Key Takeaways

• Understanding Medicare basics in 2025 can prevent unexpected out-of-pocket costs and coverage gaps.

• Knowing how the different parts of Medicare work together helps you avoid penalties and make smarter enrollment choices.

What Medicare Actually Covers—And What It Doesn’t

Medicare isn’t all-inclusive, and knowing what’s covered can help you prepare financially and medically. Original Medicare is divided into two core parts: Part A and Part B.

Part A: Hospital Insurance

Part A covers inpatient care, including:

• Hospital stays

• Skilled nursing facility care (following a hospital stay)

• Hospice care

• Limited home health care

In 2025, there’s a $1,676 deductible for each benefit period under Part A. Coinsurance kicks in for extended hospital stays: $419 per day for days 61–90, and $838 per day for lifetime reserve days.

Part B: Medical Insurance

Part B helps with:

• Doctor visits

• Outpatient care

• Preventive services

• Durable medical equipment

You’re responsible for a monthly premium, which is $185 in 2025, and an annual deductible of $257. After that, Medicare typically covers 80% of approved services, leaving you with 20% coinsurance.

Not Covered by Original Medicare

Original Medicare does not cover:

• Routine dental, vision, or hearing care

• Long-term custodial care

• Most prescription drugs

• Foreign travel emergency care

That’s where other options like Medicare Part D and supplemental coverage come into play.

Understanding the Role of Medicare Part D

Part D provides prescription drug coverage. Plans are offered through private companies but regulated by Medicare. In 2025, there’s a significant change: a $2,000 annual out-of-pocket cap on drug costs.

The Structure of Part D in 2025

• Deductible phase: Up to $590

• Initial coverage phase: After you meet the deductible, you pay a share of drug costs

• Catastrophic phase: Starts once you’ve paid $2,000 out of pocket—after that, your plan pays 100% for covered drugs

This cap eliminates the former coverage gap known as the “donut hole,” offering more predictability in drug expenses.

Enrollment Periods: Timelines You Cannot Afford to Miss

Missing a Medicare enrollment period can lead to penalties, delays in coverage, or both.

Initial Enrollment Period (IEP)

This seven-month window begins three months before the month you turn 65, includes your birth month, and continues for three months after. Sign up during this period to avoid late enrollment penalties.

General Enrollment Period (GEP)

If you miss your IEP, you can enroll between January 1 and March 31 each year. Coverage starts July 1, and you may face penalties if you delayed without qualifying coverage.

Open Enrollment (Annual Election Period)

From October 15 to December 7, you can:

• Switch from Original Medicare to a Medicare Advantage plan

• Change or drop Part D coverage

Any changes made take effect on January 1 of the following year.

Special Enrollment Period (SEP)

You might qualify for a SEP if you:

• Move

• Lose employer coverage

• Become eligible for Medicaid

SEPs allow you to make changes outside the standard windows.

What Happens If You Delay Enrollment

Delaying Medicare can cost you—literally.

Part B Late Enrollment Penalty

You’ll pay a 10% increase in your premium for each 12-month period you delay enrollment without other creditable coverage. This penalty is permanent.

Part D Late Enrollment Penalty

A 1% penalty is added to your monthly premium for each month you go without creditable drug coverage after becoming eligible. Like the Part B penalty, this one also lasts for life.

Medicare Advantage Plans: What to Know Before You Enroll

Medicare Advantage (Part C) bundles Parts A and B, often including Part D and extra benefits. However, the benefits and costs vary by location and plan structure.

Pros

• May include dental, vision, and hearing

• Annual out-of-pocket maximum for in-network care (in 2025, up to $9,350)

Cons

• Networks can limit your choice of doctors

• Out-of-network care can be expensive or not covered

• Plan benefits and provider networks may change each year

You should compare your options carefully each fall during Open Enrollment.

Medigap: A Buffer for Unexpected Costs

Medigap, or Medicare Supplement Insurance, helps pay for costs that Original Medicare doesn’t cover, such as copayments and coinsurance. Medigap plans are standardized but offered through private insurers.

When to Enroll in Medigap

The best time to enroll is during your six-month Medigap Open Enrollment Period, which starts the month you’re both 65 and enrolled in Part B. After this window, you may be subject to medical underwriting.

What Medigap Doesn’t Cover

Even the most comprehensive Medigap plans won’t cover:

• Prescription drugs (get a Part D plan)

• Long-term care

• Dental, vision, or hearing care

The Medicare-Medicaid Overlap

Some individuals qualify for both Medicare and Medicaid. Known as dual-eligible beneficiaries, these individuals often receive additional cost-sharing help.

Medicaid may help with:

• Part B premiums

• Deductibles and copayments

• Long-term care services that Medicare does not cover

Eligibility varies by state, but it can significantly reduce your costs if you qualify.

How Medicare Works with Employer Coverage

If you’re still working at 65 and covered by an employer plan, Medicare may act as either primary or secondary coverage, depending on the employer’s size.

• 20 or more employees: Your employer’s plan pays first

• Fewer than 20 employees: Medicare becomes primary

You can delay Part B (and Part D) without penalty if your employer coverage is considered creditable.

Why Medicare Isn’t Set-and-Forget

Every year brings changes to costs, benefits, and plan availability. What worked for you in 2024 might not suit your needs in 2025.

Annual Notice of Change (ANOC)

Each fall, you should receive an ANOC from your Medicare plan provider. It outlines any upcoming changes in:

• Premiums

• Copays

• Drug formularies

• Provider networks

Review it carefully before Open Enrollment to avoid unwanted surprises in January.

Medicare and Travel: The Limits of Coverage

Original Medicare usually doesn’t cover medical care outside the U.S. Some Medigap plans offer limited emergency coverage abroad, but coverage is not guaranteed.

If international travel is a priority, you’ll need to consider supplemental options that provide emergency care during travel.

Looking Ahead: 2025 and Beyond

In 2025, some of the most impactful changes include:

• $2,000 cap on out-of-pocket drug costs

• A new payment flexibility allowing monthly prescription cost installment plans

• Updates to Medicare Advantage supplemental benefits and networks

These changes aim to reduce costs and expand access, but they also add layers of complexity. Staying informed is your best line of defense.

Being Informed Means Being Prepared

Understanding Medicare’s structure isn’t just a box to check—it’s protection. Knowing when to enroll, what’s covered, and how each part functions shields you from penalties, coverage gaps, and higher costs.

If you still have questions or want to ensure you’re choosing the best combination of coverage, talk to a licensed agent listed on this website for professional advice tailored to your needs.