Medicare Out-of-Pocket Costs: Your Guide to Copays, Deductibles, and Maximizing Savings

Before diving into the specific costs under each part of Medicare, it helps to understand the four basic cost-sharing mechanisms that determine what you pay.

Premium: A premium is the monthly fee you pay for coverage, regardless of whether you use any services. Most people pay no premium for Part A, while the standard Part B premium is $185 per month in 2026.

Deductible: A deductible is the amount you must pay out of pocket before Medicare begins covering your costs. Part A and Part B each have separate deductibles.

Copay: A copay is a fixed dollar amount you pay for a specific service, such as $20 for a primary care visit. Copays are more common under Medicare Advantage plans than under Original Medicare.

Coinsurance: Coinsurance is a percentage of the cost you pay after meeting your deductible. Under Original Medicare Part B, you pay 20% coinsurance for most covered outpatient services, with Medicare paying the other 80%.

The combination of these four elements determines your total annual healthcare spending. The challenge with Original Medicare is that there is no annual limit on how much you can owe in deductibles and coinsurance combined.

Medicare Part A covers inpatient hospital care, skilled nursing facility (SNF) care, hospice care, and some home health services. While most beneficiaries pay no monthly premium for Part A, the cost-sharing for hospital stays can be substantial.

The benefit period structure is one of the most misunderstood aspects of Part A. A benefit period begins the day you are admitted as an inpatient and ends when you have been out of the hospital or SNF for 60 consecutive days. If you are readmitted after that 60-day gap, a new benefit period begins and the $1,676 deductible applies again. There is no limit to how many benefit periods you can have in a year.

Medicare Part B covers outpatient medical services, doctor visits, preventive care, durable medical equipment, and most medically necessary treatments received outside a hospital. Part B has both a monthly premium and annual cost-sharing.

Standard Part B premium: $185 per month in 2026. Higher-income beneficiaries pay more due to IRMAA surcharges (see below).

Part B deductible: $257 per year in 2026. You pay this once per calendar year before Part B begins covering your costs.

Part B coinsurance: After meeting your deductible, you pay 20% of the Medicare-approved amount for all covered services. Medicare pays the remaining 80%. There is no annual cap on this 20% coinsurance under Original Medicare.

To put this in perspective: if you have a major surgery with $100,000 in approved outpatient charges, your 20% share would be $20,000. Without a Medigap plan or Medicare Advantage, you would owe that full amount.

Preventive services: Many preventive services, including annual wellness visits, flu shots, mammograms, and colorectal cancer screenings, are covered at 100% with no deductible or coinsurance. Taking advantage of these services is one of the easiest ways to reduce your overall healthcare costs.

Medicare Part D covers prescription drugs. Costs vary by plan, but all Part D plans share a common structure that includes a premium, deductible, and tiered copays or coinsurance.

Part D premium: Varies by plan. The national average benchmark premium in 2026 is approximately $36 per month, but plans range from $0 to over $100 per month depending on the drugs covered and your location.

Part D deductible: The maximum allowed deductible in 2026 is $590. Many plans charge less; some charge none.

Part D copays and coinsurance: After the deductible, you pay a copay or coinsurance for each prescription based on the drug tier. Generic drugs typically have the lowest copays, while specialty drugs can have significant coinsurance.

The $2,000 out-of-pocket cap: Starting in 2025, there is a $2,000 annual cap on out-of-pocket costs for covered Part D drugs. Once you reach this threshold, you pay $0 for covered drugs for the rest of the calendar year. This is a major improvement from previous years when there was no cap and catastrophic drug costs could be unlimited.

Learn more about how this cap works in our detailed article on the Medicare Part D $2,000 out-of-pocket cap.

This is the most important cost fact every Medicare beneficiary needs to understand: Original Medicare (Parts A and B) has no annual out-of-pocket maximum.

Most employer-sponsored health plans and ACA marketplace plans cap your annual out-of-pocket costs at a specific dollar amount. Once you hit that cap, the insurance pays 100% for the rest of the year. Original Medicare has no such protection.

Under Original Medicare, you could theoretically owe:

For someone with a serious illness, these costs can easily reach $20,000, $50,000, or more in a single year. This is why most financial advisors and Medicare specialists recommend pairing Original Medicare with either a Medigap supplement plan or enrolling in a Medicare Advantage plan that includes an out-of-pocket maximum.

There are two primary ways to protect yourself from Original Medicare's unlimited cost exposure.

Medicare Supplement (Medigap) plans work alongside Original Medicare and pay some or all of the cost-sharing that Original Medicare leaves behind. The most popular plan, Plan G, covers the Part A deductible, Part A coinsurance, Part B coinsurance, skilled nursing facility coinsurance, and foreign travel emergency care. After paying the $257 Part B deductible, you pay nothing for covered services for the rest of the year. Medigap plans have higher monthly premiums but provide predictable, low out-of-pocket costs.

Medicare Advantage plans replace Original Medicare and are required by law to cap your annual out-of-pocket costs for covered in-network services. In 2026, the maximum allowed cap is $9,350 for in-network services and $14,000 for combined in-network and out-of-network services. Many plans set their caps lower. Medicare Advantage plans often have lower premiums than Medigap but may require referrals, prior authorizations, and network restrictions.

For a deeper comparison, see our article on Original Medicare vs. Medicare Advantage.

If your income exceeds certain thresholds, you pay more for Medicare Part B and Part D through the Income-Related Monthly Adjustment Amount (IRMAA). IRMAA is based on your modified adjusted gross income (MAGI) from two years prior. For 2026, Social Security uses your 2024 tax return.

IRMAA surcharges begin for individuals with income above $106,000 and married couples filing jointly above $212,000. The surcharges increase in tiers as income rises.

For example, an individual with 2024 income of $130,000 would pay an additional $74.00 per month on top of the standard $185 Part B premium, for a total of $259 per month. At the highest income tier (above $500,000 for individuals), the Part B premium reaches $628.90 per month.

If your income has dropped significantly since the year used for the IRMAA calculation, you can request a reconsideration from Social Security using Form SSA-44. Common qualifying life events include retirement, divorce, and the death of a spouse. Learn more in our article on how IRMAA works and how to appeal it.

There are several proven strategies to reduce what you pay for Medicare each year.

1. Add a Medigap or Medicare Advantage plan. As described above, both options can dramatically reduce or cap your out-of-pocket exposure. The right choice depends on your health needs, budget, and preferred doctors.

2. Apply for Extra Help or a Medicare Savings Program. If your income and resources are limited, you may qualify for programs that pay your Part B premium, reduce your Part D costs, or cover your deductibles and copays entirely. See our guide on how to get help paying for Medicare for full details.

3. Use preventive services. Medicare covers dozens of preventive services at no cost, including annual wellness visits, cancer screenings, flu and pneumonia vaccines, and cardiovascular screenings. Using these services can catch health issues early and reduce long-term costs.

4. Review your Part D plan annually. During the Annual Enrollment Period (October 15 to December 7), you can switch to a different Part D plan. If your medications have changed, a different plan may offer lower copays or a lower premium. Our article on the Annual Enrollment Period explains how to compare plans.

5. Ask about generic alternatives. Generic drugs are placed on lower tiers in most Part D formularies and carry significantly lower copays than brand-name equivalents. Ask your doctor whether a generic is appropriate for your prescriptions.

6. Appeal IRMAA if your income has dropped. If you are paying IRMAA surcharges based on income that no longer reflects your current situation, file a life-change event appeal with Social Security to have your premiums recalculated.