Key Takeaways

• Even with Medicare, you are likely to face several out-of-pocket costs each year that aren’t always obvious upfront. These include deductibles, coinsurance, non-covered services, and prescription expenses.

• Being aware of what Medicare doesn’t fully pay for can help you budget more accurately and avoid financial surprises during your retirement.

The False Comfort of Having a Medicare Card

When you first enroll in Medicare, it may feel like you finally have full coverage. But a closer look at how the system works reveals that many services come with shared costs. The monthly premium you pay for Part B, and potentially for Part D or a supplemental plan, is just the beginning. Without proper preparation, these recurring and sometimes unexpected charges can put a strain on your finances, especially if you are on a fixed income.

What You Actually Pay Annually

You need to factor in multiple layers of costs each year. These include:

• Premiums: In 2025, the standard Part B premium is $185 per month, or $2,220 annually. This figure can increase if your income exceeds certain thresholds.

• Deductibles: The Part B annual deductible is $257 in 2025. Part A has a $1,676 deductible per benefit period, which could apply more than once in a year if you are hospitalized multiple times.

• Coinsurance and Copayments: After meeting your deductible, you typically pay 20% of the cost for most services under Part B. Hospital stays under Part A also require daily coinsurance for longer stays.

• Prescription Drug Costs: Even with Part D, you may face up to $590 in deductibles in 2025, plus copays and coinsurance for medications. Once your out-of-pocket costs hit $2,000, catastrophic coverage kicks in, but only after significant spending.

These costs can easily add up to several thousand dollars annually, depending on your health status and how often you use services.

Non-Covered Services Catch Many Off Guard

Medicare has specific exclusions that many people overlook. Here are some of the most significant ones:

• Long-Term Custodial Care: Medicare does not pay for help with daily activities like bathing, dressing, or eating, unless it’s part of a limited skilled nursing stay.

• Routine Vision and Dental Care: Eye exams for glasses, dental cleanings, fillings, and dentures are not covered.

• Hearing Aids: While hearing exams may be partially covered if ordered by a doctor, the cost of hearing aids themselves is typically not included.

• Overseas Emergencies: Medicare generally does not cover health care services received outside the U.S., unless under very specific circumstances.

• Routine Foot Care: Unless medically necessary due to conditions like diabetes, foot care services are not paid for.

If you rely on any of these services, you’ll need to plan accordingly or explore supplemental coverage.

Income Can Affect Your Medicare Costs

Medicare uses your income from two years ago to determine your current premiums. If your modified adjusted gross income exceeds $106,000 (individual) or $212,000 (joint) in 2023, you may pay more for both Part B and Part D through Income-Related Monthly Adjustment Amounts (IRMAA). This increase can be several hundred dollars per month, so it’s crucial to be aware of how your income planning affects your Medicare expenses.

Hospitalization Can Trigger Multiple Charges

A single hospital visit can bring multiple costs:

• Inpatient Deductible: Each benefit period requires a $1,676 payment.

• Daily Coinsurance: For stays longer than 60 days, you’ll pay $419 per day (days 61-90) and $838 per day for lifetime reserve days (beyond 90 days).

• Skilled Nursing Facility Charges: Covered only if you were hospitalized for at least 3 days, and coverage only lasts up to 100 days. After day 20, you pay $209.50 per day.

Even short stays can result in steep bills if you haven’t prepared.

The $2,000 Drug Cap Helps, But Doesn’t Eliminate Costs

Starting in 2025, Medicare Part D enforces a $2,000 annual cap on out-of-pocket prescription drug costs. This is a major relief compared to previous years, when the “donut hole” left many beneficiaries paying thousands. However, this cap only kicks in after you meet deductibles and other thresholds. Until then, you’ll still be responsible for monthly premiums, copayments, and coinsurance.

Additionally, the new Medicare Prescription Payment Plan allows you to spread these costs over 12 months, but it doesn’t reduce the total amount owed.

Dental, Vision, and Hearing: The Trio of Uncovered Essentials

The absence of dental, vision, and hearing coverage in Original Medicare creates a significant financial gap. Here’s what you may face:

• Routine Dental Exams and Procedures: Cleanings, x-rays, root canals, and dentures must be paid out of pocket.

• Eyewear: After a cataract surgery, Medicare may cover one pair of glasses, but anything beyond that is your responsibility.

• Hearing Aids and Tests: You could face thousands in expenses without private insurance or supplemental coverage.

While some supplemental plans or Part C options may help, they often come with their own set of premiums and cost-sharing responsibilities.

Unexpected Emergency and Ambulance Costs

Emergency services are not always fully covered. For example:

• Ambulance Transportation: Medicare pays 80% of the approved amount after your Part B deductible is met. You’re responsible for the remaining 20%.

• ER Visits: You may have copayments and coinsurance, even if the visit results in inpatient admission.

• Observation Status: If you’re held for observation instead of being admitted as an inpatient, Medicare billing rules differ, which may leave you on the hook for higher out-of-pocket expenses.

Understanding these nuances is critical to avoiding surprises during an already stressful situation.

Annual and Lifetime Limits Are Still a Factor

Medicare Part A imposes lifetime reserve days after 90 days of hospitalization in a benefit period. You only have 60 reserve days over your entire life. After that, you pay the full cost of any hospital stay beyond 90 days.

Part B doesn’t have a lifetime limit, but cost-sharing continues indefinitely as long as you use services. This means you could pay more each year depending on how often you visit specialists or receive treatment.

Mental Health and Behavioral Services Aren’t Free

Medicare does cover mental health services, but they come with out-of-pocket costs. In 2025:

• Inpatient Psychiatric Care: Covered under Part A but limited to 190 lifetime days.

• Outpatient Services: You’ll pay 20% of the Medicare-approved amount for therapy and counseling sessions.

• Partial Hospitalization Programs: These are intensive outpatient treatments covered under Part B but still involve coinsurance.

New in 2025, Medicare covers services by mental health counselors and marriage and family therapists, expanding your access. However, coinsurance still applies.

Telehealth and At-Home Services: Coverage With Caveats

Telehealth is permanently covered under Medicare, which is a welcome update. However, as of October 1, 2025, beneficiaries must have an in-person mental health visit every 12 months to continue telehealth access for mental health. Exceptions apply for those in rural or underserved areas.

Other at-home services, such as physical therapy or skilled nursing, are covered only under strict eligibility guidelines. Failure to meet them could result in denial of coverage and full cost burden.

Preventive Care: Limited but Valuable

Medicare does cover a range of preventive services at no cost, including:

• Annual wellness visits

• Screenings for cancer, diabetes, and cardiovascular conditions

• Flu and pneumonia vaccines

However, any additional testing, follow-ups, or treatments stemming from preventive screenings are subject to coinsurance and deductibles.

How to Prepare for Medicare’s Hidden Expenses

To protect yourself, you should:

• Build a Health Expense Budget: Account for premiums, deductibles, coinsurance, and uncovered services.

• Track Your Income: Monitor how your MAGI impacts IRMAA charges.

• Review Your Coverage Each Year: Medicare Open Enrollment runs from October 15 to December 7.

• Consider Adding Coverage: If you expect to use dental, vision, hearing, or frequent prescriptions, look into supplemental options.

• Ask Questions: Medicare can be confusing. Speak to a licensed agent listed on this website who can walk you through your specific needs.

Understanding Medicare’s Gaps Can Help You Plan More Effectively

Medicare provides a critical safety net, but it is not a catch-all solution. Costs like premiums, deductibles, copayments, and non-covered services can add up quickly and quietly. If you prepare for these financial blind spots now, you’ll have fewer surprises down the road.

Talk with a licensed agent listed on this website to understand your options, ask about cost-saving strategies, and build a plan that supports both your health and financial security.