Key Takeaways

• Medicare covers a wide range of medical services in retirement, but there are predictable expenses you should plan for every year.

• Understanding your guaranteed out-of-pocket Medicare costs can help you avoid financial surprises and build a more secure retirement plan.

Some Medicare Costs Are Unavoidable

Even with Medicare, you’re not shielded from all healthcare costs. Every year, retirees face certain baseline expenses that come with being enrolled in the program. These costs apply whether you choose Original Medicare or a Medicare Advantage plan, and they form the foundation of your annual healthcare budget.

What You Pay Monthly Just to Stay Enrolled

Medicare Part B, which covers outpatient services like doctor visits and preventive care, comes with a monthly premium. In 2025, the standard premium is $185. If your income is higher, you may pay an additional amount due to the Income-Related Monthly Adjustment Amount (IRMAA). These premiums are unavoidable unless you qualify for assistance programs.

While Medicare Part A (hospital insurance) is premium-free for most people, those who didn’t work enough quarters must pay a monthly premium. This can be as high as $518 if you paid Medicare taxes for fewer than 30 quarters.

You must pay these premiums each month, regardless of how much medical care you use.

Your Annual Deductibles Aren’t Optional

Each part of Medicare has its own deductible. These must be paid before coverage kicks in.

Medicare Part A Deductible

The 2025 Part A deductible is $1,676 per benefit period. A benefit period begins the day you’re admitted as an inpatient and ends 60 days after you leave. If you’re hospitalized multiple times with breaks of more than 60 days in between, you could pay the deductible more than once in a year.

Medicare Part B Deductible

The annual deductible for Part B in 2025 is $257. Once you’ve paid it, Medicare covers 80% of the approved amount for most services, and you’re responsible for the remaining 20%.

These deductibles are part of your guaranteed annual Medicare spending.

Coinsurance and Copayments Are Built In

After you meet your deductibles, you still share costs with Medicare.

• Part A coinsurance for hospital stays longer than 60 days: You pay $419 per day for days 61 to 90 and $838 per day for lifetime reserve days.

• Skilled nursing facility coinsurance is $209.50 per day for days 21 through 100.

• Part B coinsurance is 20% of the Medicare-approved amount for outpatient care, diagnostic tests, and durable medical equipment.

These cost-sharing amounts add up over time and are an almost certain part of your annual Medicare expenses.

Prescription Drugs Come With Ongoing Costs

Prescription coverage is not included in Original Medicare, so most people enroll in a separate Part D plan or get drug coverage through a Medicare Advantage plan. Regardless of how you get your coverage, certain costs are a near guarantee:

• Monthly premiums for Part D (amounts vary by plan)

• Annual deductible, capped at $590 in 2025

• Copayments and coinsurance based on the drug tier and coverage phase

Once your total out-of-pocket drug spending hits $2,000 in 2025, your plan covers all further drug costs for the year. But reaching that cap can still mean significant monthly spending, especially for those on multiple medications.

Out-of-Pocket Maximums Still Leave Gaps

Original Medicare doesn’t have a cap on your total out-of-pocket costs. This means there’s no annual ceiling to limit your exposure if you experience a major illness.

Some choose Medicare Advantage plans because they include an out-of-pocket maximum, which is set at $9,350 for in-network services in 2025. However, this limit only applies to Medicare-covered services and doesn’t include drug costs, dental, vision, or hearing if those are offered.

Even with a cap, you could pay thousands before reaching that limit.

Preventive Care Isn’t Always Free

Medicare covers many preventive services at no cost to you, such as screenings for cancer, heart disease, and diabetes. But not all tests or visits are fully covered. If your doctor orders additional services during a preventive visit, those extras may fall under Part B cost-sharing.

In some cases, even a service labeled “preventive” may lead to follow-up care that includes copayments or coinsurance.

Services Medicare Doesn’t Cover at All

There are entire categories of care Medicare generally does not pay for. You will need to cover these out of pocket or find supplemental coverage to help offset the costs:

• Routine dental care (cleanings, fillings, dentures)

• Routine vision care (eyeglasses, contacts, exams)

• Hearing aids and exams

• Long-term custodial care (help with activities of daily living in nursing homes or at home)

These are not random exclusions. They are longstanding gaps in Medicare, and the costs can become unavoidable over time, especially with aging.

Emergency and Foreign Travel Coverage Is Limited

Medicare does not provide comprehensive coverage outside the United States. If you travel abroad, you’re largely on your own for medical care unless you have a Medigap policy that offers limited emergency coverage or purchase separate travel insurance.

Even domestically, emergency room visits under Part B come with a 20% coinsurance and possibly facility fees that aren’t fully covered. Ambulance rides also involve out-of-pocket charges.

These are high-probability events that many retirees encounter at least once.

Mental Health Services Are Subject to Cost Sharing

Medicare Part B covers outpatient mental health services, including therapy and psychiatric evaluations. Starting in 2024, licensed marriage and family therapists and mental health counselors are also covered providers.

You’ll pay:

• 20% coinsurance after meeting your Part B deductible

• Hospitalization for psychiatric care is subject to Part A deductible and coinsurance, up to a lifetime limit of 190 days

These costs are likely if you seek behavioral health support during retirement.

Late Enrollment Penalties Are Lifelong

One of the most predictable Medicare expenses is one you might not even expect: penalties for late enrollment. If you don’t enroll in Part B or Part D during your Initial Enrollment Period and don’t qualify for a Special Enrollment Period, you could face late penalties:

• Part B penalty: 10% for every 12-month period you delay, added to your premium for life

• Part D penalty: 1% of the national base premium for each month you delay, also permanent

These fees accumulate and can follow you for the rest of your retirement if you miss the deadlines.

Medigap Premiums Can Be a Consistent Expense

If you choose to stay with Original Medicare, you may opt for a Medigap (Medicare Supplement) plan to help cover out-of-pocket costs. These plans have their own monthly premiums that are not paid to Medicare but to private insurers.

While you’re not required to buy a Medigap policy, doing so helps smooth out the unpredictable expenses mentioned above. Still, the premiums are part of your recurring retirement healthcare budget.

Premiums generally increase with age and inflation, so even if they’re affordable now, they may rise over time.

Medicare Advantage Plans Still Have Shared Costs

Choosing a Medicare Advantage plan doesn’t eliminate expenses. While these plans often cap your spending and bundle services, they still include:

• Monthly premiums (varies by plan)

• Deductibles for medical and drug coverage

• Copayments for doctor visits, specialists, hospital stays, urgent care, and more

• Prior authorization requirements that could delay care or affect out-of-pocket amounts

You may also face higher out-of-pocket costs if you go out of network.

Healthcare Inflation Makes Everything Cost More Over Time

Medical costs generally rise faster than regular inflation. This means today’s predictable expenses will likely be higher in five or ten years. Even fixed elements like premiums, deductibles, and coinsurance amounts can go up annually.

For example:

• The Part B premium rose from $174.70 in 2024 to $185 in 2025.

• The Part D deductible increased from $545 to $590.

• The Part A hospital deductible increased by $32.

You should expect these figures to continue increasing in the future, especially as Medicare adjusts for rising healthcare spending.

Don’t Assume You’ll Spend Less Just Because You’re Healthy

Many people mistakenly believe that if they’re healthy, their Medicare costs will be minimal. While it’s true that you may avoid hospitalization or extensive treatment, you’ll still pay premiums, deductibles, and possibly drug costs.

In addition, certain health needs increase with age, regardless of current wellness. These include:

• Preventive screenings

• Eye exams and glasses

• Dental issues

• Hearing loss

• Mental health support

You may not be able to avoid these entirely, even with excellent overall health.

How to Plan Around These Inevitable Costs

Now that you know which expenses are essentially guaranteed, take time to:

• Build them into your retirement budget

• Compare Medigap or Medicare Advantage options to minimize variable costs

• Consider health savings accounts if you’re still working and eligible

• Monitor changes in Medicare cost-sharing every year during open enrollment

Staying informed helps you make adjustments before small expenses grow into big problems.

Knowing What to Expect Helps You Stay in Control

You can’t foresee every health event, but you can absolutely prepare for Medicare expenses that are built into the system. From premiums and deductibles to coinsurance and uncovered services, these costs are part of the structure of your retirement healthcare.

Planning for them now helps you protect your savings later.

To get help reviewing your Medicare options or understanding how these costs apply to you specifically, speak with a licensed agent listed on this website. They can walk you through choices that may help reduce uncertainty and improve your coverage.