Medicare Part A provides for your inpatient hospital coverage. How much does it cost? Well, that depends on your work history. (This post was updated in 2018.)
People nearing Medicare age wonder how much all the different parts of Medicare are going to cost. The good news is that, for Part A at least, most people will not have to pay a monthly premium. During their working years, most people pay FICA taxes, which are automatically deducted from their paychecks. This money goes into the Medicare general fund, in a sense, to pre-pay for your future Medicare hospital benefits.
FICA stands for Federal Income Contributions Act. This law requires workers and their employers to contribute to both the Medicare and Social Security systems. Your employer deducts these taxes and forwards them to the federal government quarterly.
The Medicare portion of this deduction is 1.45% of your monthly income. It is matched by your employer for a total contribution of 2.9%.
People who are self-employed have to pay the full 2.9% themselves. Individuals with incomes higher than $200,000 will also pay additional FICA taxes toward their future Medicare hospital insurance.
Cost of Medicare Part A
If neither you nor your spouse has paid Medicare taxes for the full 10 years, then you may be able to buy Medicare Part A. The amount you will have to pay depends on how many years you have contributed to Medicare.
In 2018 people who have to purchase Part A will pay a monthly premium of over $400/month. Generally, if you choose to buy Part A, you will have to sign up for Part B as well. However, in some cases people with group employer insurance choose to delay Part B until later when they retire.
Part B has a monthly premium that is based on your household, modified, adjusted gross income. Around 95% of all Part B beneficiaries pay the base Part B amount, which is $134/month in 2018.
Medicare Part A Cost-Sharing
You will still have cost-sharing when you use your Medicare Part A benefits. Cost-sharing is a term which describes all of the items that the patient will pay for when accessing medical services. For example, you will have a deductible that you satisfy up front. In 2018, that deductible is $1340 per benefit period. A benefit period begins when you enter the inpatient hospital and ends when you have been out of the hospital for 60 days or more.
It will only take you a few hours in an inpatient hospital to rack up at least that much in billing. The hospital will bill Medicare. Medicare will pay its share and then tell the hospital to bill you for the deductible.
Most Medicare beneficiaries purchase supplemental insurance to help them cover these gaps in Medicare. For example, you could enroll in a Medicare supplement plan that helps to pay for your Part A deductible and hospital copays.
Part A Late Enrollment Penalty
If you’re not eligible for premium-free Medicare Part A, you must sign up at your first opportunity or your premium could go up by 10%. This increased premium must be paid for twice the number of years you could have signed up for Part A but didn’t.
People who are still working at age 65, though, may be able to avoid this penalty. If they have coverage through their employer and sign up during a special enrollment period after losing their coverage, they will have no penalty.
Are you trying to determine your costs for Medicare? Give us a call today and our friendly staff can walk you through all the costs of Medicare.