38% of Retirees Say Health Care Has Cost More Than They Expected. Here’s What a 65-Year-Old Should Budget Instead

Plenty of people turn 65 thinking Medicare covers their health care. That’s a reasonable assumption, and it’s also where many retirement budgets fall short. In the EBRI and Greenwald 2025 Retirement Confidence Survey, 40% of retirees as of April 2026 say their health care costs have been higher than they expected. If you’re turning 65, this is what to plan for in 2026: the premiums Medicare charges, the costs it doesn’t cover, and a sample yearly health budget under two common plans.

Medicare Bills That Start Before Coverage Kicks In

Part B covers doctor visits and outpatient care. Its standard premium is $202.90 a month in 2026, which is up from $185 last year. There’s also a $283 deductible, which is what a person pays out of pocket each year before Part B starts covering its share. According to CMS, the increase mostly comes from expected price changes and increased service use.

Part A covers hospital stays, and about 99% of beneficiaries don’t pay a premium. Getting admitted still costs money, though. The hospital deductible is $1,736 per benefit period, and stays that run past day 60 add $434 per day.

Income Surcharges Most Retirees Don’t See Coming

Higher earners pay extra on top of the standard premium. Medicare calls it an income-related monthly adjustment amount, and it kicks in above $109,000 of modified adjusted gross income for single filers or $218,000 for joint filers. At the first tier, the Part B premium goes up to $284.10. At the top tier, it’s $689.90.

Drug coverage carries its own surcharge, running from $14.50 to $91 a month on top of the plan premium. CMS says about 8% of people on Medicare pay these extra amounts.

Drug Costs Now Have a Ceiling

Part D plans cover prescriptions, and their premiums vary from plan to plan. The base beneficiary premium that CMS uses as a benchmark is $38.99 for 2026. Enrollees also have an annual cap on what they spend out of pocket on covered drugs. It’s $2,100 in 2026 and goes up to $2,400 in 2027.

Coverage Gaps That Catch New Retirees Off Guard

Original Medicare has no annual limit on out-of-pocket costs. That’s why many people add a supplement policy, also called Medigap. The Advantage plans do have a limit. According to KFF, it can’t go above $9,250 for in-network care in 2026. Neither plan takes care of everything. Medicare.gov lists long-term care and most dental care among the services it doesn’t cover, and Original Medicare also generally leaves out routine vision care and hearing aids.

Two Sample Budgets for a 65-Year-Old

Both budgets assume the standard Part B premium with no surcharge. The supplement costs $200 a month. Boomer Benefits says supplement premiums can run from $70 to over $300 a month, so that’s a middle-of-the-range figure. Drug coverage is priced at the CMS base premium. Each budget sets aside $2,000 for dental, vision, and hearing.

The Advantage budget assumes no extra premium, since KFF reports 75% of Advantage enrollees in individual plans with drug coverage pay nothing beyond Part B. It also sets aside $3,000 for copays.

In an average year, the two plans are close. The gap shows up in a bad year. If the Original Medicare enrollee hits the drug cap, the total rises to $9,686. If the Advantage enrollee hits the in-network limit, the total reaches $13,685, and that’s before drug costs, which count toward the separate Part D cap. For comparison, the average retired worker’s monthly Social Security benefit is $2,071 after the 2026 cost-of-living increase.

Ways Retirees Shrink the Bill

A health savings account, or HSA, is usually funded before Medicare starts. Contributions are tax-deductible, and withdrawals for qualified medical costs aren’t taxed. After 65, the account can pay Medicare premiums, but the IRS doesn’t let it pay for Medigap policies. Contributions have to stop once someone enrolls in Medicare.

Plans also change every year, and AARP reports those changes are driving a busy open enrollment this fall. Income timing matters too. Because the surcharges are based on modified adjusted gross income, a big IRA withdrawal or a large capital gain can push someone over the $109,000 line (we detailed IRMAA and the other premium traps that catch retirees in a free Medicare guide, available here).

One Date That Resets Every Health Budget

Medicare’s open enrollment runs from October 15 to December 7 every year, and new coverage starts January 1. It’s open right now for 2027 plans. That window lets you compare premiums, drug lists, and out-of-pocket limits side by side, and October 15 is when next year’s numbers become available.

Contact [email protected] for any questions or corrections.