Key Takeaways

• Simply having a Medicare card doesn’t mean you’re fully covered; unexpected costs can still add up quickly, especially for outpatient care, hospital stays, and prescriptions.

• Understanding what Medicare does not cover in 2025 is critical to avoid budget surprises and medical debt later in retirement.

The Illusion of Full Coverage

Carrying a Medicare card might give you peace of mind, but it shouldn’t give you a false sense of financial security. While Medicare plays a crucial role in helping you manage healthcare costs in retirement, it doesn’t eliminate them. There are premiums, deductibles, coinsurance, and numerous exclusions that many enrollees only discover after receiving a hefty bill.

What Original Medicare Actually Covers

Original Medicare includes Part A (hospital insurance) and Part B (medical insurance). While it offers broad coverage, it’s far from comprehensive:

Part A (Hospital Insurance)

• Covers inpatient hospital stays, limited time in skilled nursing facilities, hospice care, and some home health services.

• Comes with a deductible per benefit period, which in 2025 is $1,676.

• Requires coinsurance payments if you’re hospitalized for more than 60 days.

Part B (Medical Insurance)

• Covers doctor visits, outpatient care, preventive services, and some home health.

• Requires a monthly premium, which is $185 in 2025.

• Has a yearly deductible of $257.

• After meeting the deductible, you typically pay 20% of Medicare-approved services.

Major Costs Medicare Doesn’t Cover

Even though Medicare helps reduce healthcare expenses, several essential services are not covered:

Long-Term Care

• Medicare doesn’t pay for custodial care, which includes assistance with activities of daily living like bathing, dressing, or eating in a nursing home or assisted living facility.

• These services can cost thousands of dollars per month.

Dental, Vision, and Hearing

• Routine dental cleanings, dentures, hearing aids, and eyeglasses are not included under Original Medicare.

• Many retirees are shocked by how much these services cost when paid out-of-pocket.

Prescription Drugs

• Part D is optional and comes with its own premium and cost-sharing rules.

• In 2025, Part D has a $590 deductible and a new $2,000 out-of-pocket spending cap, but the coverage gaps and complexities still exist.

Emergency Travel Abroad

• Medicare generally doesn’t cover care received outside the U.S., which becomes a risk for retirees who travel.

Why Out-of-Pocket Costs Continue to Climb

Healthcare inflation hasn’t slowed, and Medicare cost-sharing responsibilities continue to rise accordingly. Between premiums, copayments, and coinsurance, your share of medical bills can still reach tens of thousands annually.

Here’s why these costs keep catching people off guard:

• Yearly increases in Part B premiums and deductibles

• Uncovered services like dental, vision, and long-term care

• Coinsurance responsibilities that have no annual cap under Original Medicare

Part D Costs Add Up Too

While the 2025 out-of-pocket cap of $2,000 on prescription drugs under Part D is a relief, you still need to factor in:

• Monthly Part D premiums

• Annual deductible (up to $590)

• Cost-sharing for each prescription filled before you hit the cap

• The complexity of formulary restrictions, prior authorizations, and tiered pricing

Hospital Costs Can Still Surprise You

Medicare Part A seems generous at first glance, but prolonged hospital stays or multiple admissions in one year can quickly lead to large out-of-pocket liabilities:

• After the 60th day of inpatient hospitalization, you must pay daily coinsurance ($419/day for days 61-90)

• If you exceed 90 days, you enter lifetime reserve days, with a daily coinsurance of $838

• Once lifetime reserve days are used up, you’re fully responsible for any costs beyond that

The Impact of No Out-of-Pocket Maximum on Original Medicare

Unlike most private insurance plans, Original Medicare has no cap on annual out-of-pocket costs. That means:

• There’s no upper limit on what you could pay in a bad year

• A single year of poor health could drain retirement savings

• Even preventive care can lead to follow-up diagnostics and treatments that carry high coinsurance charges

The Role of Medigap and Other Coverage

To limit risk, many people buy additional coverage such as:

• Medigap (Medicare Supplement Insurance): Helps cover costs like coinsurance, deductibles, and foreign travel emergencies

• Retiree health benefits: Offered by some former employers to cover what Medicare doesn’t

• Medicare Advantage (Part C): Includes a cap on out-of-pocket costs, though it comes with its own limitations and network restrictions

It’s essential to compare these carefully based on your personal health needs and finances. Not every plan is the same, and cost-saving features can vary.

Late Enrollment Penalties That Don’t Go Away

If you delay enrolling in Medicare Part B or Part D when you’re first eligible, you may be penalized for life:

• Part B penalty: 10% increase in your premium for every 12-month period you delay

• Part D penalty: 1% increase in your premium for each month you were without creditable coverage

These penalties are permanent and can make your premiums significantly more expensive over time.

The Risk of Assuming Everything Is Covered

Too many people equate having a Medicare card with full protection. This misconception leads to underestimating future expenses and failing to budget for uncovered needs. The result is:

• Unanticipated debt

• Delaying care due to cost

• Draining savings earmarked for other retirement goals

Planning for the Gaps in 2025

With all these potential out-of-pocket costs, it’s essential to build a realistic plan. Here’s what you can do:

• Review your Annual Notice of Change (ANOC): Know what’s changing in your plan each year

• Create a monthly medical budget: Include premiums, deductibles, co-pays, and expected prescriptions

• Consider supplemental coverage: Evaluate the trade-offs between Original Medicare with Medigap and Medicare Advantage options

• Talk to a professional: Get personalized help to understand how different coverage choices impact your future

Common Triggers for High Medical Bills

Even with Medicare, the following situations often lead to expensive surprises:

• Extended rehabilitation stays following surgery

• Needing home health aides for daily activities

• Unplanned hospitalizations or emergency visits

• Regular use of brand-name medications or specialty drugs

• Skipping Part D and later trying to catch up

The Psychological Toll of Medical Debt in Retirement

It’s not just your finances that suffer. The stress of unexpected bills can take a toll on your mental and emotional well-being:

• Fear of seeking care due to high costs

• Anxiety about future health issues

• Strain on relationships from financial pressures

By acknowledging these potential risks ahead of time, you give yourself a better chance at avoiding them entirely.

Proactive Planning Means Better Outcomes

You can’t control every medical event, but you can control how prepared you are. Understanding your Medicare coverage and taking steps to fill in the gaps can mean the difference between a secure retirement and one full of costly surprises.

Be Ready Before the Bills Arrive

Just having a Medicare card in your wallet doesn’t guarantee financial protection. You still need to plan for what’s not covered, assess your risk exposure, and consider your options for supplemental coverage.

If you want help making sense of the costs, coverage gaps, and Medicare options that suit your needs in 2025, speak with a licensed agent listed on this website.