How to budget for Medicare expenses

When it comes to Medicare expenses, budgeting is equally as important as managing the costs you pay. Given that Medicare does not cover everything, setting up a budget will help keep you from running into financial troubles. Read our Medicare budget tips to see how you can manage Medicare expenses and medical costs.

Saving for Part A

Medicare Part A covers hospital insurance, hospice care, and limited home health services. Here are the costs to save for:

Premium: $458
*Most beneficiaries don’t pay the Part A premium, but you may have to if you or your spouse have not paid Medicare taxes for 10 years.

Deductible: $1,408 annually

Co-insurance: Costs per benefit period:
Day 1-60: $0
Day 61-90: $352/day
Day 91+: $704/day per lifetime reserve day

Skilled Nursing Facility Co-insurance:
Day 1-20: $0
Day 21-100: $176/day
Days 101 and beyond: all costs

Saving for Part B

Medicare Part B covers health care services, doctor office visits, laboratory fees and radiology. Here are the costs to save for in 2020:

Premium: Most people in 2020 pay $135.50/month

Deductible: $198 annually

Individual services & supplies: 20% of the service after you pay off the deductible. You may elect a Medicare Supplement plan to help cover this remaining cost. All eligible services and treatments have a Medicare-approved cost.c

Saving for Part D

Medicare Part D covers prescription drug costs. Since they are sold by private insurance companies, the costs tend to vary, especially the premiums. Here are the costs to save for:

Premium: $10-$100 range

Deductible: $435 standard

Prescription Costs: 75% of prescription costs are paid for after you pay off the deductible

Per drug cost: Varies per plan tier setup. Depending on your specific prescription needs, some plans may be a better option than others.

Avoiding penalties

It is easy to get a firm grip on your Medicare budget when you avoid any penalties. Beneficiaries incur penalties when they sign up late to Medicare parts. Make sure you sign up for Medicare on time if you are new to this insurance.

If you sign up late, you will be subject to the following penalties:

Penalty Medicare Part Reasons for Costs
10% increase in premiums Part B For every 12-month delay
1% of the national base beneficiary premium ($33.19 in 2019 and $32.74 in 2020) multiplied by the number of months you didn’t have Part D Part D For 63+ consecutive days with no coverage after qualifying for Medicare

Budgeting for what Medicare doesn’t cover

Budgeting for Medicare requires more than merely mapping out the charges for each type of coverage offered. It is vital to also take into consideration the services Medicare does not cover. You may need services and supplies beyond the Medicare coverage umbrella. Below is a list of important services you will have to pay out-of-pocket, as Medicare doesn’t cover them.

Routine Dental and Vision Care

• Dental cleanings, checkups, fillings & dentures
• Eye refractions, eye exams, contact lenses, eyeglasses (unless it’s after a cataract surgery)

Alternative Medicine

• Acupuncture, chiropractic care (except to cure subluxation of the spine) & other types of alternative care

Long-Term Care

• Adult day care, assisted living facilities, nursing home

Personal Care

• Help with dressing, bathing and toileting, housekeeping services


• Routine hearing exams, hearing aids (hearing implants to treat hearing loss may be covered)

Foot Care

• Corn and callus removal, orthopedic shoes, foot supports

Nonemergency Services

• X-ray copies, nonemergency transportation, i.e. ambulette

How Medicare Supplement can help

If you have difficulty paying off Medicare costs, look into enrolling in Medigap. Also called Medicare Supplement, Medigap relieves you of paying major costs like co-insurance, copayments, and deductibles.

It is sold by private companies with the purpose of helping beneficiaries pay for what Original Medicare does not cover. Medigap doesn’t offer new benefits, rather it supplements your Original Medicare out-of-pocket costs.

The need to budget

The ability to afford and manage Medicare expenses begins with compiling a budget for the costs you will pay. Besides paying for Medicare services, you may have to pay for the various services Medicare does not cover.

Consider what you and your spouse require to meet proper healthcare services. Once you lay out a concrete number towards the Medicare parts, you can start to aggregate the costs for additional services Medicare does not cover.

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