Key Takeaways
-
Even though Medicare is a government program, it comes with complex rules, unexpected costs, and important deadlines you must actively manage.
-
Understanding the various parts of Medicare, their costs, and how they interact can help you avoid financial and coverage-related surprises.
What Medicare Covers—and What It Doesn’t
At first glance, Medicare might seem like a complete package. But once you start using it, you’ll quickly realize that coverage is not all-inclusive. Medicare Part A and Part B, known as Original Medicare, only cover certain services.
Covered Services
-
Part A covers inpatient hospital care, skilled nursing facility care, hospice, and some home health care.
-
Part B includes outpatient care, doctor visits, durable medical equipment, and preventive services.
Not Covered by Original Medicare
You are responsible for certain services unless you have other coverage:
-
Dental care and dentures
-
Routine vision exams and eyeglasses
-
Hearing aids
-
Long-term custodial care
-
Most prescription drugs (unless enrolled in Part D)
Being aware of these gaps helps you plan for possible out-of-pocket costs or additional coverage.
Understanding Costs: Premiums, Deductibles, and Co-Insurance
While Medicare is funded by taxes, you still pay premiums, deductibles, and coinsurance.
Medicare Part A
-
Most people don’t pay a premium if they’ve worked 40 quarters (10 years).
-
The 2025 deductible for each benefit period is $1,676.
-
After 60 days in the hospital, daily coinsurance kicks in: $419/day for days 61-90 and $838/day for lifetime reserve days.
Medicare Part B
-
The standard monthly premium is $185 in 2025.
-
The annual deductible is $257.
-
After meeting the deductible, you generally pay 20% of the Medicare-approved amount.
These costs can be higher if your income exceeds certain thresholds. Also, if you delay enrollment, you might pay penalties that last for life.
Prescription Drug Coverage Isn’t Automatic
You might assume that Medicare includes drug coverage. That’s not the case unless you actively enroll in a Part D plan. In 2025, the maximum deductible for a Part D plan is $590, and once you hit the $2,000 out-of-pocket cap, your drugs are fully covered for the rest of the year.
However, this cap only applies to covered medications, and you may still have copayments or coinsurance depending on the drug tier.
Failing to sign up for Part D on time—unless you have other creditable coverage—could result in a late enrollment penalty that adds to your monthly premium permanently.
Enrollment Isn’t Automatic for Everyone
If you’re already receiving Social Security or Railroad Retirement Board benefits at 65, you’ll be enrolled in Medicare Parts A and B automatically. But if you’re not, you need to sign up during your Initial Enrollment Period (IEP), which lasts for 7 months:
-
Starts 3 months before your 65th birthday
-
Includes your birthday month
-
Ends 3 months after
Missing this window could delay your coverage and result in late penalties. There is a General Enrollment Period from January 1 to March 31 each year, but it comes with consequences like late fees and a gap in coverage until July.
Timing Your Retirement and Medicare Enrollment
If you plan to retire at 65 or later, it’s fairly straightforward—you sign up during your IEP. But if you retire before 65 or continue working past 65, things get more complex.
Retiring Before 65
You won’t qualify for Medicare until your 65th birthday. You’ll need alternative coverage, such as COBRA or marketplace insurance, until then.
Working Past 65
If you’re still working and covered by employer insurance, you might delay Part B and Part D without penalties—if your employer coverage is considered creditable. Once your employment ends, you have an 8-month Special Enrollment Period to sign up without penalty.
Supplemental Coverage Might Be Necessary
Original Medicare covers a lot, but not everything. Out-of-pocket costs can stack up quickly, especially if you need frequent care. Many people choose to add supplemental coverage through Medigap or a Medicare Advantage plan.
-
Medigap helps cover deductibles, coinsurance, and other gaps in Original Medicare.
-
Medicare Advantage offers an alternative way to receive Medicare benefits but usually comes with its own network rules and coverage limitations.
Choosing supplemental coverage requires careful comparison and understanding of what is and isn’t included. You can’t be enrolled in both Medigap and a Medicare Advantage plan at the same time.
Annual Enrollment Periods Matter
Your healthcare needs change over time, and so do your Medicare options. Each year from October 15 to December 7, you can:
-
Switch from Original Medicare to Medicare Advantage (or vice versa)
-
Change from one Medicare Advantage plan to another
-
Join, drop, or switch a Part D plan
Any changes you make take effect on January 1. Not reviewing your plan annually can lead to paying more or losing access to needed services.
Income Can Impact What You Pay
Medicare uses your tax return from two years ago to determine your premiums. If your income exceeds certain thresholds, you’ll pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of your regular Part B and Part D premiums.
In 2025, IRMAA applies if:
-
Your individual income is over $106,000
-
Your joint income is over $212,000
If you’ve had a major life event, like retirement, you can request a reassessment using Social Security Form SSA-44.
Medicare Doesn’t Cover Everything You Might Expect
It’s easy to assume that Medicare will act like employer insurance, but it’s much narrower in scope. Some common surprises include:
-
No coverage for custodial long-term care
-
No routine foot care unless medically necessary
-
Limited mental health services, particularly for ongoing therapy
-
Coverage for ambulance services may be denied if not deemed medically necessary
You’ll want to budget for these possible costs or explore other insurance products to fill the gaps.
Watch Out for Marketing and Plan Changes
Even though Medicare is a government program, many private companies administer parts of it. That opens the door to marketing, which can be misleading. Plan benefits, networks, and costs often change each year.
You’ll receive an Annual Notice of Change (ANOC) each fall, and reviewing it carefully helps you avoid unexpected increases in costs or reductions in benefits.
What to Expect as Medicare Evolves
Medicare isn’t static. In 2025, changes include:
-
A $2,000 cap on Part D out-of-pocket drug costs
-
Mid-year notifications of unused benefits for Medicare Advantage enrollees
-
Shifting coverage patterns in supplemental benefits like dental and vision
Staying informed about these shifts helps you make smarter healthcare decisions. Relying on outdated assumptions about Medicare can leave you vulnerable.
Make Informed Choices From the Start
The biggest mistake you can make with Medicare is assuming it’ll take care of everything without your involvement. You need to:
-
Understand what’s covered and what isn’t
-
Know your enrollment periods
-
Be aware of costs and penalties
-
Review your coverage annually
Actively managing your Medicare benefits is key to avoiding unwelcome surprises and keeping your healthcare on track.
Get Help When You Need It
You don’t have to make these decisions alone. Getting in touch with a licensed agent listed on this website can provide the professional advice you need to make informed and confident choices about your Medicare coverage.
