Medicare Cost Sharing: Deductibles, Copays, and Coinsurance Explained

Most people going into Medicare assume cost sharing works like their old employer insurance. It doesn’t. And the gap between that assumption and reality is where a lot of seniors get hurt financially.

Cost sharing in Medicare is the portion of your medical bills you’re responsible for. That sounds simple. It isn’t, because Medicare is split into distinct parts, each with its own deductibles, copayments, and coinsurance rules that don’t always connect to each other the way you’d expect.

Here’s what trips people up most often: Original Medicare (Parts A and B) has no out-of-pocket maximum. None. You can rack up unlimited costs in a bad year if you don’t have supplemental coverage. I’ve sat across from people who thought Medicare was basically full coverage, and watching that assumption collapse is genuinely hard. Let me lay out exactly how this works.

The Part A Puzzle: Hospital Coverage Isn’t What You Think

Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health. Most people pay no premium for Part A (you earned it through payroll taxes). The cost sharing is where it gets complicated.

The deductible for a hospital stay is $1,676 in 2026. That’s per benefit period, not per calendar year. A benefit period starts when you’re admitted and ends 60 days after you’ve been out of the hospital or skilled nursing facility. Two hospitalizations close together could mean two deductibles in the same year. I’ve explained this to people who’ve had that exact situation happen and paid double what they expected.

After the deductible, days 1 through 60 cost you nothing extra. Days 61 through 90 run $419 per day in coinsurance. Beyond that, you’re drawing on “lifetime reserve days” at $838 per day, and you only get 60 of those total, for life.

Skilled nursing facility (SNF) care follows its own schedule: free for days 1 through 20 after a qualifying hospital stay, then $209.50 per day for days 21 through 100, then nothing covered after that.

Part B: The 80/20 Rule and Why 20% Can Sting

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Part B covers outpatient care: doctor visits, labs, imaging, durable medical equipment, preventive services. The standard premium in 2026 is $185 per month (higher earners pay more through a surcharge called IRMAA, which stands for Income-Related Monthly Adjustment Amount).

After your annual deductible of $257, Medicare pays 80% of the approved amount for covered services. You owe 20%. There’s no cap on that 20%.

Think about what that means for a major surgery or a serious illness treated outpatient. A $50,000 procedure leaves you with a $10,000 bill. A $200,000 cancer treatment course could mean $40,000 out of pocket, assuming every dollar is covered at the standard rate. That’s the exposure people don’t see coming.

One thing worth knowing: Medicare sets “approved amounts” for services. If your doctor accepts Medicare assignment (meaning they’ve agreed to Medicare’s rates), you pay 20% of that approved amount and nothing more. If they don’t accept assignment, they can charge up to 15% above Medicare’s rate, that’s called an “excess charge” – and you’d owe 20% of the higher figure plus any excess. It’s a real distinction worth asking about before a procedure.

Where Medigap Earns Its Keep

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Medigap, also called Medicare Supplement Insurance, is private insurance designed specifically to cover Original Medicare’s cost sharing gaps. There are standardized plan letters (Plan G is the most popular after Plan F was phased out for new enrollees). Plan G, for example, covers the Part B deductible and most other cost sharing after you’ve paid that annual $257.

I’ll be direct: for people with significant health needs or those who want predictable costs, a Medigap policy is usually worth the premium. The tradeoff is real money every month, typically $100 to $300+ depending on your age, location, and the insurer. But if you need frequent specialist visits or a hospitalization, it pays for itself quickly.

Example: A 70-year-old woman in Ohio has a hip replacement done outpatient plus six months of follow-up care. Total Medicare-approved costs run $85,000. Without Medigap: 20% coinsurance puts her share at $17,000 (ignoring her deductible). With Plan G: she pays her $257 Part B deductible, and Plan G covers the rest. Net out-of-pocket difference: roughly $16,743.

The AARP Medicare resource center has a solid plan comparison tool that lets you see standardized benefits side by side without the sales pressure.

Medicare Advantage: A Different Cost-Sharing Structure

Medicare Advantage (Part C) is an alternative to Original Medicare, offered by private insurers. These plans must cover everything Original Medicare covers, but they use their own cost-sharing structures: copays, tiered networks, prior authorization requirements.

The single biggest structural difference from Original Medicare is the out-of-pocket maximum. In 2026, Medicare Advantage plans are required to cap your in-network out-of-pocket costs at no more than $9,350 per year. Some plans set lower caps. That ceiling doesn’t exist in Original Medicare, which is the core argument for Advantage plans.

The tradeoff is network restriction. Most Advantage plans are HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations). Go outside the network and you may pay significantly more, or find the service simply isn’t covered. This matters a lot if you travel, split time between states, or have specialists you’re attached to.

Example: A man in Phoenix uses an HMO-based Advantage plan with a $3,500 out-of-pocket max for in-network care. He has a cardiac event requiring hospitalization and follow-up. His total out-of-pocket costs hit the $3,500 cap by August. Under Original Medicare without Medigap, the same care might have cost him $8,000 or more, depending on benefit period timing.

The Centers for Medicare & Medicaid Services publishes plan data annually, and Medicare.gov’s Plan Finder tool lets you compare Advantage options by premium, out-of-pocket maximum, and drug formulary all in one place.

Part D: Drug Cost Sharing Has Changed

Part D covers prescription drugs. You pay premiums, an annual deductible (up to $590 in 2026), copays or coinsurance by drug tier, and then costs shift as you move through coverage phases.

The big change that took effect recently and carries through 2026: catastrophic coverage is now free after you hit $2,000 in true out-of-pocket drug costs for the year. Prior to this reform, seniors in the old “donut hole” could face thousands more in drug costs. That cap is a genuine improvement, and it’s worth understanding whether your medications put you near that threshold.

Drug tiers matter enormously. A generic statin might cost you $5 per fill. A specialty biologic could cost $500 or more per month even on Part D. The formulary (the list of covered drugs) varies by plan, which is why picking a Part D plan by premium alone is a mistake I’ve seen too many people make. Run the actual drug costs through the Medicare Plan Finder before you decide.

Sources

• Centers for Medicare & Medicaid Services (CMS): Official 2026 Medicare cost-sharing figures including Part A, B, and D parameters
• Medicare.gov Plan Finder: Official plan comparison tool for Part D and Medicare Advantage
• AARP Medicare Resource Center: Consumer-oriented guides to Medigap standardized plans and enrollment
• CMS Medicare & You 2026 Handbook: Annual official handbook covering current benefits, costs, and rights
• Kaiser Family Foundation Medicare Cost-Sharing Analysis: Research on beneficiary out-of-pocket exposure under Original Medicare vs. Advantage plans

Photo: SHVETS production via Pexels

This article is for informational purposes only. Medicare rules change annually. Always verify current plan details at Medicare.gov or by calling 1-800-MEDICARE (1-800-633-4227). This site does not sell insurance or recommend specific plans.

Recommended Resources

Disclosure: As an Amazon Associate, we earn a small commission from qualifying purchases at no extra cost to you. We only recommend products that genuinely support the topics covered in this article.

• Medicare For Dummies (~$22), The definitive consumer guide to Medicare, enrollment windows, Part A/B/C/D, and supplement plans.
• Get What’s Yours for Medicare (~$17), Maximize your Medicare benefits and minimize out-of-pocket costs. Covers Part D drug coverage gaps and Medigap in depth.