How to Plan for Unexpected Costs in Medicare

09.24.2025 | Category: Medicare

Expertly reviewed by: Dr. Manoj Pawar, MD, FAAP
Chief Medical Officer, Mutual of Omaha

Summary: Unexpected costs in Medicare can disrupt your budget if you’re not prepared. This article explains where these costs come from, why they occur, and how you can plan to avoid surprises.

Medicare can feel like a puzzle. You may think you’re covered, only to be surprised by a charge for services you thought were included. Many underestimate the true cost of Medicare, including unexpected costs that can accumulate if you’re unaware.

The Medicare Open Enrollment Period (October 15–December 7) is the chance to change certain plans. Understanding the cost of Medicare can help you choose a plan that best fits your budget and your needs.

Let’s explore some costs of Medicare and practical strategies to help manage them, ensuring that you’re well prepared for any financial surprises.

How much does Medicare cost?

Medicare costs vary depending on your coverage and the services you use. The key to understanding its true cost lies in getting to know how the Medicare program is structured.

The cost of premiums, deductibles, copays, and coinsurance for Original Medicare Part A and Part B is generally set annually by the U.S. Centers for Medicare & Medicaid Services (CMS). Every October, CMS announces the Medicare costs for the following year.

Medicare costs usually increase every year and are mostly based on your income from two years prior. For 2026, for instance, your Medicare costs will be based on your 2024 gross yearly income.

Original Medicare Part A

Original Medicare Part A is hospital insurance that includes coverage for in-patient hospital care, care in a skilled nursing facility, hospice care, and some home health care.

If you’re over 65 years of age, you may not need to pay a monthly premium for Original Medicare Part A if you (or your spouse) have paid Medicare taxes while working for at least ten years. However, if you don’t qualify for premium-free Original Medicare Part A coverage, you can enroll and pay a monthly premium, which can be up to $518 per month.¹

Note that in 2025, you may also have to pay a deductible of $1,676 per benefit period before Original Medicare Part A coverage begins (Part A and Part B deductibles change annually).1 The maximum benefit period is 60 days of hospitalization plus 30 coinsurance days.

Original Medicare Part B

Original Medicare Part B covers certain doctor services, outpatient care, medical care, and preventive services. Original Medicare Part B costs include a standard monthly premium ($185 in 2025), which may vary based on income, plus an annual deductible ($257 in 2025) before coverage kicks in.1

Medicare Parts A and B are together referred to as Original Medicare.

Medicare Part C (Medicare Advantage)

Medicare Part C, also referred to as Medicare Advantage, is an alternative to Original Medicare that offers the benefits of Parts A and B. It also often includes additional benefits like vision, hearing, and dental coverage, as well as prescription drug benefits.

Medicare Advantage plans typically operate with provider networks, and factors in to your out-of-pocket costs. If you visit doctors, hospitals or specialists within the plan’s network, your costs are usually lower. If you see an out-of-network provider, you could face higher fees or even pay the full cost of care.

The cost of plans will vary depending on factors such as the specific plan, your location, and coverage options.

Many Medicare Advantage plans offer low or even no premiums, but you’ll still need to pay the regular Part B monthly premium. They also include maximum out-of-pocket costs and usually copays for services.

Medicare Part D

Medicare Part D provides prescription drug coverage and is provided by private insurance companies. It is not included in Original Medicare. Costs will vary based on your income, prescriptions needed, and the plan you choose, though there is an annual out-of-pocket maximum. In 2025, the out-of-pocket spending for covered drugs cannot exceed $2,000.

Medicare Supplement Insurance

Original Medicare generally covers about 80% of health care costs. Depending on your needs, you may also want to consider a Medicare supplement insurance (also known as Medigap) plan to help cover the remaining 20% of those costs. Medicare supplement insurance plans can help cover healthcare costs like deductibles, copays, and coinsurance that aren’t covered in Original Medicare. A Medicare supplement insurance plan may be the right fit for you if you want additional coverage beyond Original Medicare and prefer a steady, predictable bill. In addition, many plans offer benefits for medical emergencies when you are traveling outside the U.S.

The federal government standardized all Medicare supplement plans, ensuring that plans with the same letter designation (e.g., Plan G or Plan F) offer the same basic benefits, regardless of the private insurance provider you purchase the plan from. However, premium costs for those plans and quality of service can vary depending on the insurer (in Massachusetts, Minnesota and Wisconsin, Medicare supplement plans are standardized differently).

Note that Medicare supplement insurance cannot be used with Medicare Advantage plans, so you’ll need to choose one or the other.

What are unexpected Medicare costs?

Unexpected Medicare costs are out-of-pocket expenses that aren’t always obvious when reviewing a plan.

Here are some common examples:

Assuming dental or hearing services are covered: Original Medicare does not usually pay for routine dental, hearing or vision services. If you don’t have supplemental coverage or a Medicare Advantage plan that includes benefits, you could be responsible for the full cost of products and services like cleanings, hearing aids or glasses.
High coinsurance for certain hospital stays: Medicare Part A covers hospital stays for a set number of days. Based on the type of Medicare coverage you have, if you have a longer stay or require many weeks of follow-up care in a skilled nursing facility, you may be responsible for those costs out-of-pocket.
Surprise charges for out-of-network doctors during emergencies: With Medicare Advantage, it’s not unusual to receive care from doctors who aren’t in your plan’s network. This can lead to higher bills, even if the hospital itself is in-network.
Unanticipated prescription drug tier changes leading to higher costs: Medicare Part D plans use tiered pricing for prescription drugs. These tiers can change year to year, and a drug you’ve relied on may suddenly carry a much higher cost if it’s reclassified.

These types of expenses highlight the importance of reviewing your plan thoroughly each year and understanding how benefits may shift. Even slight differences in coverage can lead to unexpected costs.

Other costs associated with Medicare plans

It’s important to review the details of any Medicare plan you’re considering carefully to avoid potential unexpected costs. Unexpected costs of Medicare Advantage plans, for example, may include copayments, coinsurance, out-of-pocket maximums, and coverage for services like dental, vision, and hearing care.

Copayments and coinsurance

With Original Medicare, you may be responsible for coinsurance, which is the portion of the costs of a covered health care service you pay after you’ve paid your deductible. Coinsurance amounts can vary based on the specific services received. These costs can add up, particularly if you need frequent or specialized care.

While Original Medicare rarely has copays, they may be a factor if you elect to enroll in additional coverage options, like Medicare Advantage or Medicare supplement insurance. You’ll likely be responsible for copayments for doctor visits, hospital stays, and other services.

Out-of-pocket maximums

An out-of-pocket maximum limits how much you need to pay for covered health care services in a calendar year. Original Medicare does not have out-of-pocket maximums, but both Medicare Advantage and Part D prescription drug plans do. Once you reach the maximum, your plan will cover all costs for covered services for the rest of the year. Most Medicare supplement insurance plans do not have this maximum because they are designed to work alongside Original Medicare and cover out-of-pocket costs. Only Medicare supplement plans K and L have an out-of-pocket maximum.

Out-of-network costs

With Original Medicare and Medicare supplement plans, you can see any provider who accepts Medicare. However, if you enroll in a Medicare Advantage plan, your coverage may be limited to a specific network of providers, so you may not keep your preferred doctors. While you can still use out-of-network providers, they may carry significantly higher costs. You may even be responsible for the full bill.

Keep in mind that Medicare Part D plans may also have preferred pharmacy networks. Filling prescriptions at an out-of-network pharmacy can lead to higher costs or may not be covered at all.

Prescription drug costs

Original Medicare does not cover prescription drug costs. If you need prescription coverage, consider Medicare Part D coverage. Medicare Part D provides prescription drug coverage and is not included in Original Medicare coverage. It must be purchased separately. With Part D, you may be responsible for premiums, deductibles, and copays to take advantage of the coverage.

Additional coverages

Medicare plans rarely include benefits for dental, vision, and hearing coverage. If you decide this additional coverage is important to your health care needs, you’ll need to factor in the costs associated with these separate plans. Some Medicare Advantage plans can include this coverage, but it may come with additional costs, such as higher premiums or specific service fees.

Strategies for managing unexpected Medicare costs effectively

Here are a few strategies to help you manage your Medicare costs and plan for any surprises.

Understand your coverage

Regularly review your Medicare plan to ensure that it still meets your needs. You can also compare the plan you have to other plans offered. If you’re enrolled in a Medicare Advantage plan and you find another plan that offers better coverage for your needs or lower costs, you can switch plans during the open enrollment period. You can also switch back to Original Medicare during this time.

If you’re enrolled in a Medicare Supplement plan, you can switch plans at any time, but you may be subject to medical underwriting, which means you could be denied coverage.

Maximize your benefits

By using the preventive services covered by your plan and leveraging any of your additional plan benefits, you might maintain your health and help avoid higher costs down the line.

Get to know the network providers

If you have a Medicare Advantage plan, familiarize yourself with the doctors, specialists, and facilities that are covered by your plan. Using in-network providers could help minimize costs.

If you have Original Medicare with a Medicare Supplement plan, you aren’t limited to a provider network, but the provider you choose must accept Medicare patients.

Consider getting additional insurance

As you regularly review your Medicare coverage, consider any additional coverage you might need based on your changing health care needs. Not all plans provide the same coverage, and you may need additional insurance. Keep in mind that Original Medicare typically covers 80% of health care costs, so it’s important to evaluate additional options to help cover expenses such as copays, coinsurance and deductibles.

Why unexpected Medicare costs happen

Unexpected costs often happen because Medicare isn’t a one-size-fits-all program.

Factors include:

Annual changes in premiums and deductibles set by CMS
Changes in your health status requiring new treatments
Drug formulary changes in Part D
Differences in provider networks or providers who accept Medicare assignment and billing practices
Unexpected hospital stays that extend beyond Medicare’s covered days

How to estimate and plan for unexpected Medicare expenses

Don’t just guess what you’ll spend. Use these steps to estimate more accurately:

Look at last year’s health care costs: Add up the premiums, copays, and coinsurance you paid.

Consider expected care needs: Do you have chronic conditions that may worsen?
Check plan documents for maximum out-of-pocket limits: Knowing this number helps you plan for the worst-case scenario.
Build a savings buffer: Financial planners often recommend that you set aside at least $5,000–$10,000 in an emergency fund for health expenses.
Ask your pharmacy for a medication cost breakdown: An itemized bill will show the exact price, which is particularly important if you are on multiple prescriptions.

How to prepare for unexpected Medicare costs

Regularly reviewing your plan, making use of preventive services, budgeting for out-of-pocket expenses, and exploring additional insurance options are all essential strategies for making the most of your Medicare plan.

If you’d like to know more about Medicare, visit the Mutual of Omaha Medicare Advice Center to learn more. With a free, seven-question tool, we can help you determine which Medicare plan may be the right fit for you.

Frequently Asked Questions

What should I do if I can’t afford unexpected Medicare costs?

If unexpected Medicare expenses are straining your budget, contact your state’s Medicaid office or a State Health Insurance Assistance Program (SHIP) counselor to explore options like Medicare Savings Programs or Extra Help. You may qualify for assistance that reduces premiums, deductibles or prescription drug costs.

Are there any tools or resources to help compare Medicare plans and manage costs?

Yes, Medicare.gov lets you compare Medicare Advantage and Part D plans side by side, and SHIP programs offer free, personalized guidance, as well as a Procedure Price Lookup tool that helps you estimate costs for your area. You can also use Mutual of Omaha’s Advice Center to help you find the Medicare solution that will best fit your needs.

When is the best time to start planning for unexpected healthcare costs in Medicare?

Ideally, start planning before you enroll in Medicare by estimating healthcare needs and researching costs. For Medicare Advantage and Part D plans, the main time to review and make changes is during the Open Enrollment Period, which runs from October 15 to December 7 each year. Additionally, from January 1 to March 31, people already enrolled in Medicare Advantage can make a limited set of plan changes during the Medicare Advantage Open Enrollment Period.

Expertly reviewed by: Dr. Manoj Pawar, MD, FAAP

Chief Medical Officer, Mutual of Omaha

Dr. Pawar brings over two decades of clinical and executive experience with a focus on preventive care, public health and empowering physicians and patients with the tools they need to live their best lives. Dr. Pawar completed his undergraduate degree at Northwestern University, his medical degree at McGill University in Montreal and his specialty training at the University of Colorado. He’s a Fellow of the American Academy of Family Physician and a member of Delta Omega, the Public Health honor society.