Medicare serves more than 70 million Americans, including seniors aged 65+ and younger individuals with disabilities. Although the program funds extensive healthcare services, enrollees typically cover monthly premiums, deductibles, and cost-sharing expenses themselves for covered benefits.
Medicare premiums and other out-of-pocket costs have risen consistently in recent years and are expected to keep climbing over the coming decade. A significant portion of Medicare recipients have limited incomes, which can strain their ability to cover these expenses: in 2024, one in four Medicare beneficiaries earned less than $24,600 per person annually.
Premium-Free Part A Eligibility
Most Medicare beneficiaries pay no monthly premium for Medicare Part A, which covers inpatient hospital stays, short-term nursing facility care, hospice, and some home health services. People generally qualify for premium-free Part A if they or a spouse have worked at least 40 quarters (10 years) in jobs where they paid Medicare payroll taxes.
Beneficiaries are required to pay a monthly premium for Part B coverage, whether they are covered under traditional Medicare or Medicare Advantage. In 2026, the standard Part B premium is $202.90 per month. Beneficiaries with incomes greater than $109,000 for individuals or $218,000 for married couples in 2026 pay a higher, income-adjusted Part B premium ranging from $284.10 to $689.90 per person per month.
Traditional Medicare imposes no yearly cap on the amount beneficiaries may pay out-of-pocket for Part A and Part B services. Consequently, many enrollees opt to acquire a Medigap policy, which assists with Part A and B cost-sharing obligations in traditional Medicare, providing beneficiaries with protection against unexpected or large out-of-pocket expenses.
The typical monthly premium paid by current Medigap policyholders was $217 in 2023. These premiums may increase with age and other factors, showing significant variation across states and policy types. In addition to Medigap, some beneficiaries have access to other supplemental coverage options, such as employer- or union-sponsored plans or Medicaid assistance.
Medicare Advantage vs Traditional Medicare
Medicare Advantage plans are private health plans that contract with Medicare to provide Part A and Part B benefits, and serve as an alternative to traditional Medicare. Most Medicare Advantage plans also include prescription drug coverage and offer supplemental benefits not covered in traditional Medicare, such as dental, vision, and hearing services.
Medicare Advantage plans frequently require less out-of-pocket payment for many services compared to traditional Medicare. However, these plans often employ provider networks, prior authorization requirements, and referral mandates to control beneficiaries’ access to services.
Among an illustrative sample of six high-enrollment Medicare Advantage plans available in 2026, none of the six plans required an additional premium or a deductible for medical services covered under Medicare Part A and Part B, but plan costs for Part A and Part B services varied widely.
Inpatient hospitalization costs, for example, ranged from $330 per day for days 1-7 to $550 per day for days 1-5, after which no additional cost sharing was required, while coinsurance for inpatient services at out-of-network facilities ranged from 40% to 50% for all covered days.
Medicare Advantage plans are required to include a limit on enrollees’ out-of-pocket spending, which may not exceed $9,250 for in-network services or $13,900 for all covered services in 2026.
Out-of-pocket limits varied among the six illustrative plans, ranging from $5,200 to $6,700 for in-network services and from $10,000 to $10,100 for in-network and out-of-network services combined.
The scope of coverage for these benefits varies widely between plans.
Cost sharing for these benefits also varies between plans, and coverage may be subject to network restrictions, limits on the number of services covered per year, or annual dollar caps on the amount the plan will pay towards covered services. The Centers for Medicare & Medicaid Services provides more information on Medicare Advantage plans and their benefits.
In 2026, the average enrollment-weighted premium for Medicare Advantage plans that include prescription drug coverage is $15 per month. However, 75% of Medicare Advantage enrollees are in plans that charge no monthly premium.
Some Medicare Advantage plans use rebate dollars from Medicare payments to buy down a portion of the monthly Part B premium for their enrollees. In 2026, roughly one third of all MA-PD enrollees are in plans that reduce the Part B premium, most often by less than $10 per month.
Cost-sharing requirements for Part A and Part B services in Medicare Advantage plans vary across plans and may be higher or lower for a given service, with some exceptions. Cost-sharing requirements may also vary depending on whether or not a given provider or health care facility is included in the plan’s network.
Network Types: PPOs vs HMOs
Preferred provider organizations (PPOs) generally offer coverage of out-of-network services but may require higher cost sharing than would be required for in-network services, while health maintenance organizations (HMOs) do not include any coverage of out-of-network services.
Among the six illustrative Medicare Advantage plans, plan costs for Part A and Part B services varied widely, with daily copays for inpatient services at in-network facilities ranging from $330 per day for days 1-7 to $550 per day for days 1-5.
Copays for primary care visits ranged from $0 to $5 for in-network providers and from $45 to a 50% coinsurance fee for out-of-network providers.
Out-of-pocket limits for Medicare Advantage plans apply to Part A and Part B services only, though out-of-pocket spending for Part D drugs is subject to a separate limit.
The average out-of-pocket limit among Medicare Advantage enrollees in 2026 is $5,421 for in-network services, with 13% of enrollees in plans with limits of $3,000 or less and 19% in plans with limits greater than $7,000.
Among PPO enrollees, roughly one in ten are in plans with limits of $6,000 or less for in-network and out-of-network services combined, while one in four are in plans with limits greater than $12,000.
Cost sharing for these benefits also varies between plans, and coverage may be subject to network restrictions, limits on the number of services covered per year, or annual dollar caps on the amount the plan will pay towards covered services, with the Medicaid program providing additional coverage for some beneficiaries.
Part D Drug Coverage Details
In 2026, the standard Part D deductible is $615, but Part D plans can offer an enhanced benefit with a lower or no deductible, with the average Part D deductible for MA-PD enrollees at $371 and $544 for PDP enrollees.
Part D plans typically charge different amounts for covered drugs, with lower cost-sharing amounts charged for generic drugs and preferred brands and higher cost-sharing amounts for non-preferred and specialty drugs, and cost sharing typically consists of a mixture of flat dollar copays and coinsurance.
The median copay for generic drugs is $3 among PDPs and $5 among MA-PDs, with the median copay for preferred brand drugs at $45 among PDPs and $47 among MA-PDs, and the median coinsurance rate for non-preferred drugs at 34% among PDPs and 38% among MA-PDs.
The median coinsurance rate for specialty drugs is 25% among PDPs and 28% among MA-PDs, with out-of-pocket costs for Part D enrollees capped at $2,100 in 2026, after which enrollees pay no additional costs for the remainder of the year for drugs covered by their Part D plan.
Part D enrollees in plans that offer enhanced benefits could pay less than $2,100 out of pocket before they qualify for catastrophic coverage, and Part D enrollees also have the option of spreading out their out-of-pocket costs over a calendar year to lower their monthly costs, with the Part D Low-Income Subsidy program providing financial assistance to eligible beneficiaries.
Beneficiaries who qualify for the LIS program pay modest copayments for prescription drugs, no drug deductible, and no premium for drug coverage if they are enrolled in premium-free “benchmark” plans, and the Part D late enrollment penalty is a lifetime penalty equal to 1% of the Part D base beneficiary premium for each month of delayed coverage.
For example, someone who went without Part D or equivalent coverage for eighteen months would face an 18% monthly Part D premium penalty and would pay $7 per month in 2026 in addition to any premium charged by their Part D plan.
