Medicare Part A: Hospital Insurance

Part A is often called hospital insurance because it pays for care while admitted as an inpatient at the hospital. It also pays some costs outside a hospital, such as skilled nursing facility stays, home health care, and hospice care.

Part A Premium: Most Medicare beneficiaries do not owe a monthly premium for Medicare Part A because they (or their spouse) paid it while working (it’s the FICA deduction from a paycheck), often called “premium-free Part A.” Beneficiaries with premium-free Part A worked and contributed to the Part A Trust Fund a minimum of 40 working quarters or credits (about 10 years).

Beneficiaries that did not work enough credits can buy Part A, often called “premium Part A.” In 2021, those with premium Part A owe either the full premium or a prorated amount 

NOTE: Medicare beneficiaries with limited income and resources may be eligible for the Qualified Medicare Beneficiary program (QMB), one of the Medicare Savings Programs. QMB pays the Part A premium in addition to the cost-sharing and Part B premium.

Part A Deductible: The deductible is an amount paid before Medicare begins to pay its share. The Part A deductible for an inpatient hospital stay is $1,484 in 2021. The Part A deductible is not an annual deductible; it applies for each benefit period. A benefit period begins at hospital admission and ends when the beneficiary has been out of the hospital or skilled nursing facility (SNF) for 60 consecutive days. As such, a beneficiary may have multiple benefit periods requiring payment of the Part A deductible multiple times in a year.

Hospital Copayment/Skilled Nursing Facility Copayment: A copayment applies to long hospital stays (60 days or more) and to skilled nursing facility (SNF) stays (after a three night, Medicare covered inpatient hospital stay). The copayment amounts vary based on the length and location of stay.

Hospice Care: There is no deductible or copayment for hospice care, only minimal costs for medications and inpatient respite care.

Home Health Care: There is no deductible or copayment for home health care, as long as the beneficiary meets the eligibility criteria for coverage.

Medicare Part B: Medical Insurance Medicare

Part B helps pay for health care services such as doctor services, preventive benefits, hospital outpatient surgery and care, ambulance services, outpatient mental health services, durable medical equipment, and home health care (not covered by Part A).

Part B Premium: In 2021, most beneficiaries will pay $148.50/month for Part B. However, there are two scenarios in which beneficiaries may pay less or more than this amount:

• Beneficiaries subject to the “hold harmless” provision whose Social Security checks will not increase enough to cover the $148.50 premium:
  • The hold harmless provision in federal law protects Medicare beneficiaries in two ways:
    • Part B premiums cannot increase in years when there is no Social Security cost of living adjustment (COLA), and
    • The net Social Security benefit cannot be lower than the previous year’s benefit amount.

In 2020, the Social Security COLA was 1.6%. In 2021, the COLA will be 1.3%. For a small percentage of hold harmless beneficiaries with low Social Security benefit amounts, this means that while their Part B premium will increase in 2021, it will not reach $148.50, since their benefit cannot decrease.

• Beneficiaries with higher incomes: Certain individuals pay more for their Part B premiums because they are subject to income-related monthly adjustment amounts (IRMAA) rules. IRMAA applies to individuals whose modified adjusted gross income on their 2019 tax returns was more than $88,000 per individual or $176,000 for a couple.

Other Costs in Part B: In addition to the Part B premium, there are out-of-pocket costs beneficiaries pay when they receive services covered by Medicare Part B. And these costs, like the Part B premium, can change each year.

Part B Annual Deductible: Before Medicare starts covering the costs of care, people with Medicare pay an amount called a deductible. In 2021, the Part B deductible is $203.

After the deductible has been paid, Medicare pays most (generally 80%) of the approved cost of care for services under Part B while people with Medicare pay the remaining cost (typically 20%) for services such as doctor visits, outpatient therapy, and durable medical equipment (e.g., wheelchairs, hospital beds, home oxygen equipment, diabetes supplies).

Medicare has strict rules on what durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) are covered. It is important to understand Medicare’s “reasonable and medically necessary” rule or beneficiaries could end up paying more for DMEPOS. Medicare also has an approved list of DMEPOS suppliers.

Preventive Benefits: There are some services under Part B that Medicare covers at 100% such as certain preventive benefits. See Medicare.gov for more information on these services.