What to Know About Medicare Cost Increases

Health Line

2 days ago

Medicare costs, such as premiums, deductibles, and copayments, are subject to annual changes. The amounts may vary based on healthcare inflation, beneficiary income, and program utilization.
The Centers for Medicare & Medicaid Services (CMS), the federal agency that oversees both Medicare and Medicaid, announces changes to Medicare costs each year.
Most costs associated with Medicare are subject to annual increases.
For example, in 2025, the Part B standard premium increased to $185, an increase of $10.30 from 2024. Also, the Part B deductible increased to $257 in 2025, an increase of $17 from 2024.
Glossary of common Medicare terms
Out-of-pocket cost: This is the amount you pay for care when Medicare doesn't pay the full cost or offer coverage. It includes premiums, deductibles, coinsurance, and copayments.
Premium: This is the monthly amount you pay for Medicare coverage.
Deductible: This is the annual amount you must spend out of pocket before Medicare begins to cover services and treatments.
Coinsurance: This is the percentage of treatment costs you're responsible for paying out of pocket. With Medicare Part B, you typically pay 20%.
Copayment: This is a fixed dollar amount you pay when receiving certain treatments or services. With Medicare, this often applies to prescription medications.
What contributes to annual Medicare cost increases?
Medicare cost increases are generally affected by factors like healthcare inflation, program utilization, and beneficiary income.
Beneficiary income
For example, Part B and Part D premiums are determined by your income. This is known as the income-related monthly adjustment amount (IRMAA). In 2025, if you file taxes individually and have an income over $106,000, you will pay a higher monthly premium for Part B.
According to the Social Security Administration (SSA), the government pays around 75% of the Part B premium, and you pay the remaining 25%. However, if the SSA determines your income is above the set limits, you will pay a higher premium equal to a higher percentage of the total premium cost:
35%
50%
65%
80%
85%
Healthcare inflation
Medical prices have generally increased more than overall economic prices. For example, in June 2024, the nonprofit KFF reported that medical prices increased by 3.3% compared to the year before, while the overall annual inflation rate was 3%.
Also, between 2000 and 2024, the price of healthcare rose by 121.3%, while the prices for other consumer goods and services rose by 86.1%.
The increase in healthcare costs can naturally lead to higher out-of-pocket costs for beneficiaries. If Medicare is paying more for services, your cost will also increase.
Program utilization
According to KFF, Medicare spending is set to rise from 10% of total federal spending in 2021 to 18% by 2032. In the same years, it's set to increase from 3.1% of GDP spending to 3.9%.
There are several factors that may contribute to this, including growing Medicare enrollment.
As of February 2025, CMS reported that the total Medicare enrollment was 68.5 million, of which 90.1% were age 65 years or older.
KFF notes that in the entire year of 2024, 61.2 million people were enrolled in Original Medicare (parts A and B). This is a difference of more than 7 million people enrolling in Medicare.
What healthcare trends affect the costs for Medicare?
According to KFF, healthcare spending in the United States has risen over the past several decades due to various factors, including:
aging population
higher rates of chronic conditions
advancements in medicine and technology
higher prices
expansions in health insurance coverage
It is estimated that by 2030, the U.S. population 65 years old and over will increase to 67 million. This means there will be more people in this age group with Medicare coverage. Higher rates of program utilization can lead to cost increases.
In 2023, the Centers for Disease Control and Prevention (CDC) reported that 9 in 10 older adults had at least one chronic condition. It also noted that roughly 3 in 4 older adults reported having multiple chronic conditions.
The report also highlighted that the rates of at least one chronic condition in younger adults increased from 52.5% to 59.5% between 2013 and 2023. The rate of multiple chronic conditions increased from 21.8% to 27.1% in the same time period.
This means that as the younger population ages, they are more likely to require additional medical care. This is likely to add to cost increases for Medicare and health insurance.
Medicare cost increases in 2025
The following table shows the Medicare cost increases from 2024 to 2025.
2024 2025
Part A deductible $1,632 $1,676
Part B premium $174.70 $185
Part B deductible $240 $257
Medicare Advantage (Part C) maximum out-of-pocket limit $8,850 $9,350
In 2024, the individual IRMAA income limit was set at $103,000, and the joint income limit was $206,000. In 2025, these limits increased to $106,000 for an individual and $212,000 for a married couple. This means that if your tax returns from 2 years prior showed incomes higher than these limits, you will have to pay more for your Part B premium.
Potential increases for 2026
CMS has not officially released all cost increases for 2026. However, it has stated that in 2026, the out-of-pocket spending limit for Part D will increase to $2,100 from $2,000 in 2025.
This means that in 2026, when your Part D out-of-pocket spending reaches $2,100, you will automatically enter catastrophic coverage and not have to pay anything for your prescription drugs for the rest of the year.