Coverage and Costs: What You Need to Know

Understanding what Medicare covers—and what it doesn't—is essential for managing healthcare expenses in retirement. While Medicare provides substantial coverage, gaps exist that can lead to unexpected out-of-pocket costs if you're not prepared.

Medicare Part A covers inpatient hospital care, including semi-private rooms, meals, general nursing, and medications as part of your inpatient treatment. It also covers short-term skilled nursing facility care following a hospital stay, hospice care for terminal illnesses, and limited home health services. However, it doesn't cover long-term care (custodial care), private-duty nursing, or private rooms unless medically necessary.

Medicare Part B covers two types of services: medically necessary services needed to diagnose or treat your condition, and preventive services to prevent illnesses or detect them at an early stage. This includes doctor visits, outpatient care, durable medical equipment, mental health services, and some preventive services like flu shots and cardiovascular screenings.

For 2025, the standard Part B premium is paid monthly, with an annual deductible that must be met before Medicare begins to pay. After meeting your deductible, you typically pay 20% of the Medicare-approved amount for most services, known as coinsurance.

Part A costs in 2025 include a deductible for each benefit period and coinsurance for extended hospital stays. While most people don't pay a premium for Part A, those who haven't worked long enough may pay up to several hundred dollars monthly.

Medicare Advantage (Part C) plans must cover everything that Original Medicare covers and often include additional benefits like vision, dental, and prescription drugs. These plans may have different costs and restrictions, such as networks of doctors and prior authorization requirements.

Part D prescription drug plans vary in cost and coverage. Each plan has a formulary (list of covered drugs) divided into tiers with different copayment amounts. Most plans also have a coverage gap (donut hole) where you pay more for drugs after reaching a certain threshold until catastrophic coverage kicks in.

Medigap policies, sold by private insurers, can help cover some out-of-pocket costs of Original Medicare, such as deductibles, coinsurance, and copayments. They're standardized across all states (except Massachusetts, Minnesota, and Wisconsin), with plans labeled A through N offering different levels of coverage.