Medicare Costs Explained: Parts A, B, C, and D

Many people are surprised to learn Medicare comes with real costs. Understanding the four parts, what each covers, and how income affects your premiums helps you plan for healthcare in retirement instead of being caught off guard.

Part A: hospital coverage

Part A covers inpatient hospital stays, skilled nursing, and some home health care. Most people pay no premium for Part A because they (or a spouse) paid Medicare taxes while working, but it still has a per-stay deductible and daily coinsurance for long stays.

Part B: medical coverage

Part B covers doctor visits, outpatient care, and preventive services. It has a standard monthly premium and an annual deductible, after which you typically pay 20% coinsurance with no out-of-pocket maximum, which is why many people add supplemental coverage.

Part C and Part D

Part C (Medicare Advantage) is a private alternative that bundles A, B, and usually D, often with extra benefits, in exchange for using a network. Part D is prescription drug coverage, sold separately, with its own premium that varies by plan.

The income surcharge (IRMAA)

Higher earners pay more for Parts B and D through an income-related surcharge called IRMAA, based on your tax return from two years earlier. This is why retirement tax planning matters: a big one-time income event (like a large Roth conversion or capital gain) can raise your Medicare premiums two years later.

Filling the gaps

Because original Medicare has no out-of-pocket cap, many retirees add a Medigap (supplemental) policy or choose Medicare Advantage to limit their exposure. Comparing total expected costs, premiums plus likely care, is the way to choose.

Estimate your premiums, including any IRMAA surcharge, with our Medicare premium calculator.