The Annual Costs of Medicare in 2025 That Retirees Often Forget to Budget For

Key Takeaways

• Medicare in 2025 includes many routine costs that aren’t obvious upfront—missing them in your retirement budget could lead to financial strain.

• While premiums and deductibles are well known, it’s the annual hidden expenses—like coinsurance, service limits, and inflation-adjusted fees—that often go overlooked.

The Costs You May Know—but Still Underestimate

Premiums for Part A, B, and D

Even though most Medicare beneficiaries don’t pay a monthly premium for Part A (if you or your spouse worked at least 40 quarters), many are still surprised by how quickly other premiums add up:

• Part B (Medical Insurance): In 2025, the standard monthly premium is $185. This means $2,220 annually—before any additional income-based adjustments.

• Part D (Prescription Drug Coverage): While average premiums in 2025 are lower than in 2024, they still vary based on the plan, and you must budget for them separately.

If your income exceeds a certain threshold, you’ll also face IRMAA (Income-Related Monthly Adjustment Amount) surcharges, which can add hundreds to your annual cost.

Deductibles You Must Meet Annually

Medicare has annual deductibles, and you’ll need to meet these out-of-pocket before your benefits kick in:

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

• Part B annual deductible: $257.

• Part D deductible: Up to $590, depending on your plan.

These apply before coinsurance or cost-sharing begins and can recur if you’re hospitalized multiple times in a year.

Often-Forgotten Costs That Add Up

1. Coinsurance for Extended Hospital Stays

Original Medicare does not fully cover extended hospital or skilled nursing stays. Here’s what that looks like:

• Days 61–90 in a hospital: You pay $419 per day.

• Lifetime reserve days (after day 90): $838 per day.

• Skilled nursing facility (SNF) care from days 21–100: $209.50 per day.

If you need post-acute care beyond 20 days, the cost spikes quickly, even with Medicare coverage.

2. Doctor and Specialist Coinsurance

After meeting your Part B deductible, you still pay 20% of Medicare-approved costs for most services:

• Office visits

• Outpatient procedures

• Durable medical equipment (DME)

These expenses have no cap under Original Medicare, meaning the more you need care, the more you’ll spend.

3. Medications Not Covered by Part D

Not all prescriptions are included in your plan’s formulary. If your medication isn’t covered or is placed in a high-cost tier, you may:

• Pay full retail price for uncovered drugs

• Spend more for drugs not on your plan’s preferred list

Generic alternatives may be available, but not guaranteed to work the same way for everyone.

4. Services Outside the U.S.

Medicare typically does not cover care received outside the U.S., except in rare emergencies. If you plan to travel internationally, you’ll need to budget for either:

• Separate travel medical insurance, or

• Out-of-pocket payment for services abroad

This cost is often left out of retirement planning.

5. Dental, Vision, and Hearing Care

Medicare does not cover routine dental care, eyeglasses, hearing aids, or exams. That means you must pay out-of-pocket for:

• Annual cleanings and dental procedures

• Vision exams and prescription lenses

• Hearing aids and hearing tests

These services can cost hundreds or even thousands annually, depending on your needs.

6. Home Health Care Limits

Medicare covers home health care only under strict guidelines. If your condition or recovery doesn’t meet these requirements, you may be responsible for:

• Private-pay home health aides

• Long-term custodial care

• Home modifications (e.g., wheelchair ramps, stair lifts)

These services are not typically included, even if you require daily help.

Unexpected Budget Pressures from Medicare Rules

7. The Lack of an Out-of-Pocket Maximum

Original Medicare (Parts A and B) does not include an annual cap on out-of-pocket costs. This means if you face major illness or injury, your costs can continue climbing all year.

Unless you buy additional coverage like Medigap, you’ll remain exposed to uncapped medical bills.

8. IRMAA Surcharges That Can Sneak Up

If your income from two years prior crosses certain thresholds, you’ll owe IRMAA surcharges for Parts B and D. For 2025:

• Threshold for individuals: $106,000

• Threshold for couples: $212,000

These surcharges are deducted automatically from your Social Security benefits or billed directly, often catching retirees off guard.

9. The Cost of Staying in a Plan That No Longer Fits

Each year, Medicare plans change their:

• Premiums

• Copays

• Formularies

• Covered providers

If you don’t review your Annual Notice of Change (ANOC) or compare plans during Open Enrollment (October 15 to December 7), you might end up paying more than necessary for the same or reduced coverage.

10. Inflation-Driven Increases

Many Medicare-related costs increase annually. Deductibles, coinsurance, and even the standard Part B premium tend to rise year over year. Even small increases add up over time:

• $5–$10 increases in copays

• Annual adjustments to coinsurance rates

• Inflation-driven price hikes in prescription drug tiers

Staying on top of these increases is essential to avoid shortfalls in your healthcare budget.

Strategies to Keep Your Medicare Costs in Check

Review Your Coverage Every Year

Use the annual Open Enrollment Period to compare options, even if you’re satisfied with your current plan. You might discover:

• Lower-cost drug plans

• Plans with more favorable formularies

• Coverage that includes additional benefits

Understand What’s Not Covered

Make a list of services Medicare doesn’t cover, and estimate what you may spend yearly. Common areas include:

• Dental and hearing

• International care

• Extended long-term care

Budgeting for these costs prevents unexpected surprises.

Consider Supplemental Insurance

Many retirees choose to pair Original Medicare with supplemental coverage like Medigap to reduce their exposure to:

• High coinsurance

• Lack of an out-of-pocket maximum

• Unexpected hospitalization fees

While supplemental insurance comes with its own premiums, the peace of mind from capped costs can outweigh the expense.

Use Preventive Services

Medicare offers many preventive services at no additional cost to you, including:

• Screenings

• Vaccinations

• Annual wellness visits

Taking advantage of these can reduce your chances of needing high-cost care later.

Plan for the Unplanned

Keep a portion of your retirement savings liquid and available for unexpected healthcare needs. An emergency health fund can help you manage:

• A sudden hospitalization

• Out-of-network services

• Higher-than-expected drug costs

Planning Ahead Means Less Stress Later

Your Medicare costs in 2025 are more than just premiums—they’re a complex mix of known fees, lesser-known coinsurance, and potentially large surprise expenses. Ignoring these could make your retirement less financially stable.

Start by identifying which of these costs are likely to apply to your personal health situation. Then, reevaluate your Medicare coverage and supplement options. For guidance tailored to your needs, get in touch with a licensed agent listed on this website who can walk you through your next best steps.