Is Medicare Free?

Medicare is health insurance coverage for Americans who are over age 65, have end-stage renal disease or have been disabled for more than two years. Medicare has several parts: Part A, hospital insurance; Part B, medical insurance and Part D, prescription drug coverage. While Medicare is managed by the federal government, the costs are covered by working Americans and Medicare beneficiaries.

Medicare Part A

• All working Americans contribute to the cost of Medicare by paying 2.9 percent of all of their earned income to FICA taxes. Paying into the system makes you eligible for Medicare coverage when you turn 65 or meet the other qualifications. You earn one credit towards Medicare for every $1,120 you earn from employment, up to a maximum of four credits per year. Once you reach 40 working credits you are eligible for premium-free Medicare Part A coverage. If you do not earn enough working credits, but meet the other eligibility requirements, you must pay a monthly premium for your Part A benefits.

Medicare Part B

• In most cases, Medicare beneficiaries pay a premium for their Part B benefits. If you enrolled in Medicare prior to 2010, your monthly Part B premium would be $96.40. For all enrollments after January 1, 2010, the monthly premium is $110.50. Medicare beneficiaries who earn more than $85,000 per year pay more for their benefits. The premium is automatically deducted from your monthly Social Security benefit check. Low-income Medicare beneficiaries may qualify for special assistance programs that cover their Part B premium costs.

Deductibles, Co-Insurance and Co-Payments

• In addition to the monthly premiums, Medicare beneficiaries must pay deductibles, co-insurance and co-payments on the services they receive. As of 2011, you pay $1,100 for a hospital stay up to 6 days; $275 per day for stays between 61 and 90 days, $550 per day for stays between 91 and 150 days and all of the costs for hospital stays over 150 days. Under Medicare Part B, you pay 20 percent of the costs for physician services, outpatient services, home health services and durable medical equipment until you meet the $155 annual deductible.

Part D Plans

• Medicare Part D prescription drug coverage is offered either by a private insurance company or a Medicare-approved drug plan provider. Plans vary according to where you live, and in some cases, your monthly premium is determined by your income. Most prescription drug plans require Medicare beneficiaries to pay co-payments for their prescriptions.

Medicare Advantage and Supplement Plans

• Some Medicare beneficiaries choose to enroll in a Medicare Advantage or Medicare supplement plan to cover their healthcare needs. Both of these plan types are offered by private insurance companies, and charge monthly premiums on top of the Medicare premiums. In some cases, though, the deductible and co-insurance amounts you pay with these plans are lower than what you would pay under regular Medicare.