Key Takeaways

• Even though Medicare is designed to reduce healthcare costs in retirement, you can still face significant and ongoing out-of-pocket expenses.

• Understanding deductibles, coinsurance, copayments, coverage limits, and service exclusions is essential to avoid being blindsided by bills.

Medicare Isn’t Free—And That’s Just the Beginning

When you first become eligible for Medicare, you might assume your healthcare costs will finally become manageable. After all, you’ve spent decades contributing to the system. But in 2025, Medicare still comes with its own set of ongoing costs, and many of them aren’t immediately obvious. Instead of eliminating financial worries, Medicare can sometimes introduce new ones, especially when you underestimate what isn’t covered or miscalculate what you still have to pay.

The Monthly Premiums Are Only the Starting Point

Let’s start with what you know: Medicare has premiums. Part A is premium-free for most people who have worked and paid Medicare taxes for at least 40 quarters. But Part B comes with a standard monthly premium in 2025 of $185. If your income exceeds certain thresholds, you may pay more through an Income-Related Monthly Adjustment Amount (IRMAA).

But these monthly payments are just your entry fee. What follows are a series of cost-sharing mechanisms that can significantly raise your actual healthcare spending over the course of the year.

Deductibles That Must Be Met Before Coverage Starts

In 2025, Medicare Part A has a hospital deductible of $1,676 for each benefit period. That means if you’re hospitalized twice in the same year with at least a 60-day gap in between, you could be responsible for more than one Part A deductible.

For Part B, the annual deductible is $257. Once you pay that, Medicare generally covers 80% of approved services, leaving you with 20%. This 20% coinsurance adds up quickly, especially for services like outpatient surgeries, diagnostic tests, and frequent doctor visits.

Copayments and Coinsurance Stack Up Quickly

After you meet your deductible, coinsurance becomes your next out-of-pocket hurdle. Medicare Part B typically covers 80% of approved services. That remaining 20% is your responsibility unless you have supplemental coverage.

Hospital stays also come with their own cost structure under Part A:

• Days 1–60: $0 coinsurance

• Days 61–90: $419 per day

• Days 91–100 (using lifetime reserve days): $838 per day

And for skilled nursing facility care:

• Days 1–20: $0 coinsurance

• Days 21–100: $209.50 per day

These are not small amounts, especially if your hospital or skilled nursing stay extends beyond the initial window.

Prescription Drug Costs Add Another Layer

Medicare Part D covers prescription drugs but comes with a separate monthly premium, a deductible (up to $590 in 2025), and cost-sharing throughout the year. Even more significant is the out-of-pocket spending cap that went into effect in 2025. Once you reach $2,000 in out-of-pocket costs for your covered medications, your plan pays 100% for the rest of the year.

While that $2,000 cap is an improvement from previous years, many people reach it faster than expected, particularly those with chronic conditions requiring brand-name medications.

What Medicare Doesn’t Cover Can Surprise You

Some of the most expensive gaps in Medicare coverage come not from what is included, but from what isn’t covered at all:

• Dental care: Routine exams, cleanings, fillings, and dentures are not covered.

• Vision care: Eye exams for glasses, and the glasses themselves, are excluded unless related to a medical condition.

• Hearing aids: Devices and exams for fitting them are not included.

• Long-term care: Custodial care in a nursing home is not covered by Medicare.

These services often have to be paid entirely out-of-pocket or through separate insurance options, which adds to your healthcare budget substantially.

Surprise Bills from Out-of-Network or Non-Assigned Providers

Even if a provider accepts Medicare patients, they might not accept Medicare assignment. This means they can charge up to 15% more than the Medicare-approved amount. You’ll be responsible for that excess cost.

Also, Medicare does not have a traditional network like most private insurance plans, but seeing a provider who doesn’t accept Medicare at all means Medicare pays nothing. If you’re not careful about verifying provider status, you could end up footing the entire bill.

Emergency Room Visits and Ambulance Services

Emergency situations can lead to some of the largest unexpected costs:

• Emergency room (ER) visits typically fall under Part B, meaning you pay 20% after the deductible.

• Ambulance services are also covered under Part B but are subject to coinsurance and approval. If Medicare deems the trip not medically necessary, you may owe the full amount.

In an emergency, verifying coverage isn’t a priority, but the financial fallout often comes later.

Home Health Services Aren’t Always Fully Covered

Medicare Part A and B do cover home health care under certain conditions, such as being homebound and requiring skilled nursing or therapy. However, this doesn’t mean full-time, long-term, or custodial care is included.

Medicare pays for part-time skilled services and medical supplies, but if you need help with bathing, dressing, or eating, you’re on your own to cover those costs.

Mental Health Treatment Costs Are Still Significant

As of 2025, Medicare provides expanded mental health coverage, including care from mental health counselors and marriage and family therapists. While this is a positive step, the cost-sharing structure remains:

• 20% coinsurance after meeting the Part B deductible

• Coverage limits for inpatient psychiatric care (190-day lifetime limit in a psychiatric hospital)

Ongoing therapy sessions, medication management, and follow-ups can create a steady stream of copayments.

Managing Chronic Illness Can Drain Your Budget

If you live with chronic conditions like diabetes, heart disease, or arthritis, your ongoing care involves frequent appointments, lab tests, imaging, prescription medications, and possibly durable medical equipment (DME).

Each of these services adds coinsurance costs that accumulate rapidly over months. Medicare Advantage plans may include some chronic care coordination features, but they also come with their own out-of-pocket costs, which vary widely.

Yearly Cost Planning Can Be Unpredictable

Even with all the listed costs, the total you spend out-of-pocket varies depending on your health each year. A single surgery, unexpected hospitalization, or new diagnosis can turn a manageable healthcare budget into one you struggle to cover.

And if you don’t have supplemental insurance, such as a Medigap plan or coverage through retirement benefits, you absorb the full brunt of Medicare’s cost-sharing structure.

Limited Annual Enrollment Periods Can Lock You In

If you want to adjust your Medicare coverage due to high out-of-pocket costs, you can’t make changes whenever you like. The Annual Enrollment Period (October 15 to December 7) is the only time most people can switch plans. If you miss this window, you could be stuck with a costly plan until the following year.

Special Enrollment Periods exist but only under specific circumstances, such as moving or losing other coverage.

Reviewing and Comparing Plans Is Essential

Many out-of-pocket surprises stem from assuming all Medicare plans are the same. They are not. In addition to Original Medicare (Parts A and B), there are Medicare Advantage plans and standalone Part D plans, each with different:

• Premiums

• Deductibles

• Copayments

• Provider rules

• Covered services

Taking the time to review each plan annually during the Open Enrollment period helps you stay ahead of unexpected costs.

Financial Help May Be Available—But Only If You Apply

Programs like Medicaid, the Medicare Savings Program, and Extra Help (for drug costs) exist to reduce out-of-pocket spending. However, they require applications, income assessments, and sometimes documentation that must be submitted each year.

Don’t assume you’re not eligible. Many people qualify for assistance but miss out simply because they didn’t apply or didn’t know the program existed.

Take Control of the Costs Before They Control You

Understanding Medicare’s out-of-pocket charges is critical if you want to maintain both your health and your financial stability in retirement. From hospital stays to prescriptions, and from mental health to chronic care, these costs can escalate quickly if you’re not prepared.

If you’re unsure how your current plan handles these charges or whether another plan could reduce your risk of financial strain, speak with a licensed agent listed on this website. You don’t have to figure it all out alone, and the right guidance can help you manage Medicare on your terms.