“Most persons aged 65 or older are automatically entitled to premium-free Part A because they or their spouses paid Medicare payroll taxes for at least 10 years. Persons under the age of 65 who receive cash disability benefits from Social Security for at least 24 months and individuals of any age with end-stage renal disease (ESRD) are also entitled to Medicare Part A. Eligible individuals who are not entitled to premium-free Part A may obtain coverage by paying a monthly premium.

“All persons entitled to Part A may enroll in Part B by paying a monthly premium ($135.50 in 2019). Some Part B enrollees may pay less due to a “hold-harmless” provision in the Social Security Act. Beneficiaries with high incomes pay higher premiums, whereas those with low incomes may qualify for premium assistance through their state Medicaid programs.

“When beneficiaries first become eligible for Medicare, they may enroll in either original Medicare or a private MA [Medicare Advantage] plan. Beneficiaries may also choose to enroll in a Part D plan at this time. There is an annual open enrollment period each fall during which Medicare beneficiaries may choose a different MA and/or Part D plan or may choose to leave or join the MA and/or Part D programs.

“Beneficiaries generally pay monthly premiums for Part D, and there may be an additional premium for those who chose to enroll in MA (Part C). Premiums for Parts C and D vary by plan. Similar to Part B, some high-income enrollees pay higher premiums for Part D, and the Part D program provides assistance to low-income enrollees. Individuals who do not enroll in Part B or Part D when they first become eligible for Medicare may pay a permanent penalty of increased monthly premiums if they choose to enroll at a later date.

“Beneficiary Costs

“In addition to paying premiums for Medicare Parts B, C, and/or D, beneficiaries may pay other out-of-pocket costs, such as deductibles and coinsurance, for services provided under all parts of the Medicare program. For example, there is a $1,364 per episode deductible for inpatient services under Part A, and for Part B, there is an annual deductible ($185 in 2019) and a 20% coinsurance for most services. Under Part D, although costs can vary by plan, enrollees generally pay a deductible and cost sharing for prescriptions and 5% of costs after reaching a catastrophic threshold.

“There is generally no limit on beneficiary out-of-pocket spending for Medicare services. (MA does have an annual limit of $6,700 for in-network services.) Medicare also does not cover some items and services, such as long-term care, hearing aids, eyeglasses, and most dental care. Most beneficiaries therefore have some form of supplemental coverage through MA, private supplemental (Medigap) plans, employer-sponsored retiree plans, or Medicaid. It is estimated that, on average, health expenses (including premiums) account for about 14% of Medicare household spending.”

Source: U.S. Congressional Research Service. In Focus: Medicare Overview (IF10885; August 8, 2019). https://crsreports.congress.gov/product/pdf/IF/IF10885