Two myths trip people up at 65: that Medicare is free, and that it covers everything. Neither is true. Medicare has real, ongoing costs, and it has real holes — some of them large enough to reshape a family's finances. This closing lesson maps both, calmly, so neither the bills nor the gaps come as a shock. As always, it describes how things work rather than telling anyone what to do.
This is educational content, not personalized health-coverage, financial, or legal advice. The premiums, deductibles, surcharges, and coverage rules here are general, approximate, and change every year. Only medicare.gov and a specific plan's documents can confirm the figures and details for any individual.
What Medicare costs
Medicare's costs come in layers. Even the "free" parts carry some cost, and the income-based surcharges surprise higher earners.
| Cost piece | What it is | Rough shape |
|---|---|---|
| Part A premium | Hospital insurance | $0 for most people (paid in via payroll taxes over a career) |
| Part A deductible/coinsurance | What you owe for an inpatient stay | A per-stay deductible, plus daily coinsurance for long stays |
| Part B premium | Medical insurance | A standard monthly premium — around $185/month in recent years |
| Part B deductible + coinsurance | Annual deductible, then ~20% coinsurance | You pay roughly 20% of many services after the deductible |
| Part D premium | Drug coverage | Varies by plan |
| IRMAA surcharges | Income-based add-ons to Part B and Part D | Higher-income people pay more on top of the standard premiums |
Two things to highlight. First, Part A being premium-free for most people doesn't make it cost-free — a hospital stay still carries a deductible and, for long stays, daily coinsurance. Second, the standard Part B premium is the same for most people (often quoted as roughly $185/month in recent years, rising over time), but it isn't the same for everyone — which is where IRMAA comes in.
IRMAA: the higher-income surcharge
IRMAA — the Income-Related Monthly Adjustment Amount — is an extra charge added to the Part B and Part D premiums for people whose income is above certain thresholds. The higher the income, the larger the surcharge, in tiers.
| Income level (concept) | What happens to Part B & D premiums |
|---|---|
| Below the first threshold | Standard premium only — no surcharge |
| Above the thresholds | An IRMAA surcharge is added, in tiers, rising with income |
A few honest caveats make IRMAA less startling. It's based on income from a prior tax year (generally two years back), so a recent retiree's surcharge may reflect their higher working income — and there's a process to request a reconsideration after a life-changing event like retirement. The thresholds and tier amounts change yearly. The general idea from taxes-101 — that more income can trigger more cost — shows up here too.
The gaps: what Medicare doesn't cover
Now the holes. People assume Medicare is comprehensive; it isn't. Several everyday categories fall partly or entirely outside Original Medicare.
| Care category | Coverage under Original Medicare |
|---|---|
| Routine dental (cleanings, dentures) | Generally not covered |
| Routine vision (eye exams, glasses) | Generally not covered |
| Routine hearing (exams, hearing aids) | Generally not covered |
| Most care outside the US | Generally not covered |
| Long-term custodial care | Not covered — the biggest gap of all |
Routine dental, vision, and hearing being excluded surprises people every day — it's part of why some choose a Medicare Advantage plan that bundles those extras, or buy separate coverage. But the gap that does the most financial damage is the last one.
The biggest gap: long-term custodial care
The single most consequential thing Medicare does not cover is long-term custodial care — the ongoing, non-medical help with daily living (bathing, dressing, eating, supervision) that a person may need for months or years, whether at home, in assisted living, or in a nursing home. Medicare covers skilled care that follows a hospital stay and is expected to improve a condition, but not the open-ended custodial care that so many people eventually need.
This catches families flat-footed because custodial care is enormously expensive and feels like exactly what health insurance "should" cover. It generally doesn't. The program that does cover long-term care is Medicaid — but only after a person has spent down most of their assets and meets strict, state-specific income and asset limits. The full landscape of what that care costs and who actually pays for it is covered in depth in the aging-parents lesson on elder-care costs.
Importantly, even a Medicare Advantage plan that adds dental, vision, and hearing extras generally still doesn't cover long-term custodial care — that gap exists across both Medicare paths. The extras Advantage adds are real, but they don't close the big hole.
That closes the Medicare track: the parts, the deadlines and lifelong penalties, the Original-vs-Advantage fork, and now the costs and the gaps. For the broader retirement picture these costs sit inside, the retirement-401k track and the Social Security track carry the story forward.