Is Medicare Free?

(Hint: There is no such thing as a free lunch)

In a nutshell, the answer is NO! Medicare is a federal program, provided to assist with the costs associated with managing your healthcare. The program is administered by the Department of Health and Human Services (HHS), administered through the Centers for Medicare and Medicaid (CMS). Typically, one becomes eligible for Medicare at the age of 65, although it is possible to enroll for this plan (with specific qualifications) prior to age 65. Medicare consists of two (2) parts; Part A – covering hospital costs, and Part B – covering medical (think doctors and testing) costs.

Part A does not usually require any payment when applying at age 65. That doesn’t mean it’s free, however. The government will not charge an extra premium for this coverage as it has already been paid. That premium has been paid – BY YOU – after you (or spouse) have completed 40 quarters of eligible employment. That’s right, the required premium has been slowly taken out of your pay as part of your withholding over the years. If you do not have the necessary quarters accumulated, Medicare (Part A) may still be available to you – with a required monthly cost ($259 – $471 in 2021). Be aware, should you opt out of enrollment when you are first eligible, you will be paying a penalty of 10% on top of that monthly expense. You will also pay that extra penalty for twice the amount of time you did not enroll. Say you waited 2 years, enrolling at age 67, you will be responsible for paying that extra penalty until age 71. As you can see, timely enrollment will save money over time.

Part B, on the other hand, always requires a payment. The payment required in 2021 is $148.50 per month. Again, if you do not enroll for Part B, when first eligible, the government will penalize you and the penalty is 20% of the standard payment. Unlike the Part A penalty, this penalty has no finite end period. In other words, you will be paying that extra 20% forever. If you receive benefits from Social Security, Railroad Retirement Board, or Office of Personnel Management, your payment will be deducted by these parties. If you are not entitled, or deferring collection of benefits from these entities, CMS will mail a bill directly to your residence every quarter. Just a few words of caution here – pay that bill by the due date or your benefits can be interrupted. If you have elected to participate in additional plans, such as Part D (Medicare prescription drug service) or Part C (Medicare Advantage), you can also expect to pay an additional fee for those services. Why one might choose to pay over and above Part A and Part B will be addressed in another article.