Key Takeaways

• Your monthly Medicare premium only covers a portion of your healthcare needs—expect to budget for deductibles, coinsurance, and out-of-pocket expenses that are not immediately visible.

• Many essential services such as dental, vision, long-term care, and certain prescription drugs may not be included, making supplemental coverage or additional budgeting essential.

The Real Cost Behind Your Medicare Premium

When you enroll in Medicare, it’s easy to assume your monthly premium covers all your healthcare expenses. After all, you’re paying into a national program that’s supposed to support your health needs in retirement. But the reality is that your monthly premium—whether it’s for Part A, Part B, or a combination—only scratches the surface. In 2025, Medicare enrollees face a range of additional costs that can significantly impact a retirement budget.

Understanding what your Medicare premium does not include is crucial to avoid financial surprises. Let’s walk through the major categories where out-of-pocket costs add up.

Medicare Part A: Premium-Free, But Not Cost-Free

Part A covers inpatient hospital care, but even if you qualify for premium-free Part A (through 40 quarters of work history), you’re still on the hook for:

• Inpatient deductible: $1,676 per benefit period

• Daily coinsurance: $419/day for days 61–90, and $838/day for lifetime reserve days

• Skilled nursing facility coinsurance: $209.50/day for days 21–100

These costs can escalate quickly, especially if you face extended hospital stays or repeat admissions during the year.

Medicare Part B: Monthly Premium Plus More

In 2025, the standard monthly premium for Part B is $185. While this covers doctor visits, preventive care, and outpatient services, it comes with other costs:

• Annual deductible: $257

• 20% coinsurance: For most covered services after the deductible is met

Part B also doesn’t include any cap on your out-of-pocket expenses. That means if you undergo a major outpatient procedure or need frequent visits to specialists, your bills can accumulate rapidly.

Prescription Drugs: Gaps in Part D Coverage

Even though 2025 brings relief through a $2,000 out-of-pocket cap under Medicare Part D, not everything is covered:

• Not all drugs are on every plan’s formulary

• You may need prior authorization or step therapy

• Excluded medications (like certain vitamins or weight-loss drugs)

You could still face unexpected costs if your doctor prescribes a drug that isn’t fully covered under your chosen plan.

What’s Often Not Covered by Medicare

Medicare has notable exclusions—services many people assume are covered but aren’t:

Dental Care

Routine dental care, including cleanings, x-rays, fillings, dentures, and root canals, is not covered. You’ll need to pay out-of-pocket or consider a standalone dental plan.

Vision Services

Medicare only covers vision when it relates to specific medical conditions (like cataract surgery). Routine eye exams, glasses, and contact lenses aren’t included.

Hearing Aids

In most cases, hearing aids and exams for fitting them are excluded. Given that hearing aids can cost thousands of dollars, this omission can be a major financial burden.

Long-Term Care

Custodial care in nursing homes or assisted living facilities is not covered under Medicare. While Medicare may cover short-term skilled nursing care post-hospitalization, long-term services are generally excluded.

Overseas Medical Care

Traveling abroad? Original Medicare won’t cover care outside the U.S. You’ll need alternative insurance or budget accordingly.

Medicare Advantage Doesn’t Solve Everything

Medicare Advantage plans (Part C) can include extra benefits like dental, vision, or wellness programs—but they also come with their own limits, such as network restrictions and prior authorization rules.

Even with broader coverage, you’re still responsible for:

• Plan-specific copayments and coinsurance

• Annual out-of-pocket maximums, which can still be thousands of dollars

• Possible denial of services not deemed medically necessary

Surprise Medical Bills and Balance Billing

Original Medicare limits what providers can charge, but not all doctors accept Medicare assignment. If a provider charges more than Medicare’s approved amount, you could be responsible for the difference—this is known as balance billing.

Providers Who Opt Out

Some healthcare professionals opt out of Medicare entirely, meaning they aren’t bound by Medicare pricing. You’ll be responsible for 100% of their charges unless you make other arrangements.

Premium Adjustments Based on Income

Many people don’t realize that your Medicare Part B and Part D premiums can be higher if your income exceeds a certain threshold. In 2025:

• Individuals with modified adjusted gross income (MAGI) above $106,000

• Married couples filing jointly with MAGI above $212,000

You’ll pay an Income-Related Monthly Adjustment Amount (IRMAA), which adds significantly to your monthly costs.

Equipment and Supplies: Partial Coverage

Medicare covers some durable medical equipment (DME) like walkers, wheelchairs, and oxygen—but you’ll often owe 20% coinsurance after meeting your Part B deductible.

Additionally, supplies like incontinence products or home safety items (grab bars, stair lifts) are not covered at all.

The Cost of Keeping Coverage

Even if you’ve paid into Medicare your entire working life, you’ll need to budget every year to keep full coverage:

• Part B premiums (monthly)

• Part D premiums (monthly)

• Potential IRMAA surcharges

• Medigap premiums (if you have a supplemental policy)

• Additional costs for dental, vision, or hearing care through private plans or direct payment

Medigap: Not Free and Not Unlimited

If you choose to pair Original Medicare with a Medigap (supplemental) plan to cover out-of-pocket costs, you’ll need to pay a separate premium for that coverage. And while Medigap can reduce what you owe in coinsurance or deductibles, it does not cover everything, especially services Medicare excludes.

Emergency Coverage Limitations

Emergency room visits are generally covered under Part B (as outpatient), but:

• You still owe the Part B deductible and 20% coinsurance

• If you’re admitted as an inpatient, Part A costs apply

• If your visit is deemed non-emergency or not medically necessary, Medicare may not pay at all

This can create financial uncertainty during a crisis.

Extra Costs for Chronic Illness Management

Living with a chronic condition such as diabetes, heart disease, or arthritis means more frequent doctor visits, medications, lab tests, and possibly physical therapy. Even with Medicare, managing chronic illness brings added costs:

• More frequent specialist copays

• Higher prescription drug expenses

• Possible medical devices or supplies not fully covered

Hidden Administrative Costs

There’s also a time and effort cost to managing your Medicare coverage effectively:

• Reviewing Annual Notice of Change (ANOC) each fall

• Comparing plan formularies and networks during Open Enrollment (October 15 to December 7)

• Tracking Explanation of Benefits (EOB) statements and disputing denied claims

While not monetary, these administrative burdens can become stressful and may lead to missed deadlines or costly oversights.

What This All Means for Your Budget

By the time you include premiums, deductibles, copayments, uncovered services, and possible IRMAA surcharges, your actual annual healthcare costs can be much higher than anticipated. The Medicare premium is only a starting point—it’s the foundation, not the whole structure.

Many enrollees underestimate the cumulative financial impact. Without preparation, these overlooked expenses can strain even a well-planned retirement income.

Take Action to Understand Your Total Medicare Costs

Planning ahead is essential. Work with a licensed agent listed on this website to:

• Analyze your expected healthcare needs

• Estimate all parts of your total out-of-pocket spending

• Review supplemental coverage options to fill the gaps

Healthcare is one of the largest retirement expenses, and Medicare alone won’t eliminate the need for careful budgeting. Know the full picture, not just the monthly premium.