Healthcare is one of the largest and least predictable expenses in retirement, and it is easy to plan for the wrong number.
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Medicare covers a great deal starting at 65, but it was never designed to cover everything, and the gaps — not the parts it does cover — are usually what catch retirees off guard.
What Medicare Actually Costs in 2026
Original Medicare has real, published costs, not a flat free benefit. For 2026, Medicare Part A (hospital insurance) is premium-free for most people who paid Medicare taxes for at least 10 years, but carries a $1,736 deductible for each inpatient hospital benefit period, and coinsurance of $434 a day for days 61-90 of a hospital stay. Skilled nursing facility care costs $0 for the first 20 days and then $217 a day through day 100, after which the patient pays the full cost. Part B (medical insurance) has a standard monthly premium of $202.90 (higher for people with higher income) and a $283 annual deductible, plus 20% coinsurance on most covered services with no out-of-pocket maximum unless the person also has a Medigap policy or Medicare Advantage plan (Medicare.gov, “Costs”). Part D prescription drug costs vary by plan.
What Medicare Does Not Cover: Long-Term Care
The biggest gap is long-term care. Medicare covers only limited, short-term skilled nursing care after a qualifying hospital stay — it does not pay for an extended nursing home stay, assisted living, or ongoing in-home custodial care once someone can no longer manage daily activities independently. When those costs last for years rather than weeks, they become large enough to be the single biggest financial risk in many retirement plans, which is exactly why long-term care insurance and Medicaid planning exist as separate topics from routine retirement healthcare budgeting.
Medicaid Planning Comes With a Five-Year Look-Back
For people who exhaust their own resources, Medicaid can cover long-term care, but only after meeting state-specific income and asset limits, and federal law imposes a five-year “look-back” period: transfers of assets made within five years of applying for Medicaid long-term care benefits can trigger a penalty period during which Medicaid will not pay (Medicaid.gov). Trusts and other legal structures can, in some circumstances, help protect assets while still allowing a path to Medicaid eligibility — but this is a genuinely technical area of law that varies by state, and getting it wrong can mean both losing assets and losing Medicaid eligibility. This is not a do-it-yourself project: anyone considering Medicaid planning or an irrevocable trust for long-term care purposes should work directly with an elder law attorney licensed in their state before transferring or retitling any assets.
Higher-Income Retirees Pay More for Medicare (IRMAA)
Retirees with higher income pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of standard Part B and Part D premiums, based on income reported two years prior. Because IRMAA is recalculated using a two-year-old tax return, a large one-time income event — a Roth conversion or a big capital gain, for example — can raise Medicare premiums two years later even if income has since dropped. Coordinating the timing of withdrawals, conversions, and capital gains with this delay is a legitimate part of retirement tax planning, and is worth discussing with a tax professional rather than assuming it will sort itself out.
Estimates Vary — Plan With a Range, Not One Number
Independent estimates of lifetime retirement healthcare costs differ because they use different assumptions about longevity, health status, and what counts as a “healthcare” expense. Fidelity Investments publishes a widely cited annual Retiree Health Care Cost Estimate that has put the lifetime figure for a single 65-year-old retiring today in the mid-to-high six figures when long-term care is excluded, and substantially higher for couples or when extended long-term care is included. The specific number matters less than the habit it should encourage: budgeting for healthcare as a distinct, sizable line item in retirement, with a real range between a healthy-case and a worse-case scenario, rather than assuming Medicare alone will handle it.
This article is for educational purposes only and is not personalized financial, legal, or tax advice. Sirocco’s writers are researchers, not certified financial planners, licensed investment advisors, elder law attorneys, or accountants. Read our full Financial Disclaimer.
