The cost of Medicare in the 2021 enrollment year depends on whether or not a person paid taxes throughout their employment. For many people, Medicare Part A is free.
However, those who had Medicare in 2020 will see a price increase in 2021 for deductibles and Part B premiums.
This article will break down what to expect from Medicare premiums and out-of-pocket costs in 2021.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
The premium is the amount a person pays for Medicare each month. Medicare Advantage plans and Medigap policies also charge a premium.
The sections below will cover the Medicare premium costs for 2021.
Some people do not pay a monthly premium for Medicare Part A. Medicare collects taxes from a person’s pay throughout their working life.
The eventual fee a person will pay for Medicare Part A depends on how many quarters they worked.
Those who worked more than 40 quarters in their lifetime while paying Medicare taxes receive a $0 premium. Most people qualify for premium-free Medicare Part A.
If a person worked 30–39 quarters during their lifetime, their monthly premium for 2021 is $259. Those who did not work for at least 30 quarters pay $471 per month for Part A in 2021.
Medicare Part B also requires a monthly premium. Medicare Part B bases the monthly cost on income. Therefore, people from different income brackets pay varying premiums.
In 2021, the standard Part B premium is $148.50 per month if a person’s income is $88,000 or less. This is an increase from $144.60 in 2020.
The Medicare Part B premium costs more for those who have a higher income. Medicare assigns premium increases for Part B in the following ways:
|Individual yearly income||Monthly premium fee|
|$500,001 or above||$504.90|
Medicare Part D covers prescription drugs. Private companies administer Part D plans, so the cost of Medicare Part D varies depending on the plan a person chooses.
Monthly premiums also vary based on income. People with higher incomes pay more for Part D premiums. To determine the monthly cost, Medicare uses adjusted gross income from tax returns from 2 years before a person signs up.
People who have an income above the limit Medicare sets pay an adjusted monthly fee in addition to their plan premium.
Medicare Part C, or Medicare Advantage, is a privately administered plan that bundles together parts A, B, and sometimes D. Learn more about it here.
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
An insured person needs to pay out-of-pocket expenses for healthcare before Medicare provides any benefits. These include deductibles, coinsurances, and copayments.
In 2021, the following out-of-pocket expenses apply:
- A $1,484 inpatient hospital deductible for Part A. This covers the first 60 days of an inpatient hospital stay. After that, out-of-pocket expenses include $371 per day from days 61–90. After 90 days, the copay increases to $742 per day during 2021.
- A $203 deductible for Medicare Part B. Before Medicare Part B covers outpatient services, an individual needs to pay the 2021 deductible of $203.
- A 20% coinsurance on outpatient services. People will need to pay 20% toward the cost of many healthcare services under Part B, such as doctor’s fees and any costs for physical therapy.
- A copayment for prescribed medications on Part D. People with a Medicare Part D plan will need to pay a copayment or coinsurance for each purchase of prescribed medications. This may vary depending on individual plans.
After spending a certain amount on a Part D plan, people enter a coverage gap known as the “donut hole.” Learn more here.
The premiums and out-of-pocket expenses for both Medicare Part A and Part B increased from 2020 to 2021. The table below outlines the changes.
|Service||2021 cost||2020 cost||Increase|
|Part A deductible||$1,484||$1,408||$76|
|Hospital coinsurance costs for days 61–90||$371 per day||$352 per day||$19|
|Hospital coinsurance costs for day 91 and after||$742 per day||$704 per day||$38.00|
|Medicare Part B standard monthly premium||$148.50||$144.60||$3.90|
|Part B deductible||$203||$198||$5.00|
Medicare costs usually increase each year by varying amounts. The reasons for this are unclear, but some explanations may account for these changes.
For example, continually increasing healthcare costs may explain some elements of the increase in Medicare pricing.
Hospitals and doctors increase their fees to cover advancing costs in medical equipment. This results in higher healthcare insurance premiums, including those for Medicare services.
Another possibility for the increase is that people are living longer lives. An increase in life expectancy means that people require more years of healthcare.
This could lead to Medicare adjusting premiums to reflect the increased length of coverage and demand on funds.
The Centers for Medicare & Medicaid Services suggest that Medicare adjusts rates for copayments, deductibles, and premiums according to the Social Security Act.
The costs of prescription drugs also increase regularly. This is another possible contributing factor for increasing Medicare Part D costs.
As the ratio of employed workers paying into Medicare decreases in comparison with retired people who need Medicare, insurance costs may also increase to cover the gap in available funds.
The costs of Medicare supplement plans, or Medigap, will vary in 2021.
The government does not provide Medigap insurance. Instead, private insurance companies sell optional policies in agreement with Medicare. The cost of the plan depends on a person’s location, needs, and age.
Medigap insurance provides supplemental coverage. These policies cover some costs that Medicare parts A and B do not include, such as out-of-pocket expenses for parts A and B.
Medicare costs in 2021 include premiums and out-of-pocket expenses. Both increased from 2020 to 2021.
Several factors play a role in increased costs, including rising prescription drug prices. Income also affects the cost of Medicare Part B premiums. Premiums increase for people who earn higher wages.