Turning 65 is a big milestone for many people. It’s a time for retirement adventures, spending more time with loved ones, and picking up new hobbies. But your 65th birthday can also come with a major financial and medical change: Transitioning to healthcare provided by the federal government. If you’re new to Medicare, all the different parts and options can feel overwhelming.
Some may not know, but Medicare is not free, and it doesn’t cover 100% of your services. To protect your savings and make sure you get the care you need, treat your future healthcare costs as a key part of your financial planning.
Understanding Medicare and its Parts
Your coverage begins with Original Medicare. It has two main parts, A and B, and knowing the costs for each is important for your budget.
Part A: Inpatient Care
Part A covers costs related to inpatient or critical care, such as hospital stays, hospice, skilled nursing facility care and some home health services.
Most people pay no monthly premium for Part A. This is because you or your spouse likely worked and paid Medicare taxes for at least 10 years (40 quarters). If you did not meet this threshold, you may have to pay a premium for Part A, which can cost up to $565 per month in 2026.
While the premium may be $0, the care is not. Part A has a deductible of $1,736 per benefit period in 2026. It’s important to note that this is not an annual deductible; it applies to each “benefit period.” This means if you are hospitalized, released, and then readmitted 60 days later, you would have to pay that deductible again.
Part B: Outpatient Care
Part B covers outpatient services like your doctor visits, preventive care, lab work, durable medical equipment, outpatient surgery, physical therapy, and more.
Unlike Part A, Part B has a monthly premium. For 2026, the standard premium is $202.90 per month. This amount is typically deducted automatically from your Social Security check. You also have an annual deductible of $283 to meet before it starts to cover 80% of your services.
The biggest financial risk in Original Medicare lies in the amount that Part B doesn’t cover. After you meet your Part B deductible, you are typically responsible for 20% of the Medicare-approved amount for most covered services. The 20% coinsurance has no cap.
Part D: Prescription Drug Coverage
Medicare Part D helps cover your medication costs. It is offered through private insurance companies approved by Medicare. Although technically voluntary, you can incur lifetime late-enrollment penalties if you do not sign up for Part D and have no creditable drug coverage elsewhere.
Part D plans can have a monthly premium, though it can vary by location and by the specific plan you choose. Part D also has an annual deductible that can be no more than $615 and annual out-of-pocket cap of $2,100 in 2026.
The Impact of IRMAA
If you have a higher income, you may pay more for Parts B and D. This is called the Income-Related Monthly Adjustment Amount (IRMAA). The good news is that you do have the option to appeal this additional charge if you’ve had a qualifying event like work reduction or retirement.
Closing Coverage Gaps
As mentioned earlier, because Part B leaves you exposed to unlimited financial liability, its highly encouraged to choose a supplemental plan to ensure your costs are capped per year.
Path 1: Medicare Supplement (Medigap Plans)
A Medigap policy is insurance you buy from a private insurance carrier to help cover costs that Original Medicare leaves as your cost sharing. You keep Original Medicare as your primary insurance, and then the Medigap pays the secondary costs, such as the Part A deductible and the Part B 20% coinsurance and copays.
With Medigap, you can see any doctor, specialist, or hospital in the U.S. that accepts Medicare. You typically pay a higher monthly premium for a Medigap plan.
Path 2: Medicare Advantage (Part C)
A Medicare Advantage plan, also referred to as Medicare Part C, is an all-in-one alternative to Original Medicare, offered by private insurance companies.
These plans bundle your Part A, Part B, and usually Part D (prescription drugs) into one single plan. Many Advantage plans also offer “extra” benefits that Original Medicare does not cover, such as gym benefits, routine dental, vision, and hearing care.
Advantage plans typically operate within a specific network of doctors and hospitals, such as an HMO or PPO. You generally need referrals to see specialists, and using providers outside the network can result in higher costs or no coverage at all except for in an emergency.
These plans often have lower (or even $0) monthly premiums. However, you pay copays and coinsurance for services as you go along. Advantage plans have an annual maximum out-of-pocket (MOOP) limit. In 2026, this limit is $9,250 for in-network services.
