When you’re first learning about Medicare, it’s easy to feel a little overwhelmed. There are deadlines to make, penalties to avoid, and a whole “alphabet soup” of parts to figure out. In this article, we’ll walk you through the five parts of Medicare: Part A and Part B (which together are called Original Medicare), Part C, Part D, and Medigap. Each one covers something different. This means you can choose the coverage you want and avoid paying for anything you already have or don’t need. We’ll also look at another government program, Medicaid, which some retirees may qualify for.
While we’ve worked to keep this article informative without being overwhelming, we recognize it is still a lot of information to review and digest. Don’t worry – we are here to help guide you! You can schedule an appointment to speak with one of our licensed experts and they will share just what you need to know, along with giving you personalized guidance for what options will be best for your unique situation.
Original Medicare: Part A
Often referred to as “hospital insurance,” Part A covers hospital stays, including a semi-private room, meals, and general nursing care. It also pays for some care outside of the hospital, such as short stays in a skilled nursing facility (SNF), many aspects of home health care, and most hospice care. Part A does not cover extras such as a private room, private-duty nursing, phone service, or personal care items like slipper socks or razors.
How Much Does Medicare Part A Cost?
The monthly premium for Medicare Part A depends on how many work credits you’ve earned. Every three months of work count as one “work credit”. As long as you have paid Social Security taxes for at least 10 years (40 work credits), you will receive Part A at no cost when you enroll. This means you won’t pay a monthly premium. If you do not meet this requirement, you can purchase this coverage. In 2025, you will pay $518 a month if you’ve accrued fewer than 30 credits, or $285 if you’ve accrued between 30 and 39 credits. Even though there is no monthly premium for Part A , there are costs to take into account.
Medicare Part A - Inpatient Hospital Stay Coverage
In 2025, the Part A deductible for an inpatient hospital stay is $1,676 per benefit period. A benefit period begins the day you’re admitted to the hospital and ends when you haven’t received hospital care for 60 days in a row. This is important since it means two hospital stays that occur less than 60 days apart may be included in the same benefit period, which can impact how much you’ll pay out of pocket.
If you’re in the hospital longer than a 60 day period, you’ll be responsible for part of the cost of your stay. The amount you will be responsible for depends on how long you’re in the hospital. If your hospital stay lasts between 61 and 90 days, you’ll pay $419 per day. If your hospital stay lasts longer than 90 days, you have two choices: You can either pay the full cost of each day you’re in the hospital after day 90, or you can tap into your lifetime reserve days.
Lifetime reserve days are an additional 60 days of hospital coverage that can be used only once. If you choose to use this benefit, you’ll still have to pay a coinsurance for each day (in 2025, it’s $838).
Inpatient Hospital Stay and Amounts
- One-time deductible: $1,676
- Days 1-60: $0/day
- Days 60-90: $419/day
- Day 91+ (without using lifetime reserve days): All Costs
- Day 91+ ( using lifetime reserve days): $838/day
Medicare Part A - Skilled Nursing Facility Coverage
Under Medicare Part A, a stay in a skilled nursing facility is covered differently than an inpatient hospital stay. In this type of facility, which is often used for short stints for rehabilitation after a fall or injury, a surgical procedure, or a heart attack or stroke, you’ll pay nothing for the first 20 days of your stay. Between days 21- 100, you’ll pay a daily coinsurance amount of $209.50. If your stay lasts 101 days or longer, you will be responsible for all costs associated with your care.
Skilled Nursing Facility and Amounts
- One-time deductible* $0
- Days 1-20 $00
- Days 21-100 $209.50
- Day 101+ (without using lifetime reserve days) All Costs
*If you're in a Medicare Advantage Plan, you may be charged copayments during the first 20 days.
SOURCE: “Costs.” Medicare.gov, https://www.medicare.gov/basics/costs/medicare-costs. Accessed 6 May 2025.
Original Medicare: Part B
Medicare Part B helps to cover the cost of Medical Care. This includes doctor’s visits, surgeries, preventive care services such as flu shots and annual wellness visits; outpatient services; some home health services; and durable medical equipment like wheelchairs, oxygen tanks, and hospital beds. Some medications that are given in a doctor or hospital setting including chemotherapy, infusion therapy, and allergy shots are also addressed under Medicare Part B.
Long-term care, most dental care, dentures, hearing aids, cosmetic surgery, and routine foot care are not covered under Original Medicare. Later, we’ll give you some suggestions for how you can more easily afford these types of medical expenses.
How Much Does Medicare Part B Cost?
Most people enrolled in Medicare Part B pay a standard monthly premium. The amount you pay for Medicare is based on your IRS tax returns from two years ago. In other words, the amount you pay for Medicare in 2025 is based on your Modified Adjusted Gross Income as reported on your income tax returns in 2023.
In 2025, the Part B premium is $185.00 per month for individuals who earn $106,000 or less a year, or for couples filing jointly who earn $212,000 or less per year. If your income exceeds $106,000 (for individuals) or $212,000 (for couples who file jointly), you’ll pay the standard premium amount plus an extra charge, called an Income Related Monthly Adjustment Amount (IRMAA).
It is also important to understand that sometimes life events happen (the loss of a spouse or a permanent reduction in salary income through retirement) and there are ways to manage these special circumstances as you enroll, if they apply to you.
Similar to Part A, there are additional costs to take into account.
Additional Medicare Part B Costs
Medicare Part B enrollees are responsible for meeting an annual deductible. In 2025, the amount is $257. After you meet your deductible for the year, you typically pay 20% of the Medicare-approved amount for medical care, including:
- Most doctor services, including those you received as an inpatient in a hospital
- Outpatient therapy
- Outpatient mental health care
- Durable medical equipment
- Part B Medications
- Mental Healthcare
- Lab tests and other testing procedures (CT Scan, MRI, x-rays, etc)
Delaying Medicare Part B
Unless you continue working past 65 and have an employer health plan that meets Medicare’s minimum requirements, you may be assessed a late enrollment penalty when you do enroll. This means that if you decide not to enroll in Part B when you’re first eligible, you will pay a higher monthly premium for Part B. The amount you're penalized increases the longer you delay signing up. That said, there are times when you may be able to avoid a late enrollment penalty if you qualify for a Special Enrollment Period, including retirement.
Now that you’re familiar with Original Medicare, it's time to learn about the areas of healthcare that are not covered under Part A and Part B, as well as your options for adding increased coverage.
SOURCE: “Costs.” Medicare.gov, https://www.medicare.gov/basics/costs/medicare-costs. Accessed 6 May 2025.
Medicare Part C: Medicare Advantage - Alternative to Medicare Supplement Plans
Also called Medicare Advantage, Part C plans are offered through private insurance companies approved by Medicare. Think of these plans as an all-in-one alternative to Medicare Supplement plans. They combine the hospital and medical coverage of Part A and Part B, in addition to extra benefits such as vision, hearing, or dental services; wellness services; or membership to a fitness club. They also typically include prescription drug coverage. Depending on the Medicare Advantage plan, your out-of-pocket costs may be lower than a Medicare Supplement plan.
Medicare Advantage plans may require you to use doctors, hospitals, and pharmacies in their network and may not pay for services outside that network. They also don’t cover care outside of the United States, services that aren’t medically necessary under Medicare, and hospice care.
Before you can sign up for a Medicare Advantage plan, you must be enrolled in Medicare Part A and Part B. This means you’ll pay a monthly Part B premium in addition to your Medicare Advantage plan’s monthly premium, coinsurance, and deductibles. In 2025, the average premium for a Medicare Advantage plan is $17.00 per month, slightly lower than last year's $18.231. However, these plans limit how much you pay out of pocket each year.
Expenses and What You’ll Pay for Medicare Advantage
- Monthly Premium: Varies by plan; the average is $17.00 per month
- Out-of-pocket expenses for covered prescription drugs: No more than $2,000
- Coinsurance: Varies by plan
- Copayment: Varies by plan
When you add up all of the benefits included in a typical Medicare Advantage plan, you may find it’s less expensive than coverage through Original Medicare. Once in a while, there are situations where you could end up paying more for care. Consider a lengthy inpatient hospital stay. With Original Medicare, you’d pay a $1,676 deductible per benefit period and no copayments until day 60.2 But with Medicare Advantage, you’d start paying a copayment on day one.3 By day five, you’re likely to start incurring higher costs than someone with Original Medicare. In general, Medicare Advantage may be great for someone healthy but if you become sick, those costs can skyrocket. Therefore, it’s best to think about your general health and what it might look like in the future when deciding between Original Medicare and Medicare Advantage.
SOURCES:
- “Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025.” CMS, 24 September 2024, https://www.cms.gov/newsroom/fact-sheets/medicare-advantage-and-medicare-prescription-drug-programs-remain-stable-cms-implements-improvements. Accessed 6 May 2025.
- "Inpatient Hospital Care." Medicare, www.medicare.gov/coverage/inpatient-hospital-care. Accessed 6 May 2025.
- “Understanding Medicare Advantage Plans.” Medicare, https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf. Accessed 6 May 2025.
Medicare Part D: Adding Prescription Drug Coverage to Original Medicare
Medicare Part D helps pay for the prescription drugs you need. Like Medicare Advantage, Part D is offered by private insurers that are approved by Medicare.
There are two ways to get prescription drug coverage: You can enroll in a Part D plan in addition to your Original Medicare and/or Medigap plan, or you can enroll in a Medicare Advantage plan that includes drug coverage.
Why Enroll in Medicare Part D?
If you don’t spend a lot on medications right now, you may be tempted to skip Part D. It’s optional, after all. But there are reasons to consider signing up. Let’s say you don’t get Part D when you’re first eligible, and you don’t have another source of drug coverage. If you decide to sign up for coverage later, you may face a late enrollment penalty that you’ll have to pay as long as you have Medicare drug coverage.
Another reason to consider enrolling? Part D helps shield you from rising prescription drug costs, which can jump even higher depending on your health. On average, a Medicare beneficiary with one or two chronic conditions spent $416 annually on prescription drugs, while those with five or more chronic conditions spent $1,065 annually.1
How Much Does Medicare Part D Cost?
The cost of a Part D plan can vary, but the average monthly premium is around $46.50 in 2025.2 Many have a monthly premium, and if your income is higher than $106,000 ($212,000 married filing jointly), you’ll also pay an extra fee, called a Part D IRMAA.
The amount of the IRMAA premium surcharge varies based on income and is paid in addition to the standard monthly premium for your Part D plan. Here’s what you can expect if you’re a high-income earner:3
Income Ranges and Monthly IRMAA Premium Surcharge Amounts
- $106,001 to $133,000: $13.70
- $133,001 to $167,000: $35.30
- $167,001 to 200,000: $57.00
- $200,001 to $499,999: $78.60
- $500,000 or above: $85.80
The medications that are covered under your Part D plan will also vary depending on which plan you choose. Every Part D plan has a list of prescribed drugs it will pay for, and it includes generic and brand-name medications. This list is called a formulary. The formulary includes the name of the drug, any special requirements or limits around it, and the numbered tier it’s in. Generally, the lower the tier, the less you pay.
Three Phases of Part D Coverage
There are certain costs that may come with your prescription drug plan, including a monthly premium and a yearly deductible. If your income is higher than a certain amount, you may also need to pay an extra charge, called a Part D IRMAA.
You’ll face additional costs like copayments and coinsurance throughout the year as well, depending on which stage of Part D coverage you’re in. There are three phases that are part of Medicare Part D, and your individual costs will vary as you move through these phases. They include:
Phase 1: Deductible Phase
During this stage, you pay the full negotiated price for covered prescription drugs. No plan's deductible can exceed $590 in 2025, but some plans have no deductible.
Phase 2: Initial Coverage Phase
Once you meet the deductible, your plan begins the initial coverage phase of coverage. During this phase, your plan will cover part of the cost of your covered prescription medications; you will be responsible for copayments or coinsurance costs that your plan does not cover. This stage ends once you and your plan have spent a total of $2,000 for covered drugs in 2025.
Phase 3: Catastrophic Coverage Phase
Once your total out of pocket cost for covered prescription medications reaches $2,000, you will move to the catastrophic coverage phase. This means you will pay no cost on covered drugs for the remainder of the calendar year.
Part D payments aren't super straightforward. Your expenses will depend on which stage you’re in, and the exact time spent in each stage will be different for everyone.
Additional cost controls are being introduced for prescription drugs, including lower prescription drug prices in Medicare through price negotiation with manufacturers, and a $2,000 yearly cap beginning in 2025.4
SOURCES:
- Cubanski, Juliette, et al. “How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?” KFF, 4 Nov. 2019, https://www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-of-pocket-on-health-care/. Accessed 6 May 2025.
- “CMS Releases 2025 Projected Medicare Part D Premium and Bid Information.” CMS, 29 July 2024, https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration. Accessed 6 May 2025.
- “Monthly Premium for Drug Plans.” Medicare.gov, www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/monthly-premium-for-drug-plans. Accessed 6 May 2025.
- "Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025.” CMS, 27 September 2025, https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration. Accessed 6 May 2025.
Medigap - Medicare Supplemental Insurance: Supplement to Original Medicare
When it comes to healthcare costs, Original Medicare pays for a lot, but not everything. To help out with many of the expenses, you may want to consider Medicare Supplement insurance, also called Med Supp or Medigap.
What Does Supplemental Medicare Insurance (Medigap) Cover?
This type of insurance can help pay for copayments, deductibles, and coinsurance. Some policies even cover services Original Medicare doesn’t, such as medical care when you travel outside of the country. Long-term care, vision or dental care, hearing aids, eyeglasses and private-duty nursing are usually not covered, and Medigap doesn’t include prescription drugs.
Medigap is sold through private insurers and is only available to people enrolled in Medicare Part A and Part B. If you have a Medicare Advantage plan, you can’t purchase Medigap.
There are 10 Medigap plans, and each is named by letter. All plans offer the same basic benefits, though each provides slightly different levels of coverage.
How Much Does Supplemental Insurance (Medigap) Cost?
Insurance companies set the premiums for their Medigap plans, which means costs can vary widely for the exact same coverage. Let’s look at how monthly costs change by state for Plan G, a popular choice among new enrollees. These estimates are based on figures for a 65-year-old man who doesn’t smoke.
- New York, NY: $520
- Los Angeles, CA: $279
- Orlando, FL: $520
Shop around before signing up for a policy. And remember, you will still need to pay the monthly Part B premium in addition to the monthly cost for Medigap.
How to Enroll in Supplemental Medicare Insurance (Medigap)
As with other Medicare plans, timing matters when it comes to enrolling in Medigap. The best time to start a policy is during your Medigap Open Enrollment Period, when you can buy any Medigap policy sold in your state, regardless of your health conditions. This six-month window begins the month you turn 65, and you must already have Part A and Part B.
If you miss that enrollment period and try to apply later, you may need to meet the insurance company's underwriting requirements before you can purchase a plan. They may also charge you a higher monthly premium. And if you have a pre-existing condition, the insurer can refuse to cover any out-of-pocket costs for that condition for up to six months.
If you have the room in your budget to pay for additional coverage, supplemental insurance can provide you peace of mind that many of your out of pocket costs are covered.
Medicare and Medicaid
Medicare and Medicaid sound similar, but there are some key differences between the two programs.
Medicaid is a government-sponsored program that provides health coverage to low-income people of all ages. It’s funded jointly by states and the federal government and administered at the state level. Medicaid can be an important safety net for seniors who are concerned they won’t be able to afford healthcare in retirement.
States are required to cover certain services through their Medicaid program, including:
- Inpatient and outpatient hospital services
- Physician services
- Laboratory and x-rays
- Home health services
- Nursing facility services
Some states may also choose to cover additional benefits, such as prescription drugs, case management, eyeglasses, physical therapy and occupational therapy.
Eligibility for Medicaid
Eligibility for Medicaid depends on your income and the size of your family, and even which state you live in. Each state has its own set of criteria for income and asset limits, and this can change based on what level of care you need. Here’s a quick glance at Medicaid income eligibility in a few different states. All figures in the table below are for institutional/nursing home care for married couples where both spouses are applying for Medicaid. Amounts will differ if you’re single, or if you’re married but only one spouse is applying.
Medicaid Eligibility Income for Institutional/ Nursing Home Care - Select States
Medicaid Eligibility Income for Institutional/ Nursing Home Care - Select States
| State |
Single |
Married (both spouses applying) |
Married (one spouse applying) |
| California |
No income limit, but resident is only permitted to keep $35 / month. |
No income limit, but resident is only permitted to keep $35 / month. |
No income limit, but resident is only permitted to keep $35 / month. |
| Delaware |
$2,417.50 / month |
$4,835 / month ($2,417.50 / month per spouse) |
$2,417.50 / month for the applicant |
| Florida |
$2,901 / month |
$5,802 / month ($2,901 / month per spouse) |
$2,901 / month for applicant |
| Michigan |
$2,901 / month |
$5,802 / month ($2,901 / month per spouse) |
$2,901 / month for applicant |
| Massachusetts |
No hard limit. Income over $72.80 / month must go towards care costs. |
No hard limit. Income over $72.80 / month (per spouse) must go towards care costs. |
No hard limit. Income over $72.80 / month must go towards care costs. |
What happens if your income is too high but you're otherwise eligible for Medicaid? Many states will allow you to offset your income with medical expenses in order to qualify for Medicaid. This process is called “spending down,” and it can help retirees who otherwise can't afford major expenses, such as long-term nursing homes or assisted living care.
It’s possible to be eligible for both Medicare and Medicaid, so long as you meet both the state and federal requirements. This is called being dual eligible. To see if you qualify, visit your state’s Medicaid website. Medicaid may pay for some of the expenses Medicare doesn't. So if you receive coverage from both programs, most of your healthcare costs will likely be covered. You may also automatically qualify for lower prescription drug costs through Medicare’s Extra Help program.
Healthcare costs can really put a dent in your budget, so it’s best to exercise all options to see if you can qualify for programs that help lower your expenses. Otherwise, you’ll be stuck with a hefty bill without knowing that you could have had assistance to cover it. See how much your Retirement Score can change by increasing your expenses to account for unexpected medical costs that might occur in the future. Then find a plan to cover those expenses like delaying your retirement or adding part-time work.
SOURCE: “Medicaid Eligibility Income Chart by State.” Medicaid Planning Assistance, April 2025, https://www.medicaidplanningassistance.org/medicaid-eligibility-income-chart/. Accessed 7 May 2025.
