Medicare Part A & Part B Costs
Understand what Original Medicare covers — and what you'll pay out of pocket.
What Is Original Medicare?
Original Medicare is the federal health insurance program made up of two parts: Part A (hospital insurance) and Part B (medical insurance). Together they cover a wide range of healthcare services, but they also come with deductibles, coinsurance, and coverage gaps that can add up quickly. Knowing your costs upfront helps you plan — and helps us find the right supplemental coverage for you.
How Part A Premiums Are Determined
- Work Quarters (Payroll Taxes): Medicare Part A is funded through FICA payroll taxes. Beneficiaries or their spouses who worked and paid Medicare taxes for 40 or more quarters (10+ years) receive Premium-Free Part A ($0/month).
- Partial Work History (Reduced Premium): Individuals with 30 to 39 quarters of covered employment pay a reduced monthly premium ($311/month in 2026).
- Uninsured/Fewer Quarters (Full Premium): Individuals with fewer than 30 quarters pay the full monthly premium ($565/month in 2026).
- Annual Formula: The Centers for Medicare & Medicaid Services (CMS) calculates the base dollar amounts each year using statutory formulas based on national inpatient hospital costs.
Enactment History
- Social Security Amendments of 1965: Signed into law on July 30, 1965, by President Lyndon B. Johnson, establishing Medicare Part A. Premium-free status was tied directly to work history under the Social Security system.
- Social Security Amendments of 1972: Enacted options allowing individuals aged 65+ who did not meet the 40-quarter requirement to voluntarily "buy into" Part A by paying monthly premiums.
Can It Be Changed and How?
- By Beneficiaries (Earning Quarters): An individual paying a Part A premium can lower or eliminate it by accumulating more work quarters. If you continue working (or marry a spouse who reaches 40 quarters), your premium transitions from full to reduced, or down to $0 once the 40-quarter threshold is met.
- By Beneficiaries (Late Enrollment Penalties): Failing to sign up for Part A when first eligible (if you must pay a premium) results in a mandatory 10% penalty added to the premium for twice the number of years enrollment was delayed.
- By Federal Law (Congressional Legislation): Because the rules governing Medicare tax thresholds, quarter requirements, and calculation formulas are codified under Title XVIII of the Social Security Act, any permanent change to how Part A premiums are structured requires an act of Congress signed by the President.
- By Annual CMS Adjustments: CMS recalculates and updates the voluntary buy-in rates every autumn to adjust for healthcare inflation and hospital cost shifts without needing new congressional legislation.
2026 Part A Benefit — Monthly Beneficiary Premium without any work history: $565.00
1. Where the Part B Premium Funds Originate
Did you know that the Federal Government subsidizes 75% of the standard Medicare Part B monthly premium, leaving Medicare beneficiaries responsible for the remaining 25%? For 2026, that beneficiary share is $202.90, which means the full projected monthly cost of Part B is $811.60. However, if a beneficiary is subject to IRMAA surcharge, their Part B monthly premium will increase depending on their reported income to the IRS.
The government's roughly 75% subsidy comes directly from the General Fund of the U.S. Treasury, which is supported by general federal revenues such as income taxes and other federal taxes.
- How it flows: The government transfers these general revenues into the Supplementary Medical Insurance (SMI) Trust Fund.
- Trust Fund structure: Part B is paid out of the SMI Trust Fund. Unlike the Social Security Trust Fund or Medicare Part A's Hospital Insurance (HI) Trust Fund, which are funded by dedicated payroll taxes, Part B is financed jointly by beneficiary premiums (roughly 25%) and general federal tax revenues (roughly 75%).
2. Who Sets the Rate of Payment and Subsidy
Congress sets the statutory framework, and CMS (under HHS) calculates the exact dollar amounts each year.
- Congress: Establishes the governing laws via the Social Security Act. Congress defined by statute that, for average-income beneficiaries, standard Part B premiums must cover 25% of projected program costs, with general tax revenue subsidizing the remaining 75%. Congress also mandated higher-income surcharges (IRMAA), lowering the government subsidy to as little as 15% for top earners.
- CMS (Centers for Medicare & Medicaid Services): Performs the annual actuarial calculations. Each fall, CMS projects total expected Part B costs for the upcoming year and sets the exact monthly standard premium and deductible based on Congress's 75/25 formula.
- SSA (Social Security Administration): Does not set the subsidy rate or determine Part B premiums. The SSA merely handles administrative execution — processing Medicare enrollments, deducting Part B premiums from monthly benefit checks, and applying IRMAA tiers using income data provided by the IRS.
Medicare Part A — Hospital Insurance
What Part A Covers
- Inpatient hospital care
- Skilled nursing facility care (following a qualifying hospital stay)
- Hospice care
- Some home health care
2026 Part A Costs
- Premium
- $0 for most people (if you or your spouse paid Medicare taxes for 40+ quarters)
- Inpatient deductible
- $1,736 per benefit period
- Days 1–60 coinsurance
- $0 per day
- Days 61–90 coinsurance
- $434 per day
- Days 91+ (lifetime reserve days)
- $868 per day
- Skilled nursing facility days 1–20
- $0 per day
- Skilled nursing facility days 21–100
- $217 per day
A benefit period begins the day you're admitted as an inpatient and ends when you haven't received inpatient care for 60 consecutive days. There is no limit to the number of benefit periods.
Medicare Part B — Medical Insurance
What Part B Covers
- Doctor visits and outpatient care
- Preventive services (flu shots, screenings, annual wellness visits)
- Durable medical equipment (wheelchairs, walkers, etc.)
- Mental health services
- Some home health and ambulance services
2026 Part B Costs
- Standard monthly premium
- $202.90 per month
- Annual deductible
- $283 per year
- Coinsurance after deductible
- 20% of Medicare-approved amount
- Hospital outpatient services
- 20% coinsurance or copayment
Higher-income beneficiaries pay more through Income-Related Monthly Adjustment Amounts (IRMAA). See our IRMAA page for details.
The Coverage Gap — Why Supplemental Insurance Matters
Original Medicare covers roughly 80% of approved costs after your deductibles are met. That leaves you responsible for the remaining 20% — with no annual out-of-pocket maximum. A single serious illness or hospital stay could result in thousands of dollars in unexpected bills. A Medicare Supplement/Medigap plan or Medicare Advantage plan can protect you from these unpredictable costs.
Have Questions About Your Medicare Costs?
We'll walk you through exactly what you'd pay under Original Medicare and compare it against your supplement options — completely free.