Updated July 2026 · Reviewed by the CoverageCo team
Medicare costs you in four places: premiums, deductibles, copays and coinsurance, and services it doesn't cover at all. Most people pay no Part A premium, but nearly everyone pays for Part B, and higher earners pay an income-based surcharge on both Part B and Part D.
Key takeaways
- Original Medicare alone has no annual out-of-pocket maximum — that gap is why most people add Medigap or Advantage.
- Part B and Part D premiums are income-adjusted using a tax return from about two years earlier.
- If your income dropped since then (retirement, widowhood, divorce), you can ask Social Security to recalculate.
- Compare total annual cost — premiums plus expected copays plus your actual drug costs — not the monthly premium.
The four places Medicare costs you money
Thinking in these four buckets makes plan comparisons far easier:
- Premiums — what you pay monthly to hold the coverage, whether or not you use it.
- Deductibles — what you pay yourself before coverage starts picking up its share.
- Copays and coinsurance — your share each time you actually use care.
- Uncovered costs — services Medicare doesn't cover at all, like routine dental or hearing aids.
Why higher earners pay more
Part B and Part D premiums are income-adjusted. Higher income means a surcharge added on top of the standard premium.
The adjustment is based on a tax return from a couple of years back, which creates an obvious problem: your income at 65 may look nothing like your income while working.
If a life-changing event reduced your income — retirement, the death of a spouse, divorce, loss of a pension — you can ask Social Security to recalculate using your current income instead. Many people simply pay the surcharge without realizing they can appeal it.
The Original Medicare gap that worries people
Original Medicare on its own has no annual out-of-pocket maximum. In a genuinely bad year, there's no ceiling on your share.
That single fact is why most people add something. A Medigap policy covers much of that exposure for a predictable monthly cost. A Medicare Advantage plan handles it differently, with a legally required annual out-of-pocket maximum — though that maximum can still be substantial, and it's worth reading the actual number rather than being reassured by the concept.
Where drug costs hide
Prescription costs vary more between plans than almost anything else in Medicare, and premium tells you very little.
What matters is the formulary: whether your specific drugs are covered, what tier they're on, and whether the plan requires prior authorization or step therapy before it'll pay. A plan with a low premium can be dramatically more expensive for someone on a particular medication, and dramatically cheaper for their neighbor.
The only reliable method is to price your actual medication list against each plan. Guessing from the premium is how people end up overpaying by four figures a year.
Help paying for Medicare
Several programs help with Medicare costs for people with limited income and resources, and they're widely underused because people assume they won't qualify.
- Medicare Savings Programs, run by states, can help pay Part B premiums and sometimes other cost sharing.
- Extra Help (the Part D Low-Income Subsidy) can substantially reduce prescription drug costs.
- Eligibility depends on income and resource limits that change and vary by state, so it's worth checking rather than assuming.
Compare total cost, not monthly cost
The plan with the lowest premium is frequently not the cheapest plan for the person buying it. What matters is the total of premiums, expected copays, and your drug costs across a realistic year.
A licensed agent can build that comparison using your actual doctors and prescriptions, and show what each option would likely have cost you. It's free, there's no obligation, and it's the only way to compare honestly.
Common questions
Is Medicare free at 65?
No. Most people pay no premium for Part A because of their work history, but Part B has a monthly premium nearly everyone pays, and there are deductibles, copays, and coinsurance on top. Some services aren't covered at all.
Does Original Medicare have an out-of-pocket maximum?
No. Original Medicare alone has no annual cap on what you might pay. That's the main reason people add a Medigap policy or choose a Medicare Advantage plan, which is required to have an annual out-of-pocket maximum.
Why is my Part B premium higher than my neighbor's?
Part B and Part D premiums are income-adjusted using a tax return from roughly two years earlier. If your income has since dropped because of retirement or another life-changing event, you can ask Social Security to recalculate using your current income.
How can I lower my Medicare costs?
Compare total annual cost rather than premium alone, price your specific medications against each plan's formulary, review your coverage every year, and check whether you qualify for a Medicare Savings Program or Extra Help.