One of the most common misconceptions about Medicare is that once you enroll, Medicare pays for everything.
It doesn’t.
Medicare can provide substantial healthcare coverage, but beneficiaries may still be responsible for several different types of costs.
You’ll frequently hear four terms:
Premium. Deductible. Copay. Coinsurance.
Understanding what these terms mean — and how they work together — can give you a much better picture of what your Medicare coverage may actually cost.
Let’s break them down in plain English.
1. What Is a Medicare Premium?
A premium is the amount you pay to have insurance coverage.
Think of it as the price of keeping your coverage active, whether or not you use healthcare services that month.
Medicare Part A Premium
Most people don’t pay a monthly premium for Medicare Part A because they or their spouse paid Medicare taxes for a sufficient amount of time while working.
For people who don’t qualify for premium-free Part A, there can be a monthly premium.
Medicare Part B Premium
Medicare Part B has a monthly premium.
For 2026, the standard Part B premium is $202.90 per month.
Some people pay more because of their income. This additional amount is known as the Income-Related Monthly Adjustment Amount, or IRMAA.
Medicare Advantage Premiums
If you choose a Medicare Advantage plan, the plan may charge its own monthly premium.
Some Medicare Advantage plans have a $0 plan premium.
But there’s an important distinction:
A $0 Medicare Advantage plan premium does not mean $0 healthcare costs.
You generally still pay your Medicare Part B premium, and you’ll usually have cost-sharing when you receive healthcare services.
Medicare Part D Premiums
Standalone Medicare Part D prescription drug plans can also charge monthly premiums.
The amount varies by plan.
Higher-income beneficiaries may also pay a Part D IRMAA in addition to their plan premium.
2. What Is a Medicare Deductible?
A deductible is an amount you may have to pay before your coverage begins paying for certain services.
But Medicare deductibles don’t all work the same way.
Medicare Part A Deductible
In 2026, the Medicare Part A inpatient hospital deductible is $1,736.
Here’s something particularly important to understand:
The Part A deductible isn’t necessarily an annual deductible.
It applies to a benefit period.
That means it’s possible, under certain circumstances, to have more than one Part A deductible during the same calendar year.
Medicare Part B Deductible
The Medicare Part B deductible works differently.
For 2026, the annual Part B deductible is $283.
After you’ve met the deductible, Medicare generally begins paying its share of Medicare-approved Part B services.
Medicare Advantage Deductibles
Medicare Advantage plans establish their own cost-sharing structures within Medicare’s rules.
Some plans have deductibles and some don’t.
There may also be a separate deductible for prescription drugs when drug coverage is included.
Medicare Part D Deductibles
Prescription drug plans may have an annual deductible.
For 2026, no Medicare drug plan can have a deductible greater than $615, although some plans have a lower deductible or no deductible.
3. What Is a Copay?
A copayment, usually called a copay, is a fixed dollar amount you pay when you receive a covered service or prescription.
For example, a Medicare Advantage plan might require a specific copay when you:
- Visit a specialist
- Go to urgent care
- Visit an emergency room
- Receive certain outpatient services
Prescription drug plans may also use copays.
For example, you might pay one fixed amount for a particular prescription.
The key word is fixed.
A copay is generally a stated dollar amount rather than a percentage of the total cost.
4. What Is Coinsurance?
Coinsurance works differently.
Instead of paying a fixed dollar amount, you pay a percentage of the cost.
Under Original Medicare, after meeting the Part B deductible, you generally pay 20% of the Medicare-approved amount for many Part B services, assuming the provider accepts assignment.
For example, if the Medicare-approved amount for a covered service were $200 and 20% coinsurance applied, your share would be $40.
Medicare would generally pay its share of the approved amount.
Coinsurance can also apply to prescription drugs and services provided through certain Medicare Advantage plans.
Copay vs. Coinsurance: What’s the Difference?
Here’s the easiest way to remember it:
Copay = a dollar amount
Coinsurance = a percentage
If your plan says you pay $30 to see a specialist, that’s a copay.
If it says you pay 20% of the cost of a service, that’s coinsurance.
Both are forms of cost-sharing — the portion of healthcare expenses you’re responsible for paying.
Don’t Forget the Maximum Out-of-Pocket Limit
This is another important Medicare cost concept.
With Original Medicare alone, there is no annual maximum on what you could pay out of pocket for covered Part A and Part B services.
That’s one reason some people add Medicare Supplement insurance to Original Medicare.
Medicare Advantage works differently.
Medicare Advantage plans have an annual maximum out-of-pocket limit for covered Medicare Part A and Part B services. Plans may have different limits, including different limits involving in-network and out-of-network services.
Once you reach the applicable plan limit, you generally pay nothing for covered Part A and Part B services for the remainder of the year.
This makes the maximum out-of-pocket amount an important number to consider when evaluating a Medicare Advantage plan.
The Lowest Premium Isn’t Necessarily the Lowest-Cost Medicare Option
This is where Medicare comparisons can become misleading.
Imagine you’re comparing two Medicare Advantage plans.
Plan A has a $0 monthly plan premium but higher copays for services you use regularly.
Plan B has a monthly plan premium but lower cost-sharing for some of those services.
Which plan costs less?
You can’t answer that question from the premium alone.
The answer depends on how you use healthcare.
The same principle applies when comparing Medicare Advantage, Original Medicare with supplemental coverage, and prescription drug plans.
Look at Your Total Potential Medicare Costs
When evaluating Medicare coverage, consider the entire financial picture:
- Monthly premiums
- Deductibles
- Primary care and specialist costs
- Hospital costs
- Copays
- Coinsurance
- Prescription drug costs
- Maximum out-of-pocket exposure
- Supplemental insurance premiums, when applicable
Then consider how those costs relate to your healthcare needs.
Someone who rarely visits a doctor may experience costs very differently from someone who sees several specialists and takes multiple prescriptions.
What About Medicare Supplement Insurance?
Medicare Supplement insurance — also called Medigap — works with Original Medicare and can help pay certain out-of-pocket costs that Original Medicare doesn’t pay.
You pay a separate premium for the Medicare Supplement policy.
Minnesota has its own standardized Medicare Supplement structure, so Minnesota beneficiaries shouldn’t assume that plan names and benefits described on national websites apply exactly the same way here.
The tradeoff is important to understand:
You may pay an additional monthly premium for supplemental coverage in exchange for reducing some of the cost-sharing you would otherwise face under Original Medicare.
This is another example of why premium alone doesn’t tell you the real cost of Medicare coverage.
Four Questions to Ask When Comparing Medicare Costs
When you’re evaluating Medicare coverage, ask:
1. What will I pay every month?
Add up the premiums you’re responsible for.
2. What will I pay when I actually use healthcare?
Look at deductibles, copays and coinsurance.
3. What happens if I have a bad health year?
Consider hospital costs and your potential maximum out-of-pocket exposure.
4. What will my prescriptions cost?
Compare your actual medications rather than relying only on the drug plan’s premium.
These questions provide a much more realistic picture than simply asking:
“What’s the premium?”
Medicare Costs Can Change Every Year
Medicare costs aren’t fixed permanently.
Part A and Part B premiums, deductibles and coinsurance amounts can change annually.
Medicare Advantage and Part D plans can also change their premiums and cost-sharing from one year to the next.
That’s another reason reviewing your Medicare coverage each year is worthwhile.
The Bottom Line
The real cost of Medicare isn’t one number.
It’s a combination of:
Premiums + Deductibles + Copays + Coinsurance + Prescription Costs + Potential Out-of-Pocket Exposure
Understanding those pieces makes it easier to evaluate what you’re actually getting for your money.
A plan with a low premium isn’t automatically inexpensive.
And a plan with a higher premium isn’t automatically expensive.
What matters is how the coverage, costs, providers and prescriptions fit your individual situation.
Medicare Guidance for Minnesotans
At YourMedicareMN, our focus is education first.
We help Minnesota Medicare beneficiaries understand how Medicare works, what their options mean and what questions to ask before making a Medicare decision.
Because understanding the real cost of Medicare starts with looking beyond the premium.
Visit Contact Us to schedule a personalized Medicare review and get answers tailored to your situation.
For more information, visit: https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/what-does-medicare-cost
For official Medicare information, visit the Medicare.gov website.
YourMedicareMN is not connected with or endorsed by the U.S. government or the federal Medicare program. Plan availability and benefits vary by location and plan. Contact the plan or Medicare for complete plan information.
Learn first. Decide With Confidence.