap) reach a certain limit ($4,700 in 2015), coverage resumes. You then pay no more than 5 percent of the cost of any drug until the end of the year.

This cycle of phases — deductible, initial coverage, doughnut hole and catastrophic coverage — repeats itself every calendar year. So if you are in the doughnut hole at the end of December, full coverage begins again Jan. 1 or, if your plan has an annual deductible, as soon as you've met it. If your drug costs are not high, you may not reach the doughnut hole at all.

For detailed information on how the Medicare prescription drug program works, see the AARP Bulletin's consumer guide "Medicare Part D & You."

Next: How to get help paying out-of-pocket expenses. »

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

Advertisement

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Walgreens 1 discount membership aarp

Members can earn 50 points per $1 spent on select health & wellness products at Walgreens.

member benefit aarp hear usa

Members save 15% on easy listening devices and more at the HearUSA Hearing Shop.

Eye Med 4 Membership Benefit AARP Discount

Members save up to 60% on eye exams and 30% on glasses at Target Optical.

Membership Benefits Discounts Email Genius

Brain boost? Get AARP email for access to memory exercises & more that help you focus.

Rewards for Good

Your Points Balance:

Learn More

Earn points for completing free online activities designed to enrich your life.

Find more ways to earn points

Redeem your points to save on merchandise, travel, and more.

Find more ways to redeem points

Advertisement