With all the various "parts" of Medicare and Medigap coverage, a common question is this, "How much will pay for everything?". That's a good place to start so let's try to break down what you can expect to pay for both traditional Medicare and a corresponding Medigap plan. We'll use the Medigap F plan as our basis since it's the most popular by far and also the most comprehensive. We'll also include a baseline (average cost) Part D plan for medication since medication is increasingly an important part of health care costs. So let's begin our journey towards understanding the costs involved.
First, there's the cost of Medicare itself and yes, you do need to pay for this. Part A generally does not require any payment if you have worked and paid payroll taxes for a certain period of time or have had a spouse who qualified for Medicare this way. For most people, this is not an issue and Part A will not require any payment when eligible for Medicare since you've paid into the system during employment. For people new to the U.S. and eligible for Medicare (base on attained age, etc), you may be able to "buy into" Medicare by paying a monthly payment for Part A. So far so good...very little money out of pocket if any. Now, on to Part B.
Part B is the part of Medicare that deals with physician charges. Now we're going to have to get out the check book. Part B requires a monthly premium for most people which now varies quite a bit depending on income. Some people may qualify for offsets that can significantly reduce the Part B premium with lower incomes. Others will have to pay more for Part B than the average listed amount if they have higher incomes. This "means tested" approach will accelerate going forward as Medicare has more financial issues in order for it to be a going concern. You can find the current calculation for Part expense at our Medicare Medigap rates page but if you have a higher income, expect the amount to be more. Let's go with the base amount for now which is $99.90. Let's call it $100 since Medicare has now adopted WalMart pricing tricks! So far so good. We're looking at $100 monthly for Part A and B with traditional Medicare. That leaves us with two deductible and the big 20% hole in Medicare which we'll use a Medigap plan to fill in.
The F plan will probably run around $125/month (depending on your State and carrier) for a 65 year old. This rate will go up as you get older depending on the age bands of your particular carrier and the overall rate will also probably increase about 10% going forward. With Part A, Party B, and the F Medicare Medigap plan, we're now standing at $225 ($100 for Part B and $125 for F plan). Granted, this is getting higher but generally it is much less expensive than what people are paying on the individual/family market for age 64 medical coverage so there's typically a sigh of relief when we see these numbers. Now, the final piece...Part D coverage.
Part D is the prescription coverage portion of Medicare which is offered by private carriers. There are generally different levels of benefits offered by each carrier. Let's go with an average of $35/month which should be a fair estimation. We're now at $260 for pretty comprehensive coverage. That's just over $3K annually and a pretty good estimate of what you can expect to pay for an average situation in 2012. Hopefully, 2013 and beyond do not deviate too much from estimate.