Key Takeaways

• Even though Medicare helps reduce large healthcare expenses, many costs are deducted in ways that are not immediately visible, leading you to spend more than expected.

• Being aware of premiums, deductibles, coinsurance, and drug costs in 2025 is critical to avoid financial surprises and manage your long-term healthcare budget.

Medicare Doesn’t Work Like a Typical Insurance Plan

Many people assume Medicare will handle most of their healthcare bills once they enroll. While that is partially true, it’s the structure of Medicare that creates financial blind spots. Medicare is not one single plan, but a system made up of multiple parts, each with its own rules and costs. If you’re not paying attention, costs can pile up before you even realize it.

Premiums Are Deducted Before You Even See Your Money

Your Social Security check is often where Medicare starts pulling funds. For most people who receive Social Security, the monthly premium for Medicare Part B is automatically deducted from your benefit before you even receive it. In 2025, that standard monthly premium is $185.

If you’re enrolled in Medicare Part D or a Medicare Advantage plan with drug coverage and you opted for premium withholding, those amounts may also be deducted from your Social Security. This deduction process makes it easy to lose sight of just how much you’re paying for your coverage.

What This Means for You

• Your Social Security payment might be hundreds of dollars less than expected.

• You might not realize you’re spending over $2,000 a year on just Part B premiums.

• Any IRMAA (Income-Related Monthly Adjustment Amount) surcharges based on higher income can further reduce your check.

Deductibles Reset Every Year

Medicare operates on an annual basis. That means each year, you’re responsible for meeting a new deductible before full benefits kick in.

2025 Deductibles to Watch

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

• Part B deductible: $257 per year.

• Part D deductible: Up to $590 depending on your plan.

Unlike private insurance with one yearly deductible, Medicare Part A resets its deductible with each new hospital benefit period, not annually. That means if you’re hospitalized more than once during the year, you may face this cost multiple times.

Coinsurance Costs Add Up Quickly

Once your deductibles are met, Medicare typically doesn’t pay 100% of costs. You’ll still owe coinsurance or copayments for most services.

Here’s What You May Pay in 2025:

• Inpatient hospital care (Part A):

  • Days 1-60: $0 coinsurance

  • Days 61-90: $419 per day

  • Days 91 and beyond (lifetime reserve days): $838 per day

• Skilled nursing facility:

  • Days 1-20: $0

  • Days 21-100: $209.50 per day

• Doctor visits and outpatient services (Part B): 20% of the Medicare-approved amount after you meet the $257 deductible.

Unless you have supplemental coverage or retiree benefits to absorb these coinsurance costs, you may be paying them out of pocket without much warning.

Prescription Costs Are Capped, But Still Costly

The 2025 Medicare Part D change introduces a $2,000 annual out-of-pocket maximum. While this cap is a financial relief, reaching that amount may still be unavoidable for those on long-term or high-cost medications.

Here’s how you could reach the cap:

• First, you pay the deductible (up to $590)

• Then you pay copays or coinsurance through the initial coverage phase

• Once your total out-of-pocket costs reach $2,000, your plan covers the rest

Even though the out-of-pocket cap helps, most of these payments are made little by little, which means they often go unnoticed until you total them.

Supplemental Coverage Isn’t Free

Many enrollees choose to add a Medigap plan or switch to a Medicare Advantage plan to help reduce their out-of-pocket costs. But these come with monthly premiums of their own, sometimes higher than Part B itself.

Medigap plans don’t cover Part D, so if you enroll in one, you’ll also need to pay a separate Part D premium. Some Medicare Advantage plans include prescription drug coverage, but may still have network restrictions, prior authorization requirements, and limited providers.

So while supplemental coverage can help reduce some unpredictable expenses, it also adds to your monthly cost burden.

Unexpected Hospitalizations Multiply Costs

Hospital stays are some of the most expensive healthcare events, and Medicare Part A has limits. If you’re admitted more than once in a year, or if you exceed 90 days in a hospital, your out-of-pocket costs can escalate.

Also, if you’re placed under observation status instead of being officially admitted, Medicare Part A might not apply. Instead, you may be billed under Part B, which includes 20% coinsurance.

These classification differences can result in thousands of dollars in surprise charges, especially for those not enrolled in supplemental plans.

IRMAA Can Take You by Surprise

Your Medicare Part B and Part D premiums can be much higher if your income exceeds certain thresholds. The IRS uses your tax return from two years prior to determine if you owe an income-related adjustment.

For 2025:

• If your 2023 income was above $106,000 (individual) or $212,000 (joint), your premiums will be higher.

• These surcharges are added automatically to your monthly Medicare premium and deducted from your Social Security.

If you have a one-time increase in income from selling property, withdrawing from a retirement account, or receiving a large bonus, you might trigger IRMAA without realizing it.

Gaps in Coverage Still Exist

Even with all parts of Medicare, there are services that may not be fully covered or covered at all:

• Dental care (cleanings, fillings, dentures)

• Vision services (routine eye exams, eyeglasses)

• Hearing aids and exams

• Long-term custodial care

To pay for these, you either need to purchase additional coverage or pay out of pocket, which can amount to thousands annually depending on your health needs.

Telehealth and Mental Health: Covered but Limited

Medicare continues to support telehealth in 2025, including for mental health. However, an in-person visit is required at least once every 12 months for mental health telehealth to remain eligible, unless specific exemptions apply.

In addition, while marriage and family therapists and mental health counselors are now covered under Part B, the 20% coinsurance still applies. Therapy sessions and behavioral health programs can lead to significant out-of-pocket expenses when accessed frequently.

Yearly Cost Increases Are Built In

Each year, Medicare costs are adjusted. That includes:

• Part B premiums

• Deductibles for Parts A, B, and D

• Coinsurance rates

So even if you budgeted perfectly for 2024, you may still spend more in 2025 without any change in your health status. These annual adjustments, driven by inflation and healthcare costs, can quietly erode your savings.

You’re Probably Not Tracking All the Deductions

Between monthly premiums, deductibles, coinsurance, IRMAA, and out-of-pocket drug costs, the total amount you spend annually can exceed expectations. But because these costs are deducted in small chunks, or automatically removed from Social Security, they often go unnoticed.

Keeping a record of your Medicare-related deductions and out-of-pocket payments each year can help you:

• Identify rising trends

• Spot billing issues or incorrect charges

• Plan ahead for future years

Why Staying Proactive Makes a Difference

It’s not just about watching your current expenses. Medicare decisions affect your long-term financial health. Failing to review your plan annually during Open Enrollment (October 15 to December 7) can lock you into higher costs or a plan that no longer meets your needs.

You should:

• Review your Annual Notice of Change (ANOC)

• Compare your current plan with alternatives

• Check if your prescriptions are still covered affordably

• Confirm provider networks haven’t changed

Your Long-Term Financial Security Relies on Cost Awareness

Medicare provides vital protection, but it doesn’t insulate you from all healthcare costs. Because premiums and deductions are automated and often overlooked, your actual spending may only become clear after you’ve lost thousands.

Taking the time to track your expenses, understand your plan’s coverage limits, and re-evaluate your choices annually can protect you from financial surprises. If you feel unsure, you should get help from a licensed agent listed on this website who can walk you through your current Medicare situation and suggest smarter coverage options.