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Understanding Medicare Costs

  • Writer: Cassidy Clark
    Cassidy Clark
  • Jan 21
  • 2 min read

Medicare provides excellent coverage, but it’s important to understand the costs associated with your benefits, so you can budget confidently for the year ahead. Contact your SGIA Benefit Consultant to find the best plans that meet your needs. 


Premiums 

A premium is the monthly amount you pay for insurance coverage. 

  • Part A is usually premium-free for most beneficiaries 

  • Part B has a monthly premium set by Medicare 

  • Part D and Medicare Advantage plans may also have monthly premiums; this is dependent on the insurer and plan selected 


Deductibles 

The amount you must pay out-of-pocket for covered healthcare services before Medicare or your plan begins to pay. Once you meet the deductible, Medicare will begin sharing the cost of covered services (through coinsurance or copayments). 

  • Part A has a deductible per benefit period 

  • Part B has an annual deductible 


Copayments and Coinsurance 

Copay = fixed dollar amount you pay for a specific service or prescription. 

  • This often applies after you’ve met any deductible required by your plan. 

Coinsurance = percentage of the cost of a covered service you’re responsible for paying after the deductible is met. 

  • This typically applies to services such as specialist visits, certain treatments, or hospital care, depending on the plan. 

Examples: 

  • A daily cost for hospital stays after a certain number of days 

  • A 20% coinsurance for Part B services (after the deductible) 

 

Some people use Medicare Supplement (Medigap) coverage to help manage deductibles, coinsurance, and other out-of-pocket costs not covered by Original Medicare. 


Out-of-Pocket Protections 

Out-of-pocket cost = amount you pay out of your own pocket for medical care or prescriptions. 

  • Includes deductibles, copays, and coinsurance. 

Out-of-pocket maximum = limit on the total amount you must pay in a year for covered services under certain plans.  

 

Once you reach this limit (through deductible, copays, coinsurance), the plan covers the rest of covered services for that year. Note that Original Medicare (Parts A & B) does not have a federal out-of-pocket maximum. 

  • Part D has an annual limit on prescription drug spending beginning in 2025/2026 

  • Medicare Advantage plans include an annual out-of-pocket maximum 

 

Understanding these costs can help you choose whether Original Medicare alone is enough or whether you may benefit from a Medigap plan or Medicare Advantage plan.  

 

Our SGIA Benefit Consultants are here to help you every step of the way. Subscribe to our weekly Blog for more information!



 
 
 

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