How are Medicare rates calculated?

Medicare Part A is premium-free for those having enough work hours to qualify for Social Security benefits, while Medicare Part B rates are calculated on income. Medicare Part C plan rates vary depending on providers, and Medicare Part D drug plan rates vary depending on the plans and drug formularies.

Workers and their spouses who qualify for Social Security or Railroad Retirement Board retirement benefits receive Medicare Part A hospital coverage for free, while those without enough work hours pay up to $407 per month as of 2015. Medicare Part B medical coverage premiums start at $104.90 per month, but if an enrollee's income is above $85,000 per year, the annual Part B premium goes up in increments to a maximum of $335.70. Those who do not enroll in Medicare Part B at age 65 pay a permanent late enrollment penalty that goes up every year they delay enrollment.

Medicare Part C plans, also known as Medicare Advantage, are offered by private companies that supply all the services of Medicare Parts A and B and sometimes extra medical needs such as vision, dental, hearing, drugs, and health and well-being. Enrollees usually pay the standard Medicare Part B premium and an extra Medicare Advantage premium that varies from company to company. Private companies also supply Medicare Part D prescription drug coverage, and plan rates vary depending on the pharmacies in the plan's network and the brand name and generic drugs in the plan's formulary.