Key Takeaways

• Even if you have a well-structured Medicare plan in 2025, you may still face significant out-of-pocket expenses due to premiums, deductibles, coinsurance, and uncovered services.

• Planning for Medicare involves more than just signing up; it requires understanding the fine print of what each part covers, what it doesn’t, and what additional protection you may need.

Medicare Doesn’t Cover Everything

When you enroll in Medicare, it can feel like you’ve secured reliable healthcare for your retirement. But many enrollees are caught off guard by how much they still end up paying out of pocket each year, despite having a good plan. Medicare has clear limitations, and knowing those gaps is critical to preparing financially.

What Original Medicare Covers

Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance). While it covers a broad range of services, it’s far from comprehensive:

• Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and limited home health care.

• Part B covers doctor visits, outpatient care, preventive services, and medical equipment.

Even within this coverage, cost-sharing applies. You’re responsible for deductibles, coinsurance, and copayments, which can accumulate quickly depending on the frequency and type of care you receive.

The Out-of-Pocket Costs You Might Overlook

Many enrollees underestimate how much they might still spend annually. Here are some key cost areas that can add up.

1. Monthly Premiums

In 2025, the standard Medicare Part B premium is $185 per month. Part A is premium-free for most people, but not all. If you worked fewer than 30 quarters, your monthly Part A premium could be $518. These costs are recurring, and any additional coverage like a drug plan or supplemental policy also comes with its own premium.

2. Deductibles and Coinsurance

Even after paying monthly premiums, you still owe deductibles:

• Part A deductible is $1,676 per benefit period in 2025.

• Part B deductible is $257 per year.

After meeting the deductible, you typically owe 20% of the cost for services under Part B. Hospital stays under Part A involve a daily coinsurance starting on day 61. These numbers stack up fast if you experience an illness or injury.

3. Prescription Drug Costs

Medicare Part D covers prescription drugs but has its own structure of deductibles and coinsurance. In 2025:

• The Part D deductible can be as high as $590.

• You’re protected by a new $2,000 annual out-of-pocket cap on covered drugs, but that doesn’t mean your medication costs will be minimal.

• Coinsurance or copayments may still apply for many medications.

Additionally, some drugs may not be on your plan’s formulary, and those would not count toward your $2,000 cap.

4. Supplemental Coverage Isn’t Free

Many people turn to supplemental insurance (like Medigap) or Medicare Advantage plans to fill gaps in Original Medicare. But these plans themselves carry premiums, and sometimes:

• Require copayments for specialists, urgent care, or emergency visits.

• Limit coverage to specific networks, leading to surprise costs if you go out-of-network.

• May not fully cover all services like dental, hearing, and vision.

Even with a good plan, you may still pay hundreds or thousands in additional costs each year.

Services Medicare Rarely Pays For

Some services are simply not covered by Medicare at all, even in 2025. These include:

• Routine dental care (cleanings, fillings, dentures)

• Routine eye exams and eyeglasses (except after cataract surgery)

• Hearing aids and hearing exams

• Long-term care (custodial care in a nursing home or assisted living)

• Cosmetic surgery

• Acupuncture or alternative treatments

These are often among the most expensive services for retirees, and people are frequently surprised to find they need to pay entirely out of pocket.

Annual Spending Can Still Be High

Medicare includes out-of-pocket maximums for some parts of coverage, but not all.

• Original Medicare has no cap on your spending for Part A and Part B. Your 20% coinsurance under Part B continues without limit.

• Medicare Advantage plans are required to include a maximum out-of-pocket (MOOP) limit. In 2025, the limit is $9,350 for in-network services and $14,000 for combined in- and out-of-network services.

These limits do not include prescription drug spending, which has its own cap of $2,000 under Part D.

If you have chronic conditions, require hospitalizations, or need expensive medications, it’s possible to reach these limits in a single year—even with what you consider a “good” plan.

High-Income Surcharges Can Add to Your Costs

In 2025, high-income beneficiaries pay more for Parts B and D through Income-Related Monthly Adjustment Amounts (IRMAA). This applies if your individual income is above $106,000 or joint income is above $212,000 (based on your 2023 tax return).

These surcharges can add hundreds more per month to your Medicare premiums. If your income was higher in a previous year due to a one-time event like selling a home or retiring, you may still be subject to IRMAA unless you successfully appeal.

Unplanned Medical Events Create Financial Strain

No one expects to get injured or need surgery, but it happens. When it does, you may face:

• Emergency room copays or coinsurance

• Follow-up specialist visits

• Physical therapy sessions

• Imaging services like MRIs

• Medical equipment like walkers or braces

All of these services have cost-sharing, and if you need multiple of them in a year, your expenses can surge unexpectedly.

Coordination with Other Coverage Can Be Complicated

Some people have retiree coverage, VA benefits, or are still working and enrolled in employer insurance. Medicare coordination rules determine which plan pays first, and if misunderstood, this could lead to denied claims or unexpected bills.

For example:

• If your group plan is secondary to Medicare, and you didn’t enroll in Medicare when required, your other insurance may deny claims.

• If you opt out of Part B while depending on retiree coverage, you may face late enrollment penalties or gaps in care.

Missteps in coordination can cost you significantly in both coverage and penalties.

Planning Isn’t Just About Enrollment

You might assume that once you’ve signed up for Medicare, your job is done. But the truth is, Medicare requires ongoing attention:

• Annual enrollment periods (October 15 to December 7) are critical to review changes in your plan or drug coverage.

• Formulary changes may mean your medication is no longer covered.

• Provider network updates can affect which doctors you can see affordably.

• New plan benefits or cost-sharing changes are introduced each year.

Ignoring these updates could result in higher costs or losing access to care you previously relied on.

Long-Term Care Is a Major Financial Blind Spot

Medicare only covers short-term skilled nursing care following a qualifying hospital stay. It does not pay for long-term custodial care, such as:

• Nursing homes

• Assisted living facilities

• Home aides for help with bathing, dressing, and eating

These services are among the most expensive in retirement, often costing thousands per month. Unless you have separate long-term care coverage or substantial savings, these costs can erode your financial security.

Financial Strategies Can Help—but Require Expert Guidance

There are ways to limit your exposure to high Medicare costs:

• Consider a Supplement plan to cover coinsurance and deductibles.

• Shop for drug plans carefully to ensure your medications are covered.

• Evaluate if a Medicare Advantage plan with lower MOOP limits fits your needs.

• Use a Health Savings Account (HSA) before you enroll in Medicare to build tax-free funds for medical expenses.

• Appeal IRMAA surcharges if your income has decreased due to retirement or other qualifying events.

However, these strategies require up-to-date information and detailed comparisons. This is where working with a licensed agent can be crucial.

Medicare Costs Are Manageable When You Plan for the Unexpected

Even the best Medicare plan can leave you with substantial out-of-pocket expenses if you don’t understand how coverage works, what’s excluded, and how cost-sharing applies. Reviewing your coverage annually and preparing for surprises can reduce the risk of financial shock.

If you want help understanding your Medicare expenses, or need to evaluate your options, reach out to a licensed agent listed on this website for personalized advice.