Key Takeaways

• Several factors, like delayed enrollment and income-based adjustments, can increase your Medicare costs, but careful planning can help you avoid these surprises.

• Understanding Medicare’s cost structure and taking proactive steps can save you money and prevent unexpected financial burdens.

The Role of Income in Your Medicare Costs

Your income level plays a major role in determining how much you pay for Medicare, especially for Part B and Part D. If your modified adjusted gross income (MAGI) surpasses a certain threshold, you will pay more due to the Income-Related Monthly Adjustment Amount (IRMAA). In 2025, IRMAA applies if your individual income exceeds $106,000 or joint income exceeds $212,000.

How to Avoid Higher Costs

• Consider strategies like contributing to tax-advantaged retirement accounts to lower your MAGI.

• Be mindful of required minimum distributions (RMDs) from retirement accounts, as they can push you into a higher income bracket.

• Plan ahead before selling assets or making large withdrawals that might increase your income.

Delayed Enrollment Can Lead to Late Penalties

If you don’t sign up for Medicare on time, you could face lifelong penalties. These penalties apply to Medicare Part B and Part D if you go without creditable coverage for too long. The longer you delay, the higher your penalties will be.

How to Avoid Higher Costs

• Enroll in Medicare Part B during your Initial Enrollment Period (IEP), which starts three months before you turn 65 and ends three months after.

• If you delay enrollment because you have employer coverage, sign up for Part B within eight months of losing that coverage to avoid penalties.

• Make sure your prescription drug coverage is considered creditable to avoid Part D penalties.

Out-of-Pocket Costs Add Up Quickly

Medicare doesn’t cover everything, and out-of-pocket costs like deductibles, copayments, and coinsurance can add up. In 2025, the Medicare Part A hospital deductible is $1,676 per benefit period, and the Part B deductible is $257. Once these deductibles are met, you’re responsible for a percentage of the remaining costs.

How to Avoid Higher Costs

• Understand how cost-sharing works under Medicare and plan accordingly.

• Consider coordinating benefits with other coverage options to reduce out-of-pocket expenses.

• Review your Medicare Summary Notice (MSN) regularly to ensure you’re not overpaying for services.

Not Choosing the Right Coverage for Your Needs

Medicare offers different coverage options, and selecting the wrong one could lead to higher expenses. If you enroll in a plan that doesn’t align with your healthcare needs, you might end up paying more in out-of-pocket costs.

How to Avoid Higher Costs

• Assess your healthcare needs and expected medical expenses before choosing a plan.

• Compare different Medicare options during Open Enrollment (October to December each year) to ensure you have the best coverage.

• Pay attention to changes in your plan’s Annual Notice of Change (ANOC) to avoid unexpected costs.

High Prescription Drug Costs

Prescription drug prices can be a major financial burden, especially if your medication isn’t covered under your chosen plan. Medicare Part D has a standard deductible of up to $590 in 2025, and after reaching the out-of-pocket threshold, you enter catastrophic coverage where you pay minimal costs.

How to Avoid Higher Costs

• Review the formulary (list of covered drugs) for your Part D plan before enrolling.

• Ask your doctor about lower-cost alternatives or generic medications.

• Take advantage of the Medicare Prescription Payment Plan, which spreads out drug costs over the year.

Ignoring Preventive Services Can Lead to Costly Treatments

Medicare covers many preventive services at no additional cost, but skipping them can result in higher medical bills down the line. Preventive screenings, vaccinations, and wellness visits help catch health issues early, reducing the need for expensive treatments later.

How to Avoid Higher Costs

• Take advantage of Medicare-covered screenings, such as cancer screenings and cardiovascular checks.

• Schedule your annual wellness visit to review your overall health.

• Stay up to date on recommended vaccines covered by Medicare.

Take Control of Your Medicare Costs

Unexpected Medicare costs can catch you off guard, but by planning ahead and making informed decisions, you can keep your expenses under control. Pay close attention to enrollment deadlines, coverage choices, and income-related adjustments to avoid unnecessary costs. If you need help navigating Medicare, speak with a licensed agent listed on this website for professional guidance.