Medicare has many parts and plans, each of which has premiums based on various factors. However, you may be able to save money on Medicare premiums, depending on your situation. It’s important to estimate your Medicare premiums before enrollment, so you are prepared for the cost of your new insurance, as you likely know by now, isn’t free.
Medicare Part A premiums
Throughout your working years, you likely paid FICA taxes. Part of these taxes went towards funding your Medicare Part A. Therefore, if you have worked at least 40 quarters (10 years), your Part A will have a $0 premium. However, if you worked any less than that, you would have a monthly Part A premium.
But all is not lost. If you have been married for at least one year to someone who is at least 62 years old and has worked at least 40 quarters, you can earn premium-free Part A through his or her work record.
Medicare Part B premiums
Although FICA taxes go towards funding your Part A premium, they do not fund your Medicare Part B premium. Medicare Part B premiums are set by Medicare and can increase due to higher income or decrease if you qualify for Medicaid.
For example, the standard base Part B premium for 2021 is $148.50 per month. However, if you earned a high enough income in 2019, your 2021 premium will be higher due to an added income-related monthly adjustment amount (IRMAA).
However, if you are no longer making that same higher income due to a qualifying event, you can appeal the IRMAA and save on your Medicare Part B premium. Also, if you qualify for your state’s Medicaid program, you may be eligible for help paying all or some of your Part B monthly premium.
Medicare Part C (Medicare Advantage) premiums
Medicare Part C plans, more commonly known as Medicare Advantage plans, are 100% optional. However, they too come with a monthly premium. Fortunately, many of them have premiums on the lower end of the spectrum, as low as $0. Still, you have to pay your Part B monthly premium when enrolled in a Medicare Advantage plan.
You may be able to save on Medicare Advantage premiums if you shop your plan each year during the Annual Election Period. You also may be able to save on Part B premiums if you find a Medicare Advantage plan with a Part B premium allowance built in. With this allowance, your plan will cover part of your Part B premium, and you will cover the remainder.
Medicare Part D premiums
Like Part B premiums, Medicare Part D premiums are partially based on your income from two years prior. If your Part B premium has an IRMAA, so will your Part D premium. However, the Part D IRMAA is a dollar amount added to whatever your Part D plan’s premium is.
For example, if you are in the first tier of higher income, your IRMAA for 2021 will be $12.30. This IRMAA will be added to your Part D premium, so if your Part D premium is $10 per month, you will now pay $22.30 per month. But again, you can appeal your IRMAA if you have dropped income tiers. You can also save on Medicare Part D premiums by shopping your plan each year during the Annual Election Period.
Medigap plan premiums
Like Medicare Advantage plans, Medigap plans are another type of plan that is 100% optional. However, unlike Medicare Advantage plans, Medigap plans generally have higher premiums. Medigap premiums are based on age, gender, zip code, carrier, plan, and tobacco use.
There aren’t any ways to lower your Medigap premium. However, you can shop your rate at any time throughout the year to try to find savings. Keep in mind that applying for a new Medigap plan outside your one-time, six-month Medigap Open Enrollment window requires medical underwriting in most states.
A word about health savings accounts
A health savings account (HSA) is a great tool that can help you save money on Medicare premiums. You can use your funds from your HSA to help pay your Part A, Part B, Part C, and Part D premiums. However, you can not use the funds to pay for your Medigap premiums. The more you can contribute to your HSA pre-Medicare, the more you can save on Medicare premiums.