Medicare Costs Explained: Premiums, Deductibles, Copays, and Out-of-Pocket Costs

One of the biggest surprises for people new to Medicare is that it is not free. While Part A is premium-free for most people, Medicare still involves a range of costs that can affect your budget in different ways.

Understanding the full cost picture helps you plan realistically and choose coverage that protects you without paying more than you need to.

Premiums

A premium is the amount you pay each month just to have coverage, regardless of whether you use any services.

Part A Premium

Most people pay $0 for Part A because they (or their spouse) paid Medicare taxes for at least 40 quarters (10 years). If you do not qualify for premium-free Part A, you may be able to buy it — in 2026 the cost is either $311 or $565 per month, depending on how long you or your spouse paid Medicare taxes.

Part B Premium

The standard Part B premium is $202.90 per month in 2026. Higher-income individuals pay more through IRMAA (Income-Related Monthly Adjustment Amount). IRMAA is based on your tax return from two years prior.

Part D Premium

Part D premiums vary widely by plan and are set annually by each insurer, so the right comparison is always the current year's plan list in your area rather than an average. Higher-income individuals may also pay a Part D IRMAA surcharge.

Medicare Advantage Premium

Many Medicare Advantage plans have $0 monthly premiums (beyond the Part B premium). Others charge an additional monthly premium, particularly for plans with richer benefits.

Medigap Premium

Medigap premiums vary by plan letter, insurance company, and your age/location. In Kentucky, Plan G premiums differ meaningfully between insurers for identical coverage, which is why comparing several carriers for the same plan letter matters.

Deductibles

A deductible is the amount you must pay out of pocket before your insurance starts covering costs.

• Part A deductible: $1,736 per benefit period in 2026
• Part B deductible: $283 per year in 2026
• Part D deductible: No Medicare drug plan may charge more than $615 in 2026 (varies by plan; some plans have no deductible)
• Medicare Advantage deductible: Varies by plan; some have no deductible

Copays and Coinsurance

After you meet your deductible, you typically share costs with your plan:

• Copay: A fixed dollar amount for a service (e.g., $20 for a doctor visit)
• Coinsurance: A percentage of the cost (e.g., 20% of the Medicare-approved amount)

Under Original Medicare, Part B coinsurance is typically 20%, and there is no cap on how much you can owe in a year. This is one of the primary reasons people purchase Medigap — to cover that 20% coinsurance.

Medicare Advantage plans typically have copays for doctor visits and coinsurance for hospital stays, but the amounts vary by plan.

Out-of-Pocket Maximum

Medicare Advantage plans include an annual out-of-pocket maximum — the most you will pay for covered services in a year. Once you reach this limit, the plan pays 100% of covered costs for the rest of the year.

Medicare sets a federal maximum for in-network out-of-pocket costs each year, and many plans set their limits below it — check the current figure on the plan you are considering.

Original Medicare has no out-of-pocket maximum. This is an important distinction and one of the key reasons people pair Original Medicare with a Medigap plan.

• Medicare involves premiums, deductibles, copays, and coinsurance — understanding each one helps you plan your budget.
• Original Medicare has no annual out-of-pocket cap — which is why Medigap or Advantage coverage is important for financial protection.
• Total costs depend on how you use care — someone who uses few services may spend less on a plan with higher cost-sharing, while someone with frequent needs may benefit from richer coverage.

Putting It All Together

The total cost of Medicare is not just your premium. It includes:

1. Monthly premiums (Part B + Part D or Advantage + Medigap if applicable)
2. Annual deductibles
3. Copays and coinsurance for services you actually use
4. Prescription drug costs through the Part D coverage phases

The best way to estimate your total annual cost is to combine all of these factors based on your actual healthcare usage and medications. Summit Benefits Group does this analysis for Kentucky clients as part of our plan comparison process.

Related Reading

For Kentucky-specific figures, see the cost of Medicare in Kentucky. If you are on a Medicare Advantage plan, understanding your Medicare out-of-pocket maximum explains the one number that caps a bad year. Our Medicare overview ties the parts and their costs together.

Medicare costs can be confusing, but they do not have to be. At Summit Benefits Group, we help Kentucky clients understand the full cost picture and find coverage that balances protection with affordability.