Key Takeaways

• Medicare has multiple parts, each covering different healthcare needs, and understanding how they work together can prevent coverage gaps.

• Failing to enroll at the right time or choosing the wrong coverage can lead to lifelong penalties and unexpected healthcare costs.

1. Medicare Is Not Free, and Costs Can Add Up Quickly

If you thought Medicare would cover all your healthcare expenses at no cost, you’re in for a surprise. While Medicare Part A (hospital insurance) is typically premium-free if you or your spouse worked and paid Medicare taxes for at least 10 years, it still comes with costs. In 2025, the inpatient hospital deductible is $1,676 per benefit period. After 60 days in the hospital, you start paying daily coinsurance, which increases significantly after 90 days.

Medicare Part B (medical insurance) has a standard monthly premium of $185 in 2025, with an annual deductible of $257. After that, Medicare generally covers 80% of approved services, leaving you responsible for the remaining 20%. These costs can add up, especially if you need frequent doctor visits or medical treatments.

2. Late Enrollment Penalties Can Last a Lifetime

Many retirees mistakenly assume they can enroll in Medicare whenever they want without consequences. The truth is, delaying enrollment can lead to lifelong penalties. If you don’t sign up for Medicare Part B during your Initial Enrollment Period (which starts three months before your 65th birthday and lasts for seven months), you could face a late enrollment penalty. This penalty increases your monthly premium by 10% for each full 12-month period you were eligible but didn’t enroll.

The same applies to Medicare Part D (prescription drug coverage). If you don’t sign up when you’re first eligible and don’t have other creditable drug coverage, you’ll face a late enrollment penalty that stays with you as long as you have Medicare.

3. Medicare Doesn’t Cover Everything

Even with Medicare, you’re not completely covered. Certain healthcare services, including routine dental, vision, and hearing care, are not included under Original Medicare (Parts A and B). Long-term care, like extended nursing home stays, is also not covered, which can be a huge financial burden for retirees who need ongoing care.

To fill these gaps, you may need additional coverage, such as a separate vision and dental plan or long-term care insurance. It’s important to assess your healthcare needs early and plan accordingly to avoid unexpected expenses.

4. Coordination Between Medicare and Other Coverage Matters

If you have other healthcare coverage—such as employer-sponsored insurance or retiree benefits—you need to understand how it works with Medicare. Some employer plans require you to enroll in Medicare once you turn 65. If you don’t, your employer coverage may not pay for your medical bills.

If you’re still working and covered by a group health plan through your job or your spouse’s employer, you might be able to delay Medicare enrollment without penalty. However, once that coverage ends, you typically have an eight-month Special Enrollment Period to sign up for Medicare without facing late penalties.

For retirees with TRICARE or Veterans Affairs (VA) benefits, understanding how Medicare fits into those plans is crucial. Some benefits require you to have Medicare Part B to keep full coverage.

5. Medicare Advantage and Part D Plans Change Every Year

Even if you’re already enrolled in Medicare, your coverage isn’t set in stone. Medicare Advantage (Part C) and Medicare Part D (prescription drug) plans can change their benefits, costs, and formularies each year. That’s why it’s critical to review your plan’s Annual Notice of Change (ANOC), which is sent every September.

Open Enrollment runs from October 15 to December 7 each year. This is your opportunity to switch plans if needed. If you don’t review your coverage, you might end up paying more for your prescriptions or lose access to certain doctors in your plan’s network.

6. The New Out-of-Pocket Cap for Medicare Part D in 2025

One of the most significant changes in 2025 is the introduction of a $2,000 out-of-pocket cap on prescription drug costs under Medicare Part D. Previously, there was no cap, meaning some beneficiaries paid thousands of dollars for expensive medications. Now, once you spend $2,000 on covered drugs, your plan will cover 100% of the costs for the rest of the year.

Additionally, Medicare has introduced a new payment option that allows you to spread your out-of-pocket prescription drug costs over the year instead of paying them all at once. This can provide significant financial relief for retirees on fixed incomes.

Make Sure You’re Covered the Right Way

Understanding Medicare isn’t just about knowing what’s covered—it’s about making sure you have the right plan to meet your healthcare needs. If you need help figuring out your options or ensuring you’re enrolled in the best plan, reach out to a licensed agent listed on this website. They can guide you through the process and help you make informed decisions.