You Thought Medicare Was a One-Time Decision—But the Monthly Costs Keep Changing Year After Year

Key Takeaways

• Medicare is not a fixed-cost program. Each year, premiums, deductibles, and other out-of-pocket expenses can shift based on legislation, inflation, and policy changes.

• If you’re not reviewing your Medicare coverage and costs annually, you may end up paying more than necessary or missing out on important updates that affect your wallet.

Medicare Is a Long-Term Financial Relationship, Not a One-Time Setup

When you first enroll in Medicare, it might feel like you’ve crossed a major item off your retirement checklist. But Medicare isn’t something you set and forget. Costs can and do change every year, and if you’re not paying attention, those changes can quietly take a toll on your finances.

The Reality Behind the Annual Changes

Each year, the Centers for Medicare & Medicaid Services (CMS) evaluates the financial structure of Medicare, adjusting premiums, deductibles, and coinsurance based on projected program costs and inflation. These changes apply to all parts of Medicare:

• Part A (Hospital Insurance)

• Part B (Medical Insurance)

• Part D (Prescription Drug Coverage)

• Medicare Advantage (Part C)

Even if you are satisfied with your coverage today, next year could look very different.

Medicare Part A: What Shifts Every Year

Most people qualify for premium-free Part A, but that doesn’t mean it’s free across the board. For those who do pay, the 2025 premium is $518 per month if you worked fewer than 30 quarters, or $284 per month if you worked 30 to 39 quarters. These figures have increased from 2024 and are subject to annual review.

Other changing costs under Part A include:

• Inpatient hospital deductible: $1,676 per benefit period in 2025

• Daily coinsurance for hospital stays: $419 per day for days 61-90; $838 per day for lifetime reserve days

• Skilled nursing facility coinsurance: $209.50 per day for days 21-100

These increases reflect broader healthcare cost trends and are not something you can opt out of once you’re enrolled.

Medicare Part B: Premiums and Deductibles Keep Climbing

Part B is where most retirees feel the squeeze. The standard monthly premium for 2025 is $185, up from $174.70 in 2024. The annual deductible has also increased to $257.

You may also pay more than the standard premium depending on your income. Known as the Income-Related Monthly Adjustment Amount (IRMAA), these higher premiums are based on your tax returns from two years prior. This means what you earned in 2023 determines what you pay in 2025.

Part B costs rise every year, sometimes modestly and sometimes substantially. These changes are non-negotiable and apply even if you use minimal healthcare services.

Part D Drug Costs: New Caps, but Still Variable

Prescription drug coverage through Medicare Part D continues to change. In 2025, the program introduces a major shift:

• Out-of-pocket spending is capped at $2,000 per year

This is a welcome change from the older structure that included a coverage gap (formerly known as the donut hole). Still, Part D premiums and deductibles vary by plan and can rise from one year to the next. The 2025 maximum deductible is $590, up from $545 in 2024.

Keep in mind:

• Costs differ depending on your selected plan and its drug formulary

• Your medications may change tiers or coverage rules annually

Medicare Advantage Plans: Annual Reevaluation Is Critical

If you’re enrolled in a Medicare Advantage plan, your coverage may include additional benefits not offered under Original Medicare. However, these plans also come with yearly changes to:

• Premiums

• Deductibles

• Copayments

• Provider networks

• Prescription drug coverage

Even if your plan’s premium doesn’t rise, other costs within the plan may increase. Supplemental benefits, such as dental or transportation, may be reduced or dropped entirely. You won’t know unless you review your plan’s Annual Notice of Change each fall.

Why Medicare Is More Expensive in Retirement Than Many Expect

Medicare was never designed to cover 100% of your healthcare expenses. Even with all parts combined, you’re still responsible for:

• Monthly premiums for Part B and D (and sometimes Part A)

• Annual deductibles

• Copayments and coinsurance

• Late enrollment penalties (if applicable)

Plus, if you’re not enrolled in supplemental coverage (Medigap), or if your Medicare Advantage plan doesn’t offer low cost-sharing, those out-of-pocket expenses can be significant.

What Causes the Yearly Increases?

Several factors drive the recurring cost adjustments:

• Healthcare Inflation: Medical services and drugs get more expensive each year.

• Utilization Trends: As more people use Medicare, especially with aging demographics, program costs rise.

• Legislative Changes: New laws, like those affecting prescription drug pricing or provider payments, may shift the financial structure.

• Program Solvency Adjustments: Increases may be necessary to maintain the Medicare Trust Fund’s stability.

IRMAA: Your Income Can Affect What You Pay

Higher-income individuals pay more for both Part B and Part D. The IRMAA thresholds are adjusted annually for inflation. In 2025, the IRMAA surcharges apply to those with modified adjusted gross income above $106,000 (individual) or $212,000 (joint).

Because IRMAA is based on your tax return from two years ago, a life change like retirement might warrant filing a “life-changing event” form with Social Security to lower your premiums.

Medicare Doesn’t Stop Asking for Your Attention

Each fall, from October 15 to December 7, the Annual Enrollment Period gives you the opportunity to:

• Switch Medicare Advantage plans

• Join or change a Part D plan

• Return to Original Medicare from Medicare Advantage (and vice versa)

If you skip this step and your plan changes, you may end up with:

• Higher premiums than expected

• Lost coverage for essential prescriptions

• New provider restrictions or service denials

The Cost of Ignoring Your Coverage Options

Choosing not to review or update your Medicare plan each year can result in:

• Paying for benefits you no longer use

• Losing access to doctors in your current network

• Missing out on new plans with better coverage

• Unexpected out-of-pocket costs for services or prescriptions

Staying passive may feel easier, but it usually costs more in the long run.

Coverage Gaps That May Surprise You

Even with all parts of Medicare in place, some services remain partially covered or excluded entirely:

• Dental care: Routine exams, fillings, and dentures are not covered under Original Medicare

• Vision and hearing: Limited to specific medical conditions unless added by a Medicare Advantage plan

• Long-term care: Custodial care in a nursing home is not covered

• Overseas medical care: You generally won’t be covered when traveling abroad

You may need to budget separately or consider other types of insurance to fill these gaps.

Why Medicare Costs Require Ongoing Planning

Relying on Medicare as your only financial protection in retirement can be risky. To prepare for fluctuating costs:

• Build Medicare premiums and out-of-pocket costs into your retirement budget

• Reassess your income annually to understand your IRMAA risk

• Review your plan during Open Enrollment to see if it still meets your needs

Healthcare will likely be one of your biggest retirement expenses, and Medicare is only one part of the equation.

Staying Proactive Could Save You Thousands

Every fall, you should receive two important documents:

• Annual Notice of Change (ANOC): Details any changes to your Medicare Advantage or Part D plan

• Evidence of Coverage (EOC): Explains your plan’s benefits and cost-sharing structure

Make sure to review these documents, compare your current plan with available options, and make changes during the Annual Enrollment Period if needed. This one step alone can protect you from unnecessary financial surprises in the coming year.

Getting Help Before You Make a Costly Medicare Mistake

If all of this feels overwhelming, you’re not alone. Medicare is complex, and the costs keep evolving. You don’t have to manage it by yourself. Working with someone who understands the system can help you make better decisions every year.

Medicare Planning Doesn’t End at Enrollment

You may have thought signing up for Medicare was the end of the road. In reality, it’s just the beginning. The costs don’t stay still, and neither should you. Stay informed, stay engaged, and don’t hesitate to get support.

For help evaluating your Medicare options and costs for 2025, reach out to a licensed agent listed on this website. They can walk you through what’s changing, what’s worth keeping, and where you might be overpaying.