Navigating Medicare and the related cost structures can feel overwhelming. Each part – A, B, C, and D – comes with its own premiums, deductibles, and cost-sharing rules. Knowing where these costs come from and how they affect your retirement budget can make all the difference.
This article breaks down what you’ll pay for each part of Medicare, what’s not covered, and strategies to help you manage or reduce your overall healthcare expenses in retirement.
Why It’s Important to Understand Medicare Costs
Many people assume that once they reach 65, healthcare will be “covered” by Medicare. Unfortunately, that’s not quite the case. While Medicare provides an essential foundation, it doesn’t eliminate medical expenses.
In fact, according to Fidelity Investments’ 2025 Retiree Health Care Cost Estimate, the average 65-year-old can expect to spend an average of $172,500 (in after-tax savings) to cover health care expenses in retirement, not including long-term care. This number is up nearly 4% from 2024.1
That’s why understanding the true costs of Medicare is so important. Knowing what’s covered, what isn’t, and what you’ll pay out of pocket allows you to plan confidently and avoid surprises.
Breaking Down the Costs of Medicare
Medicare has several moving parts—each with its own premium, deductible, and cost-sharing rules. Here’s what you need to know:
Medicare Part A: Hospital Insurance
What It Covers: Inpatient hospital stays, skilled nursing facility (after hospital stay), hospice, and limited home health care
Monthly Premium: Usually $0 if you or your spouse paid Medicare taxes for >10 years
Deductible: $1,676 per benefit period, indexed annually for inflation
Coinsurance:
Hospital Stays:
- Days 1-60: $0 (after deductible)
- Days 61-90: $419/day
- Days 91+: $838/day
(up to 60 “lifetime reserve days”)
Skilled Nursing Facility:
- Days 1-20: $0
- Days 21-100: $209.50/day
- Days 101+: No coverage
- No lifetime reserve days
Note: Coinsurance requirements also apply to other parts of Medicare, as discussed in the following sections.
Medicare Part B: Medical Insurance
What It Covers: Doctor visits, outpatient care, preventive services, lab work, and durable medical equipment
Monthly Premium: $185/mo. (Higher if you are subject to IRMAA)
Deductible: $257/year
Coinsurance:
- 20% of the approved amount for covered services (after deductible)
- No annual out-of-pocket maximum
- Preventive care is often covered in full
Medicare Part C: Medicare Advantage
What It Covers: Private insurers typically combine Parts A & B, often including benefits for drugs, dental, vision, and hearing.
Monthly Premium:
- Individuals continue paying Part B premiums
- Additional premiums may apply
- Some plans offer $0 premium
Deductible: Deductibles vary by plan
Coinsurance:
- Copays and provider networks differ
- Average out-of-pocket limit: $5,320 (in-network) and $9,547 (combined)
- Federal maximum: $9,350 (in-network) and $14,000 (combined)
Medicare Part D: Prescription Drugs
What It Covers: Prescription medications (stand-alone or through Advantage Plan)
Monthly Premium:
- $36.78/mo base premium (indexed annually for inflation)
- Higher-income individuals may pay an IRMAA surcharge, ranging from $13.70 to $85.80/mo
Deductible: $590/year
Coinsurance: Copays up to 25% of drug cost after deductible (up to the catastrophic threshold)
*Note that all costs listed above reflect 2025 figures and are subject to change.
Tip: Review your coverage each Open Enrollment Period (October 15-December 7) to confirm that your plan still meets your health and financial needs.
What is IRMAA?
IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge added to the Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. IRMAA is determined based on your income two years prior (so your 2025 IRMAA is based on your 2023 tax return).
In 2025, individuals with an income exceeding $106,000, or married couples earning more than $212,000, will be subject to an additional surcharge. These surcharges can increase your monthly Part B premium by $13.70/month, up to a maximum of $85.80/month. IRMAA is automatically added to your monthly premium bill. 3
You can’t always avoid paying IRMAA entirely, but there are mechanisms and strategies to mitigate or appeal it. Get in touch with us to learn more. You can also read more about IRMAA here – IRMAA Demystified:What High-Income Retirees Need to Know in 2025.
What Medicare Doesn’t Cover
This is where many retirees get caught off guard. Medicare does not cover:
- Routine dental, vision, or hearing care
- Most chiropractic services
- Custodial or long-term care (help with daily activities like bathing or dressing)
- Care received outside the U.S.
- Cosmetic surgery and alternative therapies
- Medigap (supplemental insurance policies that help cover Medicare’s gaps)
These gaps can lead to significant out-of-pocket costs. For example, a private room in a nursing home can exceed $10,000 per month. That’s why many people pair Medicare with Medigap insurance—the topic of our next article.
Ways to Manage or Reduce Medicare Costs
- Review your plan annually. Costs and coverage change every year—especially drug formularies.
- Consider income timing. Lowering your modified adjusted gross income (MAGI) can reduce IRMAA surcharges.
- Use preventive care. Medicare covers many screenings and vaccines at no cost, which can prevent costly health issues later.
- Coordinate with your spouse. Each person’s premiums and IRMAA are based on combined income, so strategic timing of distributions may help.
- Shop around for Medigap coverage. Premiums for the same plan letter can vary by insurer, so it pays to compare.
Planning Ahead with Confidence
Medicare provides essential protection in retirement, but it’s not free, and the costs can add up over time. By understanding how premiums, deductibles, and surcharges work, you can make informed decisions that help protect your income and preserve your independence.
In the next part of our series, we’ll take a closer look at Medicare Supplement Insurance (Medigap)—how it works, what it covers, and whether it makes sense for your situation.
If you’d like help understanding how Medicare fits into your retirement plan—or want to estimate your healthcare costs before you enroll—our advisors at EKS Associates are here to help.
Next in this series: Medicare Supplement Insurance (Medigap): Do You Need It?
1Fidelity Investments’ 25 Retire Health Care Cost Estimate
2 KFF Medicare Advantage in 2025: Premiums, Out-of-Pocket Limits, Supplemental Benefits, and Prior Authorization, Published July 28, 2025
3 Humana, Income-related monthly adjustment amount (IRMAA) for 2025 Medicare Part B & Part D Premiums, published March 28, 2024, updated August 7, 2025
*All numbers within this article that are not footnoted were taken from the Health Insurance Programs for Seniors booklet published by WEBCE.
