The Medicare program provides health insurance coverage to over 70 million people ages 65 or older and younger adults with long-term disabilities. While Medicare covers a wide range of health care services, Medicare beneficiaries generally pay out-of-pocket for their monthly premiums, deductibles, and cost sharing for Medicare covered services. Medicare premiums and other cost-sharing requirements have increased steadily in recent years and are projected to continue growing over the next decade. At the same time, many Medicare beneficiaries have modest incomes which can make it difficult to afford these costs: one in four Medicare beneficiaries lived on incomes below $24,600 per person in 2024, and out-of-pocket spending on Medicare premiums and cost-sharing expenses accounted for more than a third (36%) of the average Medicare beneficiary’s Social Security income in 2023.
Out-of-pocket costs may also vary depending on the choices Medicare beneficiaries make about their coverage. People with Medicare can choose to receive their benefits through traditional Medicare or through a privately administered Medicare Advantage plan. Beneficiaries in traditional Medicare can sign up for prescription drug coverage through a stand-alone Part D plan, and may also purchase a Medicare supplemental insurance policy, known as Medigap, to assist with Medicare cost sharing. Medicare Advantage plans typically include prescription drug coverage, as well as limits on how much enrollees pay out of pocket each year for Medicare covered services (in contrast to traditional Medicare, which has no limit on out-of-pocket costs), but most plans also require enrollees to use a specified network of providers or charge higher cost sharing for services from out-of-network providers. Each of these Medicare coverage options comes with different premium and cost-sharing requirements, as well as considerable variation from plan to plan. Overall, navigating these options and expenses can be complex, and the costs can be substantial, particularly for beneficiaries with high health care needs.
This brief provides an overview of the costs faced by Medicare beneficiaries in traditional Medicare, Medicare Advantage, and Medicare Part D, including premiums, deductibles, copays, and coinsurance.