Medicare Part A is responsible for covering inpatient hospital expenses. The cost of this coverage is linked to your employment history. As people approach the age of eligibility for Medicare, one common question is the cost associated with the various components of Medicare.
Fortunately, for many, Medicare Part A doesn't require a monthly premium. This is because, during our employment years, most people contribute to FICA taxes, which are automatically deducted from our salaries. These contributions essentially serve as an advance payment for future Medicare hospital coverage.
FICA stands for Federal Income Contributions Act, a law mandating that both employees and their employers make contributions to the Medicare and Social Security funds. Employers are responsible for deducting these taxes and sending them to the government every quarter.
For Medicare, the deduction is 1.45% of your monthly earnings, with your employer providing an equal match, making the total contribution 2.9%.
Self-employed individuals bear the responsibility of paying the entire 2.9% themselves. Additionally, those with annual incomes exceeding $200,000 are subject to additional FICA taxes to support their future Medicare hospital insurance.
The amount you pay for Medicare Part A is largely determined by your employment history. If either you or your spouse has contributed to the Medicare system for a total of 40 quarters (equivalent to 10 years), you won't need to pay for Medicare Part A.
However, if neither you nor your spouse has paid Medicare taxes for the complete duration of ten years, you have the option to purchase Medicare Part A. The cost for purchasing Part A varies based on the number of years you've contributed to Medicare.
As of 2024, individuals who need to buy Part A are charged a monthly premium of $505. Typically, opting to purchase Part A means you must also enroll in Part B. But, there are instances where individuals with employer group insurance may postpone enrolling in Part B until they retire.
Part B's monthly premium is calculated based on your household's modified adjusted gross income (MAGI). In 2024, about 95% of Part B enrollees pay the standard rate, which is $174.70 per month.
Even with Medicare Part A coverage, there are still shared costs, like copays and coinsurance, when you receive medical services. Cost-sharing encompasses the expenses that you, as the patient, are responsible for paying. In 2024, one of those expenses is the deductible, which is $1,632 per benefit period. A benefit period starts when you are admitted to an inpatient hospital and concludes after you haven't been hospitalized for 60 days or more.
Incurring charges that meet or exceed this deductible amount can happen swiftly during a hospital stay. The hospital will initially bill Medicare. After Medicare pays its portion, the hospital will then bill you for the deductible amount.
Many individuals with Medicare obtain additional insurance to offset these coverage gaps. For instance, enrolling in a Medicare Supplement Plan can assist in covering costs like the Part A deductible and hospital copays.
If you don't qualify for Medicare Part A without a premium, it's important to enroll as soon as you're eligible. Failing to do so can result in a 10% increase in your premium. This increased premium is payable for twice the duration you delayed your Part A enrollment.
However, people who are employed at 65 years old might evade this penalty. Those with employer-provided coverage who enroll in Medicare during a special enrollment period after their coverage ends won't face any penalty.
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