Key Takeaways

• Medicare premiums in 2025 continue to rise, with Part B alone costing $185 per month and additional out-of-pocket charges for Parts A and D leading many retirees to remain in the workforce.

• Income-related adjustments, inflation, and gaps in coverage are key drivers pushing retirees to work longer just to manage their healthcare expenses.

Medicare Was Never Meant to Replace All Medical Costs

When you enrolled in Medicare, you may have assumed your healthcare costs would drop dramatically. After all, it’s a government health insurance program for people aged 65 and older. But Medicare has always been designed to cover only a portion of your medical expenses, and in 2025, that partial coverage often feels even more limited.

Medicare has separate parts:

• Part A (Hospital Insurance): Usually premium-free if you worked at least 10 years, but still includes deductibles and coinsurance.

• Part B (Medical Insurance): Comes with a standard monthly premium of $185 in 2025, and 20% coinsurance after the deductible.

• Part D (Prescription Drug Coverage): Requires a separate premium and may include deductibles and coinsurance up to a $2,000 annual cap.

• Medicare Advantage (Part C) and Medigap: Optional and provided by private companies. These are not free and vary widely in cost and coverage.

Even with standard Medicare, you pay monthly premiums, deductibles, and coinsurance. Add in the cost of medications, non-covered services, and routine care, and you’re facing a significant monthly healthcare budget.

Why Premiums Keep Rising Every Year

You might notice that your Medicare costs seem to creep up each year. This isn’t your imagination. Medicare premiums typically rise due to:

• Healthcare inflation: The cost of medical services, equipment, and drugs continues to climb.

• Higher enrollment: With more people aging into Medicare, the system faces increased strain, and costs are passed on to beneficiaries.

• Wage-based formula for Part B: Part B premiums are tied to 25% of the program’s cost, so as expenditures increase, so does your share.

• Prescription drug spending: While 2025 introduces a $2,000 out-of-pocket cap for Part D, premiums may still increase to offset plan expenses.

In 2025, even small annual increases add up. Many retirees who planned their retirement budget years ago now find that Medicare premiums are eating into more of their fixed income than expected.

Medicare Income-Related Surcharges Hit Middle-Class Retirees

If your income exceeds certain thresholds, you pay more for Medicare Part B and Part D. This is called the Income-Related Monthly Adjustment Amount (IRMAA).

For 2025:

• If your 2023 modified adjusted gross income was over $106,000 (individual) or $212,000 (joint), you face higher premiums.

• These IRMAA surcharges can add hundreds of dollars each month to your Medicare bills.

This hits many middle-class retirees hard, especially those drawing from taxable retirement accounts or selling assets. You may not feel wealthy, but the IRS rules determine your Medicare costs based on your income from two years ago, regardless of your current financial situation.

Retirees Return to Work Just to Cover Healthcare

A growing number of retirees are working part-time—or delaying retirement entirely—just to afford their Medicare premiums and other health-related expenses. The reasons are clear:

• Premiums exceed expectations: For many, Medicare premiums now account for more than 15% of monthly Social Security income.

• Out-of-pocket expenses: Coinsurance, deductibles, and services not covered by Medicare, such as dental, vision, and hearing care, can cost thousands annually.

• Inflation in other areas: Rising food, housing, and utility costs add pressure to stretch limited budgets.

• No employer-subsidized health coverage: Once you retire, you lose access to employer plans that may have previously offset some costs.

In 2025, even a part-time job becomes a necessity for many—not for luxuries, but simply to maintain access to routine healthcare.

You Might Be Paying More Than You Think

Here’s what a typical retiree might be looking at each year in 2025:

• Part B premium: $2,220 ($185/month)

• Part D premium: Around $558 annually, depending on plan

• Part D deductible: Up to $590

• Out-of-pocket drug costs: Up to $2,000 annually

• Dental, vision, and hearing care: Often excluded from Medicare and can exceed $2,000/year

All of this can push annual healthcare spending well over $6,000—even with basic Medicare. If you face chronic conditions or unexpected hospitalizations, that figure can rise much higher.

Medicare Doesn’t Cover Everything You Need

It’s easy to overlook how much isn’t covered by Medicare until you need it. The gaps include:

• Long-term care: Custodial care in assisted living or nursing homes is not covered.

• Routine dental services: Cleanings, crowns, and dentures must be paid out of pocket.

• Vision care: Glasses, contacts, and routine eye exams are not included.

• Hearing aids: Most plans exclude these entirely.

These services are essential for quality of life but can be financially out of reach unless you plan for them separately or continue working to afford supplemental coverage.

How Your Work History Affects Medicare Affordability

Many retirees assume that working for decades will make Medicare more affordable, but that’s only partially true:

• If you worked 40 quarters (10 years), you get Part A premium-free.

• However, you still pay for Part B and Part D unless you qualify for Medicaid or receive employer-sponsored retiree health benefits.

• Retiree plans are shrinking: Fewer employers are offering retiree health benefits, and those that do often require significant premiums.

So while your work history gets you in the door, it doesn’t shield you from the full cost of Medicare.

Rising Costs Are Forcing Harder Choices

As premiums and out-of-pocket costs rise in 2025, retirees are faced with difficult decisions:

• Should you work longer just for health coverage?

• Can you afford to delay retirement to preserve income?

• Is it necessary to draw down retirement savings faster to cover health costs?

• Should you consider moving to a lower-cost state or downsizing housing to free up funds?

Healthcare spending now rivals housing as one of the biggest expenses in retirement. These decisions have long-term consequences for your financial security.

What You Can Do to Stay Ahead of the Curve

While you can’t stop Medicare from raising its prices, you can take proactive steps to better manage the financial burden:

• Plan around IRMAA: Consider tax-efficient withdrawals from retirement accounts to avoid triggering surcharges.

• Compare plan options annually: Every October through December during Medicare Open Enrollment, review your plan to see if a more affordable one is available.

• Explore supplemental insurance: If you can afford it, Medigap policies or employer-sponsored retiree plans may fill key gaps.

• Use preventive services: Medicare covers many screenings and wellness visits at no cost to you. Use these benefits to catch problems early.

• Budget for non-covered services: Set aside money for dental, vision, hearing, and long-term care planning.

• Consult a professional: A licensed agent listed on this website can help you compare your options and identify cost-saving strategies.

The Financial Pressure of Medicare Isn’t Going Away

Medicare remains a valuable benefit, but in 2025, it’s no longer enough to assume that “Medicare will take care of it.” Premiums are rising. Gaps in coverage persist. And for millions of retirees, working part-time—or even full-time—is the only way to keep up.

If you’re still working just to afford your Medicare premiums, you’re not alone. The landscape has changed, and it’s more important than ever to be strategic.

To get personalized help understanding your Medicare costs, compare your current options, or explore supplemental coverage, reach out to a licensed agent listed on this website today.