Medicare Costs in 2026: What Retirees Need to Budget

2026 Medicare Premiums and Costs

Total monthly cost:

• Original Medicare + Medigap + Part D: $390–$515.
• Medicare Advantage: $0–$200 (plus copays for every visit).

Part A: Hospital Insurance

Premium: $0 for the roughly 99% of beneficiaries with 40 quarters of Medicare-taxed work. With 30–39 quarters you buy in at $311 a month in 2026; with fewer than 30, the full premium is $565 a month.

What it covers:

• Hospital stays (inpatient).
• Skilled nursing facility (after a qualifying hospital stay).
• Hospice care.
• Home health (in some situations).

Deductible: $1,736 per benefit period in 2026 — not per year. A benefit period ends after 60 consecutive days out of a hospital or skilled nursing facility, so two unrelated admissions eleven months apart mean paying the deductible twice.

Cost sharing (2026):

• Days 1–60: $0 per day (the deductible covers your share).
• Days 61–90: $434 per day.
• Beyond day 90: $868 per day, drawn from a bank of 60 lifetime reserve days — once those 60 days are spent, they never come back and you pay the full cost of care.
• Skilled nursing facility, days 21–100: $217 per day (days 1–20 are $0; after day 100, you pay everything).

That lifetime-reserve limit is the detail most people get wrong. Part A hospital coverage is not open-ended, and there is no annual out-of-pocket maximum anywhere in Original Medicare — which is the entire reason Medigap and Medicare Advantage exist.

Part B: Doctor and Outpatient Services

Premium: $202.90/month (2026 standard). Higher earners pay more (IRMAA surcharge).

What it covers:

• Doctor visits.
• Outpatient surgery.
• Diagnostic tests.
• Preventive care (no copay).

Deductible: $283/year (2026).

Copay/Coinsurance: 20% of approved amounts (after deductible) for most services, with no annual cap.

Example: Doctor visit costs $200.

• Deductible applies: the first $283 of Part B services in the year is entirely your responsibility.
• Once the deductible is met: you pay 20% × $200 = $40.

Part B covers 80% of the approved amount; you pay 20% — and because there is no out-of-pocket maximum, a single serious year (chemotherapy, dialysis, a long course of infusions) can generate a five-figure coinsurance bill on its own.

Part D: Prescription Drug Coverage

Premium: $35–$60/month for most standalone plans (varies by plan, region and formulary).

Coverage stages in 2026 — there are only three, and this is the part of Medicare that changed most recently:

1. Deductible: whatever your plan charges, capped by law at $615. Many plans charge less or nothing.
2. Initial coverage: you pay 25% coinsurance on covered drugs, brand and generic alike.
3. Catastrophic: once your out-of-pocket spending on covered Part D drugs reaches $2,100, you pay $0 for the rest of the calendar year.

Important — the "donut hole" is gone. The coverage gap that used to sit between initial and catastrophic coverage was eliminated on 1 January 2025 by the Inflation Reduction Act and replaced with the hard annual out-of-pocket cap above: $2,000 in 2025, $2,100 in 2026. Any guide still describing a donut hole, or a catastrophic phase where you keep paying 5%, is describing pre-2025 law. The practical effect is large for anyone on a specialty drug: the worst possible Part D year now costs $2,100 plus premiums, where it was effectively uncapped before 2025.

There is also a Medicare Prescription Payment Plan — the option, available since 2025, to spread that $2,100 in level monthly instalments across the year rather than absorbing it in January when an expensive prescription is filled. It does not reduce what you owe; it stops the bill arriving all at once.

Supplemental Insurance (Medigap)

Medigap plans fill gaps in original Medicare (Part A + B). Plans are standardized (Plan G, Plan N, etc., with consistent benefits nationwide).

Plan G (most popular):

• Premium: ~$150–$250/month.
• Covers: Part A deductible and coinsurance, all 365 additional hospital days beyond lifetime reserve, Part B coinsurance and excess charges, foreign travel emergency.
• Does not cover the $283 Part B deductible. You pay that yourself each year, then Plan G covers essentially everything else. Plan F was the only plan that covered it, and Plan F is closed to anyone who became Medicare-eligible on or after 1 January 2020 — a bar set by MACRA, not by the insurers.

Plan N (lower cost):

• Premium: ~$100–$150/month.
• Covers: most of what Plan G covers, but you keep copays of up to $20 per office visit and $50 per emergency visit, and Plan N does not cover Part B excess charges.

Medigap plans are comprehensive but expensive, and the pricing detail that matters more than the letter is when you buy. During your six-month Medigap open enrolment window — which starts the month you are 65 and enrolled in Part B — insurers must sell you any plan they offer at their standard rate regardless of health history. After that window closes, in most states they can medically underwrite you, charge more, or decline you outright. Switching from Medicare Advantage back to Original Medicare plus Medigap years later is where people discover this.

Medicare Advantage (Part C)

Alternative to original Medicare: Combines Parts A, B, D into one plan (usually with a network).

Features:

• Plan premium: often $0–$200/month — but this is on top of the $202.90 Part B premium, which every beneficiary pays regardless of plan. "$0 premium" never means $0.
• Copays: $20–$60 per doctor visit (varies by plan).
• Network: must see in-network providers except in emergencies, and many plans require prior authorisation for imaging, surgery and skilled nursing.
• Prescription coverage: included, and subject to the same $2,100 out-of-pocket cap.
• Annual out-of-pocket maximum: this is the genuine advantage over Original Medicare, which has none. Typical in-network maximums run several thousand dollars, with a higher combined limit out-of-network on PPO plans.

Tradeoff: lower fixed premiums, higher per-visit costs, network restrictions and prior authorisation — and a cap on your worst year that Original Medicare alone cannot give you.

Example: a 65-year-old enrols in a $0-premium Medicare Advantage plan and sees a doctor ten times in the year.

• Plan premium: $0. Part B premium: $202.90/month = $2,435.
• Ten visits at a $40 copay: $400.
• Year: about $2,835, versus about $5,514 for the same person on Original Medicare with a $185 Plan G, a $48 drug plan and the $283 Part B deductible.

On that year, Advantage wins by roughly $2,700. On a year with a hospital admission, a course of infusions and an out-of-network specialist, Plan G wins — and by more. Medicare Advantage is the better arithmetic if you are healthy, stay in-network and can absorb the out-of-pocket maximum in a bad year; Medigap is better if you need frequent or unpredictable care, travel, or want no plan standing between you and a referral.

IRMAA: Income-Related Monthly Adjustment Amount

Higher income retirees pay IRMAA surcharges (extra premiums on Part B and D).

2026 IRMAA schedule (CMS, 14 November 2025). Premiums for 2026 are set by the MAGI on your 2024 tax return:

Important: IRMAA is based on modified AGI from two years prior, and it is a cliff, not a slope. One dollar of 2024 MAGI above $109,000 moves a single filer from $202.90 to $284.10 a month — $81.20 more, or $974.40 across the year — plus $14.50 a month of Part D surcharge, another $174. Total cost of that one dollar: about $1,148. For a married couple both on Medicare, every figure doubles, because each spouse pays a surcharge computed on the same joint MAGI.

Tax planning implication: delay large capital gains, size Roth conversions to stop below the next threshold, and watch the two-year lookback when selling a house or taking a lump sum. Find your tier and the exact distance to the next cliff with the IRMAA surcharge calculator; if you are weighing a conversion against the surcharge it triggers two years later, the Roth conversion calculator prices that trade directly.

If your income has already dropped, do not just pay the surcharge. File Form SSA-44 with the Social Security Administration to have IRMAA recalculated on current income after a qualifying life-changing event: retirement or reduced work hours, marriage, divorce, death of a spouse, loss of a pension, or loss of income-producing property. Retiring is the most common trigger and the most commonly missed — a 2024 salary of $180,000 sets a 2026 premium that has nothing to do with a 2026 income of $60,000 unless you file the form.

Healthcare Cost Variability

Healthcare in retirement varies widely, but 2026 puts a firmer ceiling on it than any year before 2025 did:

• Healthy retiree, minimal care: $6,000–$7,000/year — essentially all premiums.
• Chronic conditions, regular visits, expensive drugs: $9,000–$11,000/year. On Original Medicare with Plan G, the drug side is now bounded at $2,100 no matter how many specialty prescriptions you fill.
• Major procedures or hospitalisation: with Plan G, still roughly $6,000–$9,000/year, because Medigap absorbs the Part A deductible and the Part B coinsurance. Without supplemental coverage, the same year is genuinely open-ended — 20% of an unbounded number.

Budget for uncertainty: $7,000–$9,000 per person per year is a defensible planning figure for Original Medicare plus Plan G plus a drug plan, before dental and vision. The variance sits almost entirely in whether you carry supplemental coverage, not in how sick you get.

Dental, Vision, Hearing

Medicare does NOT cover:

• Dental care.
• Vision/eyeglasses.
• Hearing aids.

Retirees must self-pay or buy standalone plans:

• Dental: $100–$200/year for cleanings/preventive; $500+/year for major work.
• Vision: $200–$400/year for exams and glasses.
• Hearing: $2,000–$6,000 for aids (some insurance reimburses).

Realistically these add $500–$1,500 a year for a retiree with routine needs, spiking in whichever year hearing aids are bought. Standalone dental plans typically run $25–$50 a month with an annual benefit maximum around $1,000–$1,500, which means the plan stops paying at roughly the point major work begins — for a crown or an implant, the plan covers a fraction and you cover the rest.

Most Medicare Advantage plans bundle some dental, vision and hearing coverage, and that bundling is the single strongest argument for Advantage over Original Medicare plus Medigap. Read the actual annual maximums before treating it as decisive: a $1,000 dental allowance is worth $1,000, not the value of dental insurance.

Long-Term Care and Nursing Homes

Medicare covers some nursing home costs temporarily (after hospital stays), but does not cover custodial long-term care.

Private long-term care insurance costs $1,500–$3,000/year (age 60) and increases with age.

Plan for long-term care separately (insurance, Medicaid, personal savings).

Pre-Medicare (Ages 62–65)

If you retire before 65, health insurance is expensive:

• ACA marketplace plans: $500–$2,000/month full price (varies by age, location, plan tier), before any premium tax credit.
• COBRA (continue employer coverage): $1,500–$2,500/month — COBRA lets the employer charge up to 102% of the full group premium, so you pick up the share your employer used to pay plus 2% administration. It runs 18 months in most cases.

Budget $10,000–$25,000/year for health insurance from age 62–65 if retiring early, and treat that as the real cost of retiring before 65.

The conflict nobody plans around: marketplace premium tax credits are calculated on household MAGI, and so is IRMAA two years later. An early retiree who does large Roth conversions at 62 to shrink future RMDs is simultaneously shrinking their ACA subsidy now and setting up an IRMAA surcharge at 64 and 65 — because the two-year lookback means income at 63 and 64 sets premiums at 65 and 66. The conversion window that looks free between retirement and Medicare is narrower than it appears from either side. Price the whole sequence, not one year at a time.

Tax-Advantaged Healthcare Savings

HSA (Health Savings Account):

• Contribute pre-tax: $4,400 self-only or $8,750 family in 2026, plus a $1,000 catch-up from age 55.
• Withdraw tax-free for qualified medical expenses at any age.
• In retirement, HSA money pays Part B, Part D and Medicare Advantage premiums tax-free — but not Medigap premiums, which are specifically excluded.

The trap nobody warns you about: you must stop contributing to an HSA before Medicare starts, and Part A enrolment is backdated up to six months when you enrol after 65. So if you plan to work past 65 on a high-deductible plan and keep funding an HSA, stop contributions at least six months before you file for Medicare or Social Security — claiming Social Security automatically enrols you in Part A. Contributions made during the retroactive months are excess contributions and carry a 6% excise tax until corrected. This is the single most common HSA error among people retiring at 66 or 67.

HSAs remain the most tax-efficient way to pre-fund retirement healthcare if you have a qualifying high-deductible health plan — triple tax-free, and unlike an FSA the balance is yours forever.

Medicaid for Low-Income Retirees

If your income and assets are low, Medicaid may cover costs not covered by Medicare (nursing home care, etc.).

Medicaid rules vary by state. Spend down strategies may help you qualify.

Consult a Medicaid planner if low-income in retirement.

Two Retirees, Same Care, $2,885 of It Is Just Income

Both are 68, single, and use Medicare in 2026. Both fill four maintenance prescriptions and see specialists three or four times. The only differences are their 2024 income and which coverage they picked.

Two things fall out of this that are worth more than the totals themselves.

First, Dan's "$0-premium" plan is not the cheap option. He pays $4,870 of Part B premium and $450 of Part D surcharge — $5,320 — before his plan charges him a dollar, because IRMAA attaches to Part B whether you use Original Medicare or Medicare Advantage. The $0 in the marketing describes only the plan's own premium, which is the smallest line in his year.

Second, $2,885 of Dan's year is nothing but the income surcharge: $202.90 a month of extra Part B ($2,435) plus $37.50 a month of Part D ($450). Had his 2024 MAGI landed under $109,000, his year would cost $5,165 — he would be $2,449 cheaper than Ruth instead of $436 more expensive, and the entire coverage comparison would flip. Ruth's Plan G premium buys her something real: no network, no prior authorisation, and no exposure at all if the year goes badly. But on a routine year the two coverage structures land within a few hundred dollars of each other, and the decision that actually moved $2,885 was made in 2024, on a tax return, two years before either of them saw a bill. Model where your own MAGI sits relative to the cliffs with the IRMAA surcharge calculator while you can still change the number.

What This Doesn't Cover

The figures above are national, and three of the largest costs in retirement healthcare are not:

• Medigap premiums vary enormously by state, age and rating method. The same Plan G — identical benefits, standardised by federal law — can be $130 in one state and $280 in another, and states use three different pricing methods (attained-age, issue-age, community-rated) that change how fast your premium climbs as you age. The letter is standardised; the price is not.
• Long-term care is the real tail risk and Medicare does not cover it. Custodial care — help with bathing, dressing, eating — is excluded entirely. That is a separate planning problem with a separate answer (insurance, Medicaid spend-down, family, or self-funding), and no Medicare budget contains it.
• Medicare Advantage networks and prior-authorisation rules are not costs you can put in a table, but they are the reason a plan that looks cheaper on paper is sometimes not. Check that your existing specialists are in-network before switching, not after.

Planning Summary

Estimate healthcare spending (one person, Original Medicare, 2026):

1. Part B premium: $202.90/month = $2,435/year.
2. Part D premium: ~$50/month = $600/year.
3. Medigap Plan G premium: ~$180/month = $2,160/year.
4. Part B deductible: $283/year (Plan G leaves this to you).
5. Dental, vision, hearing: $500–$1,500/year.
6. Total: $6,000–$7,000/year per person, or roughly $12,000–$14,000 for a couple.

Add the Part D out-of-pocket cap ($2,100) as your worst case on drugs, and add an IRMAA tier if your MAGI two years back crossed $109,000 single or $218,000 joint. Then fold that number into your overall spending plan — healthcare is usually the second-largest line in a retirement budget after housing, and it is the one that grows fastest. Test whether your income actually supports it with the retirement calculator, and if the number looks tight, the budget allocation planner shows what has to give.

FAQ

Why is my Part B premium higher than $202.90 when my income this year is low?

Because IRMAA uses your tax return from two years ago. Your 2026 premium is set by your 2024 modified AGI, so a house sale, a Roth conversion, a severance payment or your last full year of salary in 2024 can push you into a surcharge tier long after the income is gone. If the drop was caused by a qualifying life-changing event — retirement, reduced hours, marriage, divorce, widowhood, loss of a pension, or loss of income-producing property — file Form SSA-44 with the Social Security Administration and ask for the premium to be recalculated on current income. A capital gain or a Roth conversion is not a qualifying event, so those you simply pay.

Do I still fall into the Part D "donut hole" in 2026?

No. The coverage gap was eliminated on 1 January 2025 by the Inflation Reduction Act. In 2026 a Part D plan may charge a deductible of up to $615, then you pay 25% coinsurance, and once your out-of-pocket spending on covered drugs reaches $2,100 you pay nothing more for the rest of the calendar year. There is no longer a phase where you pay 5% forever in catastrophic coverage. If a guide still describes a donut hole, it is describing law that expired at the end of 2024.

Can I keep contributing to my HSA after I turn 65?

Only if you delay Medicare entirely — and enrolling in Part A is backdated up to six months once you are past 65. Stop HSA contributions at least six months before you file for Medicare or Social Security, because claiming Social Security enrols you in Part A automatically. Contributions made during those retroactive months are excess contributions, subject to a 6% excise tax each year until you remove them. You can still spend an existing HSA balance tax-free on Part B, Part D and Medicare Advantage premiums, though not on Medigap premiums.

Is Medicare Advantage actually cheaper than Original Medicare plus Medigap?

On premiums, usually yes; on a bad year, usually no. Advantage plans carry an annual out-of-pocket maximum that Original Medicare lacks, but that maximum is often $4,000–$8,000 in-network and higher out-of-network, and you reach it through copays on every visit. Plan G costs $150–$250 a month and then leaves you paying only the $283 Part B deductible. The decision that matters more than the arithmetic is timing: your six-month Medigap open enrolment window begins when you are 65 and enrolled in Part B, and after it closes most states let insurers underwrite or decline you. Choosing Advantage at 65 can quietly make Medigap unavailable at 75.

Does Medicare pay for a nursing home?

Only briefly and only after a qualifying hospital stay: days 1–20 in a skilled nursing facility are covered in full, days 21–100 cost $217 a day in 2026, and after day 100 Medicare pays nothing. Long-term custodial care — help with bathing, dressing and eating, with no skilled-nursing component — is not covered at any point, for any duration. That is a separate planning problem, funded by long-term care insurance, personal assets, or Medicaid after a spend-down.

Sources

• Centers for Medicare & Medicaid Services. 2026 Medicare Parts A & B Premiums and Deductibles; 2026 Medicare Part D Income-Related Monthly Adjustment Amounts. Fact sheet, 14 November 2025 — the source for every Part A, Part B and IRMAA figure on this page.
• Centers for Medicare & Medicaid Services. Final CY 2026 Part D Redesign Program Instructions — the $615 maximum deductible and the $2,100 annual out-of-pocket threshold.
• Centers for Medicare & Medicaid Services. Medicare Part D Improvements under the Inflation Reduction Act — elimination of the coverage gap and the Medicare Prescription Payment Plan.
• Medicare.gov. Medicare & You 2026 (Publication 10050) and 2026 Medicare Costs (Publication 11579).
• Social Security Administration. Form SSA-44, Medicare Income-Related Monthly Adjustment Amount — Life-Changing Event.
• IRS Revenue Procedure 2025-19 (2026 HSA contribution limits) and IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.