Key Takeaways

• Medicare does provide foundational coverage, but it doesn’t eliminate all out-of-pocket expenses. You may still face costs for premiums, deductibles, coinsurance, and services not covered at all.

• In 2025, new policy updates such as the $2,000 out-of-pocket cap for Part D and ongoing requirements for Medicare Part B enrollment under certain plans are reshaping the cost landscape.

Medicare Covers a Lot, But Not Everything

You might expect Medicare to be your full safety net in retirement. While it certainly helps, it doesn’t pay for every health-related expense. Original Medicare is split into Part A and Part B, covering hospital and medical services. But there are gaps, and these gaps can lead to unexpected bills.

• Part A helps cover inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. You usually don’t pay a premium if you worked enough quarters.

• Part B covers doctor visits, outpatient care, and preventive services. You pay a monthly premium for Part B in 2025, which is $185. You’re also responsible for a deductible of $257 and 20% coinsurance on most services.

Even with these two parts, you’ll still need to pay attention to what’s not included and how those exclusions can lead to surprise bills.

What You May Pay Out of Pocket in 2025

In 2025, the most common out-of-pocket Medicare costs include:

• Part A deductible: $1,676 per benefit period

• Part B deductible: $257 annually

• Part B coinsurance: 20% of approved services after meeting the deductible

• Prescription drug costs: capped at $2,000 for out-of-pocket expenses under Part D

These figures might not seem overwhelming individually, but they can add up quickly if you experience multiple hospital stays, need frequent doctor visits, or take several medications.

Prescription Drug Coverage Still Has Limits

The Medicare Part D drug coverage structure changed in 2025. Now, the out-of-pocket costs are capped at $2,000 annually. This is a welcome shift from the previous years, where the coverage gap, or “donut hole,” could catch many off guard.

However, this cap applies only to drugs covered under Part D. If your medication isn’t on your plan’s formulary or requires prior authorization, you could still pay a significant portion out of pocket or be denied coverage entirely.

Also, your plan may still require copays or coinsurance during the initial coverage phase. While the $2,000 cap is a big relief, it’s not the end of the story.

Dental, Vision, and Hearing Are Still Missing From Original Medicare

Original Medicare does not cover most dental care, eye exams, hearing aids, or routine hearing tests. If you need dentures, glasses, or audiology services, you will likely have to pay entirely out of pocket or seek additional insurance.

These are essential services, especially as you age. Ignoring them because of cost can impact your overall health and quality of life. The only exceptions under Medicare are:

• Dental services that are integral to a covered medical procedure (e.g., jaw reconstruction)

• Eye exams related to specific conditions like glaucoma or diabetes

• Hearing evaluations ordered by a doctor for diagnostic purposes

But for routine care, coverage gaps still exist.

Long-Term Care: A Major Financial Gap

One of the largest blind spots in Medicare is long-term care. Custodial care, such as assistance with bathing, dressing, or eating, is not covered if it’s the only care you need. This means:

• Nursing home care beyond short rehabilitative stays is not covered.

• In-home assistance for daily living activities is not covered.

• Assisted living facilities are not included in Medicare benefits.

Medicare may cover a short stay in a skilled nursing facility if certain conditions are met, such as a qualifying hospital stay of at least three days and the need for daily skilled care. Even then, coverage is limited to 100 days per benefit period, and cost-sharing applies after the 20th day.

This is why planning for long-term care costs is so critical. Relying solely on Medicare could expose you to thousands in out-of-pocket costs.

Hospital Costs Can Climb Quickly

Even with Medicare Part A, you are still responsible for some hospital-related costs. For example, if you’re hospitalized, here’s what you’re expected to pay in 2025:

• $1,676 deductible for each benefit period

• $0 for days 1-60

• $419 per day for days 61-90

• $838 per day for lifetime reserve days (up to 60 days total over your lifetime)

If you’re hospitalized multiple times in a year and reset your benefit period, you may end up paying the deductible more than once.

Part B Doesn’t Have an Out-of-Pocket Maximum

One of the key reasons for Medicare’s out-of-pocket surprises is that Original Medicare doesn’t have a spending cap. With private insurance, you might be used to annual out-of-pocket maximums that limit your exposure. But under Part B, there is no ceiling.

That means if you need regular specialist visits, chemotherapy, dialysis, or other costly services, you’ll pay 20% of those charges indefinitely.

Supplemental Coverage Helps But Doesn’t Eliminate Costs

Many people choose to purchase supplemental coverage to fill in Medicare’s gaps. These are called Medigap policies. While they do help pay for deductibles and coinsurance, they come with their own costs and rules. For example:

• You must already be enrolled in Part A and Part B.

• You pay a separate premium for the Medigap policy.

• Medigap policies do not cover prescription drugs.

While helpful, these policies aren’t free, and they don’t address services that Original Medicare excludes.

Medicare Advantage Can Help—But Watch the Fine Print

Medicare Advantage plans offer an alternative way to receive Medicare benefits. These plans must offer at least the same level of coverage as Original Medicare, and many include added benefits like dental, vision, and hearing.

But you may still face out-of-pocket costs:

• Copays and coinsurance for many services

• Deductibles for some plans

• Maximum out-of-pocket limits can be high (up to $9,350 in 2025 for in-network services)

• Limited provider networks

• Prior authorizations for services

These trade-offs can lead to financial surprises if you’re not aware of how your specific plan works.

Income-Related Costs Are a Factor

If your income is above a certain level, you may have to pay more for Medicare Part B and Part D through the Income-Related Monthly Adjustment Amount (IRMAA). In 2025, IRMAA applies if your modified adjusted gross income (MAGI) exceeds $106,000 for individuals or $212,000 for joint filers.

These surcharges are deducted directly from your Social Security check (if you receive one) or billed separately, and they can amount to hundreds of dollars per month.

Failing to anticipate these higher costs can affect your retirement budget significantly.

Late Enrollment Penalties Add Long-Term Expenses

If you delay enrolling in Medicare Parts B or D without qualifying coverage, you may be subject to permanent penalties:

• Part B penalty: 10% for each full 12-month period you were eligible but didn’t enroll, added to your premium permanently.

• Part D penalty: 1% of the national base premium multiplied by the number of full months you didn’t have creditable coverage, also permanent.

These penalties aren’t just one-time fees. They continue as long as you have Medicare.

Coordination with Other Coverage Matters

If you have retiree health benefits, VA coverage, or are still working past age 65, Medicare may not be your only insurer. But the coordination between plans matters greatly. Mistakes in timing or misunderstanding which plan pays first can result in unpaid claims and large surprise bills.

Always review how your Medicare benefits interact with any employer or retiree plan you have, and make sure you understand enrollment deadlines to avoid penalties.

Stay Informed, Stay Prepared

While Medicare lays a strong foundation for health coverage in retirement, it is not a complete safety net. The costs that fall on you can be significant if you don’t plan ahead. That’s why it’s crucial to understand how coverage works, monitor your health needs, and reevaluate your options each year during the Medicare Open Enrollment Period, from October 15 through December 7.

Get Help Understanding Your Costs and Options

The best way to avoid out-of-pocket surprises is to stay informed and seek personalized help when needed. Medicare is complex, and your healthcare needs are unique. Review your current and future needs, compare available options, and make sure you’re protected against the hidden expenses Medicare doesn’t automatically cover.

If you want support in reviewing your choices or understanding how to reduce your Medicare-related costs, reach out to a licensed agent listed on this website.