Does Medicare Cover 100 Percent of Costs?

Medicare is the federal health insurance program that provides coverage for individuals aged 65 or older, certain younger people with disabilities, and those with End-Stage Renal Disease or Amyotrophic Lateral Sclerosis (ALS). While Medicare covers a substantial portion of healthcare expenses, it does not cover 100% of costs. Beneficiaries commonly encounter out-of-pocket expenses through premiums, deductibles, and coinsurance.

Understanding Original Medicare Coverage and Costs

Original Medicare consists of two primary parts: Part A (Hospital Insurance) and Part B (Medical Insurance). Medicare Part A helps cover inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health services. Most beneficiaries do not pay a monthly premium for Part A if they or their spouse paid Medicare taxes through employment for at least 10 years. Otherwise, a monthly premium of up to $518 may apply in 2025.

Even with premium-free Part A, beneficiaries are responsible for a deductible and coinsurance amounts. The inpatient hospital deductible for Medicare Part A is $1,676 per benefit period in 2025. A benefit period begins upon inpatient admission to a hospital or skilled nursing facility and ends after 60 consecutive days without inpatient care. This means a beneficiary could pay the deductible multiple times within a single year.

Coinsurance also applies for extended stays. For hospital inpatient care, there is no coinsurance for the first 60 days of a benefit period. From days 61 through 90, the coinsurance is $419 per day in 2025, and for days 91 through 150 (using up to 60 lifetime reserve days), the coinsurance is $838 per day. For skilled nursing facility care, the coinsurance is $0 for the first 20 days, but then it is $209.50 per day for days 21 through 100 in 2025, with beneficiaries responsible for all costs after day 100.

Medicare Part B covers medically necessary services such as doctor’s services, outpatient care, preventive services, and durable medical equipment. Most beneficiaries pay a standard monthly premium for Part B, which is $185 in 2025. Higher-income individuals, based on their modified adjusted gross income from two years prior, may pay an Income-Related Monthly Adjustment Amount (IRMAA) ranging from $259 to $628.90 per month in 2025.

In addition to the monthly premium, Part B has an annual deductible, which is $257 in 2025. After the deductible is met, beneficiaries typically pay 20% coinsurance of the Medicare-approved amount for most Part B-covered services.

Common Gaps in Original Medicare

Original Medicare does not cover every healthcare service or item an individual might need. Certain services are explicitly excluded, requiring beneficiaries to pay the full cost out-of-pocket unless they have other insurance.

Routine dental care (including cleanings, fillings, and dentures), vision care (such as eye exams and eyeglasses), and hearing care (including exams and hearing aids) are not covered by Original Medicare. These routine services typically require beneficiaries to pay the full cost out-of-pocket.

Most long-term custodial care, which includes assistance with daily living activities, is not covered. Original Medicare focuses on skilled care. Services like cosmetic surgery, acupuncture, and naturopathic services are not covered. Care received outside the United States is also generally not covered.

Options for Additional Coverage

Given the out-of-pocket costs and coverage gaps in Original Medicare, many beneficiaries seek additional insurance to help manage their healthcare expenses. Two primary options are Medicare Supplement Insurance, also known as Medigap, and Medicare Advantage Plans (Part C). These options offer different approaches to supplementing Original Medicare.

Medicare Supplement Insurance plans are private insurance policies designed to work alongside Original Medicare. These plans help pay for some of the out-of-pocket costs associated with Original Medicare, such as deductibles, coinsurance, and copayments. For example, many Medigap plans pay the 20% Part B coinsurance, significantly reducing a beneficiary’s financial responsibility for doctor visits and outpatient services. Medigap plans are standardized, meaning a Plan G from one insurer offers the same basic benefits as a Plan G from another, though premiums can vary.

Medigap plans do not cover services that Original Medicare itself does not cover, such as routine vision, dental, or hearing care. They simply help cover the cost-sharing for services covered by Parts A and B. Choosing a Medigap plan means continuing to receive healthcare through Original Medicare’s network of providers, as long as they accept Medicare. Unlike Original Medicare, some Medigap plans have an annual out-of-pocket limit after which the plan pays 100% of covered costs.

Medicare Advantage Plans, or Part C, are offered by private insurance companies approved by Medicare. These plans provide all of the benefits of Medicare Part A and Part B, and often include additional benefits not covered by Original Medicare, such as routine dental, vision, and hearing care, and typically prescription drug coverage (known as Medicare Advantage Prescription Drug plans or MAPD). When choosing a Medicare Advantage plan, beneficiaries receive their Medicare benefits directly from the private plan rather than through Original Medicare.

Medicare Advantage plans often have their own network rules, such as Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs), which may limit choices of doctors and hospitals. These plans usually involve copayments for services rather than coinsurance, and they have an annual out-of-pocket spending limit. Once this limit is reached, the plan pays 100% of covered services for the remainder of the calendar year, providing a financial safety net not inherent in Original Medicare.

Medicare Prescription Drug Coverage

Prescription drug coverage is an aspect of healthcare costs that Original Medicare generally does not cover. To address this, Medicare offers Part D, which provides optional prescription drug coverage through private insurance companies approved by Medicare. Part D plans help cover the cost of prescription medications, which can be a substantial expense for many individuals.

Beneficiaries typically pay a monthly premium for their Part D plan, which varies by plan and insurer. There is also an annual deductible that must be met before the plan begins to pay for prescription drug costs; in 2025, no Part D plan can have a deductible higher than $590. After meeting the deductible, beneficiaries usually pay copayments or coinsurance for their prescriptions, which vary depending on the drug and the plan’s formulary, or list of covered drugs.

Part D coverage also involves different cost-sharing phases. After the deductible, beneficiaries enter an initial coverage phase where they pay a portion of the drug cost, and the plan pays the rest. After a certain amount of spending, beneficiaries may enter a coverage gap, often called the “donut hole,” where they pay a higher percentage of the drug cost. Finally, a catastrophic coverage phase provides financial protection, where beneficiaries pay a very small coinsurance or copayment for covered drugs for the rest of the year.

Part D coverage can be obtained in two ways: as a stand-alone Prescription Drug Plan (PDP) if an individual has Original Medicare, or it can be included as part of a Medicare Advantage Plan (MAPD). Individuals with higher incomes may also pay an Income-Related Monthly Adjustment Amount (IRMAA) for their Part D premium, similar to Part B.