Key Takeaways

• Medicare typically covers only 80% of approved medical costs, leaving you responsible for the remaining 20% unless you have supplemental coverage.

• In 2025, options to cover the gap include Medigap, Medicare Advantage, and other forms of insurance or savings—but your choice must align with your health, budget, and long-term needs.

Understanding the 80/20 Structure of Original Medicare

Original Medicare in 2025 still consists of Part A (hospital insurance) and Part B (medical insurance). Together, they cover a broad range of healthcare services but leave significant gaps in out-of-pocket responsibility. The structure is straightforward:

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

• Part B covers outpatient care, doctor visits, durable medical equipment, preventive services, and some home health care.

The key issue? Part B generally covers 80% of approved charges, which means you pay the remaining 20%. That 20% might seem small—until you receive a large medical bill.

For example:

• If a procedure is approved at $10,000, Medicare Part B would pay $8,000.

• You would be responsible for the remaining $2,000, and that doesn’t include the Part B annual deductible of $257 for 2025 or any monthly premium, which is $185 in 2025.

This out-of-pocket cost has no cap under Original Medicare, meaning your costs can continue to climb with continued treatment or frequent use of services.

What That 20% Actually Means for You

In 2025, the reality of this 20% cost-sharing structure is more pressing than ever due to rising healthcare prices. Without a financial safety net, you could face significant medical bills, especially if you:

• See specialists frequently

• Need outpatient surgeries

• Use expensive diagnostic tests like MRIs or CT scans

• Require ongoing treatments for chronic conditions

And while Part A covers hospital stays, it too has cost-sharing:

• $1,676 deductible per benefit period in 2025

• Coinsurance after day 60 in a hospital stay

So even hospitalization could leave you with a sizable bill if you lack secondary coverage.

Your Main Options for Covering the Remaining 20%

You don’t have to leave yourself financially exposed. In 2025, you have several ways to cover what Medicare doesn’t:

Medigap (Medicare Supplement Insurance)

Medigap plans are designed specifically to work alongside Original Medicare and help cover:

• The 20% coinsurance from Part B

• Part A deductibles and coinsurance

• Foreign travel emergency care in some plans

You must have Original Medicare (Parts A and B) to enroll in a Medigap plan, and you generally can’t have Medigap and a Medicare Advantage plan at the same time.

Medicare Advantage Plans (Part C)

Medicare Advantage plans replace Original Medicare entirely but are required to cover everything Original Medicare does, at a minimum. These plans often include:

• Annual out-of-pocket maximums

• Additional benefits like dental or vision

• Copayments and coinsurance instead of the 80/20 split

But keep in mind: they come with networks, referral requirements, and plan rules, which vary year to year.

Employer or Retiree Coverage

If you have access to employer-sponsored or retiree health coverage, it may serve as secondary insurance to Medicare. In 2025, many retirees are finding that these options are being phased out or come with high premiums. However, if still available, this can ease the financial burden significantly.

Medicaid (for Low-Income Individuals)

If your income and resources are limited, you may qualify for Medicaid. In 2025, Medicaid can help pay for:

• Medicare premiums

• Deductibles

• Coinsurance

This is typically referred to as dual eligibility when you qualify for both Medicare and Medicaid.

Health Savings Accounts (HSAs)

While you can’t contribute to an HSA once you’re enrolled in Medicare, funds already in your account can be used to pay for out-of-pocket medical expenses like coinsurance, deductibles, and copayments.

Timing Matters: When to Enroll in Medigap or Medicare Advantage

Medigap Enrollment

The best time to enroll in a Medigap plan is during your Medigap Open Enrollment Period, which lasts six months starting the first month you’re 65 or older and enrolled in Part B. During this time, insurance companies:

• Cannot deny you coverage

• Cannot charge you more based on your health status

Outside this window, you may be subject to medical underwriting, which could limit your options or increase your premiums.

Medicare Advantage Enrollment

You can join or switch Medicare Advantage plans during:

• Initial Enrollment Period: Around your 65th birthday

• Annual Enrollment Period: October 15 to December 7 each year

• Medicare Advantage Open Enrollment: January 1 to March 31

These windows are critical. Missing them could mean staying in a plan that no longer meets your needs or leaving you exposed to the 20% coverage gap.

Why Some People Skip Extra Coverage (And Why That’s Risky)

Some people in 2025 are opting to skip Medigap or Medicare Advantage, often for the following reasons:

• They feel healthy and assume they won’t need extra care

• They want to save on monthly premiums

• They don’t understand the full cost exposure of Original Medicare

This choice, however, carries significant risk. Health can change rapidly, and without supplemental coverage, a single outpatient surgery or chronic illness diagnosis can lead to thousands of dollars in bills.

Medicare’s Lack of an Out-of-Pocket Cap

Perhaps the most critical aspect of this discussion is that Original Medicare has no out-of-pocket maximum. In 2025, that means your financial liability is theoretically unlimited if you rely on Parts A and B alone.

Medicare Advantage plans must include an out-of-pocket cap, which is $9,350 for in-network services and $14,000 for combined in-network and out-of-network services in 2025.

Medigap plans, while not imposing a cap, can eliminate most or all out-of-pocket costs depending on the plan you choose.

Budgeting for What Medicare Doesn’t Cover

Even with the best plan, not everything is covered. Here’s what else you should prepare for in 2025:

• Prescription Drugs: Part D helps, but you’ll still face copayments, deductibles, and a $2,000 out-of-pocket cap.

• Dental, Vision, and Hearing: Original Medicare does not cover these services. Some Advantage plans include them, or you might need to purchase separate insurance.

• Long-Term Care: Medicare only covers short-term skilled care under strict conditions. It does not cover custodial or assisted living.

Planning ahead with either savings, long-term care insurance, or additional support is essential.

Reviewing Your Coverage Annually Matters

Even if you have coverage to supplement Medicare in 2025, don’t assume it’s still the best fit every year. Plans change, benefits shift, and your health needs evolve. It’s important to:

• Review your Annual Notice of Change (ANOC)

• Compare plans each fall during open enrollment

• Confirm whether your providers remain in-network (especially for Medicare Advantage)

• Check for updates to formularies and drug tiers in Part D

How to Decide What’s Right for You

The right plan depends on many factors:

• Health status: Ongoing conditions might favor broader Medigap coverage.

• Budget: If monthly costs are a concern, weigh all premiums against expected usage.

• Lifestyle: Frequent travelers may prefer Medigap due to broader provider access.

• Doctor preferences: Want to keep your doctor? Make sure they accept the plan you choose.

Balancing these variables is key to protecting your health and finances.

It’s Your 20%—But You Don’t Have to Shoulder It Alone

If you’re approaching Medicare or already enrolled in 2025, it’s time to evaluate how you’ll handle the 20% that Original Medicare leaves behind. You deserve healthcare that supports your needs without exposing your retirement savings to unnecessary risk. Talk to a licensed agent listed on this website to compare your options, discuss your priorities, and select a plan that works for you.