Medicare may come as a relief when you become eligible. Not only does it provide coverage regardless of pre-existing conditions, but costs won’t increase based on your age. You only pay more when you use more medical services (or your annual income goes up significantly).
That does not necessarily mean healthcare for enrollees is inexpensive. Medicare leaves many costs on the table – costs that many enrollees do not plan for and may not even know about. It’s up to you, the savvy consumer, to learn where your dollars will be spent on healthcare as a Medicare beneficiary. As a retiree on a fixed income this becomes more important than ever. The more you know, the better you can plan for your financial future.
General out-of-pocket costs
Most health insurance plans have the following out-of-pocket elements. Medicare also imposes penalties for signing up too late for Part B or Part D. All rates below are for 2026, for Original Medicare (Medicare Advantage plans set their own cost-sharing and premiums, within general parameters established by the federal government).
1. The deductible
This is the amount you will pay out of pocket before Original Medicare starts paying for medical services. These amounts are for 2026:
- Part A (hospital insurance, administered by the federal government): You will pay $1,736 for each benefit period. (A benefit period starts when you’re admitted to the hospital and ends 60 days after you’ve been discharge, assuming you’re not readmitted during that time). You could pay more than one deductible per year based on the timing of any hospitalizations.
- Part B (medical insurance, administered by the federal government): You will pay $283 as the annual deductible in 2026, if you receive services covered by Medicare Part B (other than preventive services that are covered without a deductible; note that if you receive only a small amount of Part B-covered care and the total bill is less than $283, you will only pay for the care you received, rather than the full deductible)
- Part D (prescription drug coverage, offered by private insurers): Deductibles vary but can be no more than $615 in 2026.
2. Premiums
This is the amount you pay each month for Medicare, whether or not you use any healthcare services. The following rates are for 2026.
- Part A: Premiums are free if you worked 40 quarters (10 years) in Medicare-taxed employment. They cost $311 or $565 per month if you worked 30-39 or less than 30 quarters respectively.
- Part B: All enrollees pay Part B premiums, even if they are enrolled in a Medicare Advantage plan (unless they are eligible for a program that pays some or all of the Part B premium on their behalf). That amount is $202.90 for single individuals earning less than $109,000 or for married individuals with a joint income less than $218,000. (Your income from two years prior is used for this determination.)
- Part D: Premiums vary based on the plan. The national base beneficiary premium (on which late enrollment penalties are based) is $38.99 in 2026. As with Part B, premiums are higher for high-income enrollees.
3. Income-Related Monthly Adjustment Amount (IRMAA)
Medicare adds an increased amount to your Part B and Part D premiums based on your annual income. Your federal income taxes from two years prior are used to decide how much you will pay in premium (since these are the most recent tax returns on file; 2024 tax returns are the returns that were filed most recently before the start of the 2026 coverage year).
In 2026, if you earn no more than $109,000 as a single individual or $218,000 as a married couple filing jointly, you will not pay an income-related monthly adjustment amount (IRMAA). If you earn more than those amounts, you’ll pay an IRMAA surcharge, which increases incrementally based on your annual income.
4. Late-enrollment penalties
Medicare requires you to enroll in the program within designated periods. Otherwise, you will face late penalties that are added to your monthly premium.
- Part A: You will pay 10% of your monthly premium for twice the number of years you were eligible but did not enroll in Medicare Part A. (If you sign up two years late, you will pay a penalty for four years.) This penalty only applies to late enrollees who have to pay a premium for Part A; 99% of Medicare enrollees pay no premium for Part A.
- Part B:You will pay 10% of your monthly premium times the number of years you went without Medicare Part B coverage. (If you sign up two years late, you will pay 20% more on your premiums every year.) This penalty lasts as long as you have Medicare coverage. If you delay Part B because you’re continuing to work and have employer-sponsored health insurance as an active employee (or spousal coverage under your spouse’s active employee coverage), you will not have a late enrollment penalty if you sign up for Part B when you eventually stop working.
- Part D:You will pay 1% of the national base beneficiary premium, which increases every year, multiplied by the number of months you were eligible but didn’t sign up.
- Like Part B, this is a life-long penalty. The national base beneficiary premium is a standard rate set by the federal government to calculate Part D penalties, and it changes each year (it will likely not be the same as your actual Part D plan premium). If you delay Part D enrollment because you’re covered under another plan that provides creditable drug coverage (meaning the plan meets or exceeds Medicare’s minimum drug coverage requirements), you won’t be subject to the late enrollment penalty.
5. Copays and coinsurance
This is the fixed amount or percentage amount, respectively, that you pay for each Medicare-covered service or medication, after you’ve paid any applicable deductible (for the benefit period or year, depending on which part of Medicare is being used).
- Original Medicare (Costs are for 2026)
- Part A: After 60 days in a hospital, Medicare charges a coinsurance of $434 per day for days 61 to 90. Refer to lifetime reserve days below for days 91+. After 20 days in a skilled nursing facility, coinsurance costs $217 per day for days 21 to 100. After 100 days, you pay all costs out of pocket.4Medicare does not cover long-term custodial care, but beneficiaries who need long-term care may consider applying for Medicaid, which does cover custodial care for eligible enrollees. (Here’s state-by-state information on eligibility rules for Medicaid, which is available to people with limited financial means.)
- Part B: For most covered services, you’ll pay 20% of the Medicare-approved amount, although certain preventive screening tests will be covered in full. If your doctor doesn’t “accept assignment” (see below under provider-based expenses), you may have to pay up to 15% more for the medical care your receive.
- Medicare Advantage (Part C): Medicare Advantage plans cover all of the services that are covered by Part A and Part B but have their own cost-sharing structure that may differ from Original Medicare (federally administered Part A and Part B).
- Part D: Copays and coinsurance vary based on the plan. Generally speaking, costs may be higher for certain brand-name or more expensive medications. Keep in mind that you may have to pay the full cost out of pocket if a medication is not on your plan’s formulary (covered drug list). This makes it particularly important that you actively compare the available drug plans each year during the annual open enrollment window (October 15 to December 7), and see how they’ll cover the specific medications you need and the pharmacies you use.
6. Non-covered services
Medicare typically provides broad coverage but does not cover everything. Original Medicare, for example, does not cover routine dental care, dentures, routine eye care, corrective lenses, dentures, hearing aids, or long-term nursing home care.
Coverage is also limited for acupuncture (meaning you must meet specific criteria for low back pain) and cosmetic surgery (meaning you must have a medical indication for the surgery).
Provider-based expenses
Your out-of-pockets are directly affected by the healthcare provider you see. Make sure you take these factors into consideration before you schedule any appointments.
7. Doctors that don’t participate in Medicare
Not every doctor agrees to accept Medicare for payment. This can be tricky when you need to see a specialist and there are few in your area. Providers who opt out of Medicare do not accept Medicare patients but could sign a private contract with you. Those contracts will vary but will likely leave you to pay more than you would have if the doctor had not opted out of Medicare.
8. Doctors that don’t accept assignment
These doctors do accept Medicare for payment but they do not accept assignment, meaning that they do not agree to Medicare’s standard rates for their services. In order to participate in the Medicare program, however, they agree to not charge more than 15% above Medicare’s approved rates, for most services covered by Medicare. (The charge cap does not apply to some medical supplies and durable medical equipment.) This additional amount is known as the limiting charge, and some states restrict it to a smaller amount.
If you see a doctor who has not opted out of Medicare but who does not accept assignment, you’ll be responsible for paying the limiting charge unless you have supplemental coverage that pays it (for example, an employer-sponsored plan or Medigap plan F or G).
9. Doctors outside of your Medicare Advantage plan network
Original Medicare has a nationwide network of providers, meaning you can see any doctor that takes Medicare. The same is not true for Medicare Advantage.
Medicare Advantage plans are built on a local network of providers. If a doctor takes Medicare but is not in your Medicare Advantage plan’s network, your plan could require you to pay more in cost-sharing for any medical services received. Some Medicare Advantage plans will not cover any non-emergency care unless you see in-network providers, so be sure you understand your plan’s rules for this.
If your Medicare Advantage plan is a PPO that covers out-of-network medical care, your combined in-network and out-of-network out-of-pocket charges can’t exceed $13,900 in 2026 (not counting prescription drug charges).
Hospital-based expenses
10. Inpatient vs. observation stays
Staying overnight in a hospital does not necessarily mean you are admitted as an in-patient. You pay for inpatient hospital stays with a Part A deductible (and for any physician services you receive while in the hospital, you’ll pay the Medicare Part B deductible if you haven’t already met it earlier in the year, plus a 20% Part B coinsurance).
When you are placed under observation, Part B provides your only coverage, as observation is considered outpatient care. You are responsible for the Part B deductible plus 20% of the cost of any services you receive.
This adds up and explains why observation stays often cost more than inpatient stays, even if the care is the same. (Note that Medigap coverage will pay some or all of the 20% coinsurance for Part B services).
11. Lifetime reserve days
After spending 90 days in a hospital within a single benefit period, you have 60 lifetime reserve days to use. These days cost you $868 each in 2026 and extend coverage for your hospital stay for days 91 onward. After you use up those 60 days – the only ones you will ever get – Medicare stops paying for extended days altogether.
12. Skilled nursing facility three-day rule
When you leave a hospital, you may be too sick to go home. Medicare will only cover a short-term stay in a skilled nursing facility (SNF) for rehabilitation if you were in the hospital for three days as an inpatient, not counting the day you were transferred to the SNF. If your hospital stay does not meet those requirements, you could be left to pay for your SNF stay on your own.
Medicare Advantage plans can opt out of this rule and could potentially provide SNF coverage after a shorter inpatient stay. Additionally, certain Accountable Care Organizations (ACOs) can apply for a waiver of the three-night rule.
Medicare Advantage and Part D expenses
Certain out-of-pocket costs are specific to Medicare Advantage and Part D plans.
13. Maximum out-of-pocket limits
Original Medicare has no cap on out-of-pocket expenses. CMS, however, sets a cap on expenses known as the Maximum Out of Pocket Limit (MOOP) for Medicare Advantage plans. Only services also covered by Original Medicare (Parts A and B) are considered in the MOOP, so prescription drug charges will be counted separately under the Medicare Advantage plan’s integrated Part D benefit.
In 2026, the Medicare Advantage maximum out-of-pocket cap for in-network care cannot be more than $9,250, and the combined in-network and out-of-network out-of-pocket cap for PPOs can’t be more than $13,900. With that in mind, know that Medicare Advantage plans that cover out-of-network care often have a prior authorization requirement for out-of-network coverage, so be sure you understand your plan’s requirements before obtaining any non-emergency services.
14. Medicare Part D out-of-pocket costs
The Inflation Reduction Act (IRA) has had a significant impact on what Medicare enrollees pay for prescription drugs, whether through a stand-alone Part D plan (PDP) or a Medicare Advantage plan with Part D coverage (MA-PD).
Starting in 2025, the IRA imposed a $2,000 cap on enrollees’ out-of-pocket spending for covered drugs. This amount is adjusted annually for inflation, and climbed to $2,100 for 2026. The out-of-pocket cap includes the deductible (which can’t be more than $615 in 2026), but does not include the cost of your monthly premiums.
Before the IRA reformed Part D coverage, as many as 20% of Medicare beneficiaries struggled to afford their medications once they reached what was known as the donut hole, a coverage gap in Part D plans. As a result, cost-sharing is more predictable and simplified: There’s a deductible phase (if the plan has a deductible), and then coverage and cost-sharing are consistent until the enrollee reaches the out-of-pocket cap. At that point, the enrollee has no more out-of-pocket costs for covered drugs for the rest of the year.
Knowing the maximum you will pay for drug costs offers another benefit. The IRA added an option to spread your drugs costs out over the year rather than paying those costs upfront earlier in the year. This may make it easier for you to budget during the year.
Tanya Feke, M.D. is a licensed, board-certified family physician living in New Hampshire. As a practicing primary care physician in Connecticut and an urgent care physician in New Hampshire, she saw first-hand how Medicare impacted her patients. In recent years, her career path has shifted to consultant work with a focus on utilization management and medical necessity compliance.
Dr. Feke is an expert in the field, having Medicare experience on the frontlines with patients, hospital systems, and insurers. To educate the public about ongoing issues with the program, she authored “Medicare Essentials: A Physician Insider Reveals the Fine Print.” Her analysis of Medicare issues is frequently referenced by the media, and she is a contributor to multiple online publications.
