Key Takeaways

• Medicare in 2025 includes more than just monthly premiums—you need to account for deductibles, copayments, coinsurance, and other less-visible costs.

• Delays in enrollment, gaps in coverage, or choosing the wrong combination of parts can lead to lifelong penalties and avoidable out-of-pocket expenses.

What You Think Medicare Covers Versus What It Actually Does

Many people step into Medicare with the assumption that it will take care of everything once they turn 65. While Medicare offers important coverage for hospitalization, doctor visits, and prescription drugs, it’s not all-inclusive. The structure of Medicare requires you to pay close attention to what’s covered, what isn’t, and how much each part will cost you out of pocket.

Here’s what Medicare includes:

• Part A (Hospital Insurance): Covers inpatient hospital stays, limited skilled nursing facility care, and some home health services. Most people do not pay a premium for Part A, but there are deductibles and coinsurance.

• Part B (Medical Insurance): Covers outpatient care, doctor visits, preventive services, and medical equipment. There is a monthly premium, annual deductible, and 20% coinsurance after the deductible.

• Part D (Prescription Drug Coverage): Helps cover the cost of prescription drugs. Offered by private plans approved by Medicare. You pay a monthly premium, and plans may include a deductible, copayments, and coinsurance.

• Medicare Advantage (Part C): Offered as an alternative to Original Medicare but with its own network restrictions and cost structures.

Even if you enroll in all available parts, many services still require you to pay part of the bill.

Deductibles and Coinsurance Start to Add Up

In 2025, here are the standard deductibles and cost-sharing responsibilities under Original Medicare:

• Part A deductible: $1,676 per benefit period.

• Part B deductible: $257 annually.

• Part B coinsurance: 20% of the Medicare-approved amount for most outpatient services.

• Skilled nursing facility care: Covered in full for the first 20 days per benefit period, then $209.50 per day for days 21-100.

• Hospital stays beyond day 60: $419 per day through day 90, then $838 per day using lifetime reserve days.

These costs can accumulate quickly, especially if you have a chronic illness or an unexpected hospital stay.

The Late Enrollment Penalties You May Not Know About

Missing the right enrollment windows can lead to financial consequences that follow you permanently:

• Part B Late Enrollment Penalty: If you don’t sign up for Part B when you’re first eligible, your monthly premium may increase by 10% for each full 12-month period you were eligible but didn’t enroll. This penalty lasts for life.

• Part D Late Enrollment Penalty: You may pay an additional amount monthly if you go 63 days or more without creditable drug coverage. This penalty also applies for the duration of your coverage.

You can avoid these penalties by enrolling during your Initial Enrollment Period (IEP), which lasts for seven months: three months before your 65th birthday month, the birthday month itself, and three months after.

Medicare Doesn’t Cover Long-Term Care

One of the most commonly misunderstood gaps is long-term custodial care. Medicare will cover skilled nursing care under specific medical circumstances but will not pay for ongoing assistance with daily living activities like bathing, dressing, or eating if that is the only help you need.

Long-term care must be paid for privately unless you qualify for Medicaid. This omission often surprises new enrollees and can be financially devastating if no separate plan is in place.

Dental, Vision, and Hearing Services Are Still Largely Excluded

In 2025, Original Medicare still does not provide routine coverage for:

• Eye exams and corrective lenses

• Hearing aids and exams

• Dental cleanings, fillings, extractions, or dentures

You would need to pay for these services out of pocket or obtain coverage through other means, such as employer retirement plans or supplemental insurance. The costs for dental work or hearing aids, in particular, can run into thousands of dollars.

Prescription Drug Costs Continue After the Premium

Even if you sign up for Part D, that doesn’t mean your prescription expenses are over. Part D plans typically include:

• An annual deductible (up to $590 in 2025)

• Tiered copayments depending on the medication

• Coinsurance after certain spending thresholds

• A $2,000 annual out-of-pocket cap, which helps but doesn’t eliminate drug costs entirely

If you take multiple brand-name drugs, even with this cap in place, monthly medication costs can strain your retirement budget.

Out-of-Pocket Maximums Only Apply in Certain Plans

Original Medicare does not have a built-in out-of-pocket maximum. This means that, without supplemental coverage, there is no ceiling to your yearly medical spending. You could potentially be liable for thousands of dollars if you experience a serious illness or extended hospital stay.

Only Medicare Advantage plans and Medigap policies can offer protection through defined out-of-pocket limits. However, these vary greatly by plan and may come with trade-offs like provider network restrictions or prior authorization rules.

Supplemental Coverage Isn’t Free or Automatic

Many people choose to get a Medigap (Medicare Supplement) policy to help fill in the financial gaps left by Original Medicare. These plans typically help pay for deductibles, coinsurance, and other costs.

But here’s what you should know:

• You must pay a separate monthly premium.

• Plans differ in what they cover.

• You must enroll during your Medigap Open Enrollment Period to be guaranteed coverage. This period starts the first month you are 65 or older and enrolled in Part B and lasts for six months.

• If you apply later, insurers may deny coverage or charge more based on your health.

Income-Based Surcharges Increase Your Part B and D Costs

Higher-income enrollees pay more for Parts B and D due to the Income-Related Monthly Adjustment Amount (IRMAA). In 2025, if your modified adjusted gross income from 2023 was above $106,000 (individual) or $212,000 (joint), you’ll pay additional monthly amounts for both parts.

These surcharges are reassessed annually and can change if your income does. It’s important to understand how retirement account withdrawals, capital gains, or part-time work could push you into a higher IRMAA bracket.

Travel Outside the U.S. Isn’t Covered

If you plan to spend time abroad, know that Medicare generally does not provide coverage outside the United States. Only a few rare exceptions apply, like emergencies occurring near the U.S. border.

If you travel frequently, you’ll need to look into supplemental international health insurance or travel insurance policies that cover medical emergencies abroad. These policies come at an additional cost, and the coverage they provide varies.

Timing Matters for Everything

Understanding when to enroll in Medicare and how to maintain continuous, appropriate coverage is essential. Delaying or skipping enrollment, failing to read Annual Notice of Change (ANOC) letters, or assuming your plan covers everything can result in significant hidden costs later on.

Every year, from October 15 to December 7, the Annual Enrollment Period (AEP) allows you to review and change plans. This is your chance to:

• Switch from Original Medicare to Medicare Advantage or vice versa

• Join, switch, or drop a Part D plan

• Review costs, formularies, and provider networks

Missing this window without a qualifying special enrollment period can mean paying higher costs or being locked into a plan that no longer suits your needs.

The Real Cost Emerges Over Time

At first glance, Medicare may appear affordable. But over time, you begin to see the true financial footprint:

• Rising Part B and D premiums tied to income

• Accumulating out-of-pocket expenses without a cap under Original Medicare

• Uncovered services such as dental or long-term care

• Late penalties that never go away

Being proactive about choosing the right coverage, keeping an eye on enrollment windows, and preparing for what Medicare doesn’t cover is the only way to protect your health and your finances.

Planning Ahead Helps Avoid Costly Surprises

Understanding the full scope of Medicare costs puts you in a better position to plan for retirement. It allows you to:

• Create a realistic healthcare budget

• Consider adding supplemental coverage

• Avoid penalties and surprise charges

• Factor in future needs like long-term care or international travel

If you’re unsure which direction to take or feel overwhelmed by your choices, connect with a licensed insurance agent listed on this website to help you sort through your options.