Key Takeaways

1. Medicare may seem comprehensive, but it has hidden costs you should be aware of to avoid unexpected expenses.

2. Understanding and identifying these costs early can help you plan your healthcare budget effectively.

The Truth About Medicare Coverage

Medicare is often viewed as the ultimate safety net for healthcare costs, but it doesn’t cover everything. While its primary focus is providing affordable healthcare for seniors and certain eligible individuals, you’ll find that many essential services require additional out-of-pocket expenses. Let’s unravel the less obvious aspects of Medicare so you can prepare for the hidden costs.

Unpacking Medicare’s Out-of-Pocket Expenses

Premiums: The Starting Point

Even though Medicare provides substantial coverage, it’s not free. Most people are familiar with the monthly premiums for Medicare Part B and possibly Part A. In 2025, the Part B premium is $185 per month, and for those with fewer than 40 work quarters, Part A can cost up to $518 monthly. These premiums can add up quickly, especially for couples or those on fixed incomes.

Deductibles and Coinsurance

Medicare deductibles are another layer of expense. In 2025, the Part A deductible is $1,676 per benefit period, which covers hospital stays. Part B has an annual deductible of $257. Once you meet these deductibles, you’ll still face coinsurance payments—20% of the Medicare-approved amount for most services under Part B. Hospital stays under Part A come with daily coinsurance fees after 60 days.

Hidden Costs in Medicare Part D

Prescription Drug Costs Beyond Premiums

Medicare Part D provides critical prescription drug coverage, but you’re not off the hook for costs. Even with the new $2,000 out-of-pocket cap for 2025, there are copayments, coinsurance, and plan deductibles to consider. You may also encounter the need for higher-tier medications that come with higher costs, even with insurance.

Formularies and Medication Restrictions

Each Part D plan has a formulary—a list of covered drugs. If your medication isn’t on the list or requires prior authorization, you could face unexpected costs. It’s essential to review your plan’s formulary and consult your healthcare provider about alternatives to avoid surprises.

The Gap in Dental, Vision, and Hearing Coverage

Original Medicare does not cover routine dental, vision, or hearing services. If you need dentures, glasses, or hearing aids, you’ll have to pay for them out of pocket unless you enroll in supplemental coverage. The costs for these services can run into thousands of dollars annually, depending on your needs.

The High Cost of Skilled Nursing and Long-Term Care

Limited Skilled Nursing Facility Coverage

Medicare covers skilled nursing facility care only under specific conditions, and even then, it’s limited. After 20 days, you’ll pay $209.50 per day in coinsurance, up to 100 days. Beyond that, all costs are yours to bear.

Long-Term Care Isn’t Included

Long-term custodial care, such as help with bathing or dressing, isn’t covered by Medicare. If you require this kind of care, you’ll need to explore Medicaid, private insurance, or pay out of pocket.

IRMAA: The Income-Related Surprise

Higher-income earners often face the Income-Related Monthly Adjustment Amount (IRMAA). If your modified adjusted gross income exceeds $106,000 (individuals) or $212,000 (couples), your Part B and Part D premiums will increase. This surcharge can significantly inflate your healthcare costs.

Understanding Medicare’s “Benefit Periods”

A benefit period starts when you’re admitted to a hospital and ends 60 days after you’ve been out of the hospital or skilled nursing facility. If you’re readmitted after this time, a new benefit period begins, and you’ll need to pay the Part A deductible again. Multiple hospitalizations in a year can lead to unexpected out-of-pocket costs.

Supplemental Plans: Are They Worth It?

Medigap and Medicare Advantage plans are often promoted as solutions to reduce out-of-pocket costs, but they come with their own premiums and potential limitations. It’s important to thoroughly evaluate the costs and benefits to determine if they’re right for you. Keep in mind, Medigap policies don’t include drug coverage, and some Medicare Advantage plans may have restrictive networks.

Preventative Services vs. Diagnostic Costs

Medicare does offer free preventative services, such as annual wellness visits and certain screenings. However, if a preventative test identifies a condition requiring further diagnostic tests, you’ll likely pay coinsurance or deductible fees. It’s a common oversight that could lead to unexpected bills.

Emergency and International Travel

Original Medicare generally doesn’t cover healthcare outside the United States. If you’re a frequent traveler, you’ll need to purchase additional coverage, such as a Medigap policy with foreign travel emergency benefits or standalone travel insurance. Without it, you’ll face hefty bills for medical emergencies abroad.

Planning Ahead for Financial Stability

Utilize HSAs While You Can

If you’re still working and eligible for a Health Savings Account (HSA), consider contributing the maximum amount. These funds can be used for qualified medical expenses, including Medicare premiums, offering tax advantages.

Monitor Changes During Open Enrollment

Each year, Medicare plans adjust their costs and benefits. Open Enrollment from October 15 to December 7 is your chance to review these changes and select plans that align with your needs. Ignoring this window could lock you into a plan that doesn’t meet your financial or healthcare requirements.

Create a Medical Expense Budget

Developing a comprehensive budget for medical expenses can help you anticipate and manage costs. Include premiums, deductibles, coinsurance, prescription drugs, and supplemental coverage in your calculations.

What You Can Do Today to Spot Hidden Costs

Compare Plans Thoroughly

Don’t assume your current plan is the best option. Use tools and resources to compare costs, coverage, and benefits of different plans during Open Enrollment.

Ask the Right Questions

When reviewing plans, ask about:

• What services require prior authorization?

• Are your preferred doctors and hospitals in-network?

• How are prescription drug costs structured?

Stay Informed

Medicare guidelines and benefits change annually. Stay updated to avoid missing critical details that could affect your healthcare costs.

Get Ahead of the Hidden Costs

While Medicare provides invaluable coverage, being unaware of its hidden costs can lead to financial strain. By identifying potential expenses early and planning accordingly, you can make the most of your Medicare benefits without unwelcome surprises.