Fidelity Offers a Stark Reminder About Medicare and Retirement Costs

If Medicare is the foundation of your retirement health care plan, there is an uncomfortable reality to face: the red, white, and blue card is not a guarantee that everything will be paid.

Fidelity's latest estimate suggests that a 65-year-old retiring in 2026 could spend $185,500 on health care and medical expenses over the course of retirement, assuming enrollment in Original Medicare and Part D. For 2026, the Centers for Medicare and Medicaid Services set the standard Medicare Part B premium at $202.90 a month, with a Part B deductible of $283.

That does not mean Medicare lacks value. It does mean retirees may need a separate strategy for the expenses Medicare does not fully cover, especially when money is tight.

A clear warning

Fidelity's projection is essentially a retirement reality check. Even with Medicare, retirees can still encounter premiums, deductibles, copays, coinsurance, and other medical expenses over time. Fidelity says its estimate includes Part B and Part D premiums, cost sharing, and some services excluded by Original Medicare. It does not include over-the-counter medicines, most dental care, or long-term care.

The main takeaway is straightforward: Medicare can reduce your exposure, but it usually does not eliminate it. If your retirement budget assumes Medicare covers nearly everything, it may be too thin.

That shortfall exists because Medicare includes built-in cost sharing and leaves out some common needs, especially for people relying on Original Medicare without extra coverage.

The 2026 costs

The standard Part B premium for 2026 is $202.90 per month, or $2,434.80 per year before prescription drugs, supplemental insurance, dental services, or out-of-pocket treatment costs.

Part B also carries a $283 annual deductible in 2026. After that is met, you typically pay 20% of the Medicare-approved amount for many covered services under Original Medicare.

Hospital coverage has its own cost sharing. The 2026 Medicare Part A inpatient hospital deductible is $1,736 per benefit period, meaning a major hospital stay can still produce a substantial bill.

What Medicare does not pay for

Original Medicare generally does not cover routine dental care, routine vision care, hearing aids, or most long-term custodial care. These are standard exclusions.

That is where many retirees are caught off guard. A crown, new glasses, hearing aids, or help with daily activities may be important medically, but Medicare does not necessarily treat those costs the same way.

Some Medicare Advantage plans may include dental, vision, hearing, or other extra benefits. That can help, but the details still matter, including the plan rules, provider network, drug formulary, prior authorization requirements, and annual out-of-pocket limit.

Prescription drug relief

There is some good news on prescription costs. In 2026, the Medicare Part D out-of-pocket cap is $2,100 for covered drugs.

That limit can matter for people taking expensive medications. It can protect you from runaway Part D costs once your covered out-of-pocket spending reaches the annual threshold.

Still, the cap does not make every drug free. It also does not cover all health care costs, premiums, dental bills, hearing aids, noncovered medications, or many services outside your plan's rules. The relief is meaningful, but it is not a full retirement health care budget.

Original Medicare or Advantage

Your costs can differ greatly depending on whether you stay with Original Medicare, add a Medigap policy, enroll in a stand-alone Part D plan, or choose Medicare Advantage.

Original Medicare offers broad access to providers that accept Medicare, but it does not include a yearly out-of-pocket maximum for Part A and Part B services. Medigap is designed to help fill that gap, though it comes with its own premium.

Medicare Advantage plans do include annual out-of-pocket limits for covered Part A and Part B services. They may also offer extras. Some of these plans charge no additional premium, although the Part B premium generally still applies. Depending on the plan, networks, specialist referrals, prior authorization, and drug coverage rules may apply.

Long-term care

Long-term care needs their own place in a retirement plan because this is one of the biggest misconceptions about Medicare. It generally does not pay for ongoing custodial care when the main help needed is bathing, dressing, eating, or supervision.

Medicare may cover limited skilled nursing facility care after a qualifying hospital stay, and it may cover some home health services if certain requirements are met. But that coverage is limited and does not extend to open-ended nursing home care or full-time help at home.

Medicaid may help with long-term care for people who meet income and asset rules, but that is a separate program with eligibility limits. If you have savings you want to preserve, this is a gap worth planning for before a crisis arises.

What to do next

Medicare open enrollment runs from October 15 through December 7 each year. During that period, you can switch Medicare Advantage or Part D coverage, or move between Original Medicare and Medicare Advantage, with changes usually taking effect on Jan. 1. That window does not guarantee the ability to buy a Medigap policy without medical underwriting.

Look beyond the monthly premium. Review your doctors, hospitals, prescriptions, pharmacy, deductibles, copays, coinsurance, annual out-of-pocket maximum, dental coverage, and prior authorization rules.

If you are not yet on Medicare, include health care in your retirement calculations now. If you are eligible to contribute to a health savings account before Medicare, that can provide tax-advantaged money for future qualified medical expenses.

Your HSA contribution limit is zero for any month you are enrolled in Medicare, including months of retroactive Medicare coverage. You can still use existing HSA funds for qualified medical expenses.

The bottom line

Fidelity's message is simple: Medicare helps, but it is not a complete retirement health care plan. If you want to save money in retirement, understanding these numbers can help you see the broader picture.

You may still need money for premiums, deductibles, prescriptions, dental work, hearing, vision, and long-term care. Review your coverage during open enrollment, compare your regular medications, and keep a separate health care reserve in your retirement budget.

Medicare can be one of the most valuable benefits you receive in retirement. It just may not be enough on its own.

FAQs

Does Medicare have an annual out-of-pocket maximum?

Original Medicare does not have an annual out-of-pocket maximum for Part A and Part B services. Supplemental coverage, such as Medigap, can help with your share of costs. Medicare Advantage plans do have annual limits for covered Part A and Part B services, but those limits do not cover every expense.

Does Medigap cover dental care, hearing aids, or long-term care?

Medigap generally does not cover those expenses. It mainly helps pay deductibles, copays, and coinsurance for services covered by Original Medicare. Separate coverage or savings may still be needed for routine dental care, hearing aids, and long-term care.

Does the Medicare Part D cap cover all prescription costs?

No. The $2,100 out-of-pocket cap in 2026 applies to covered Part D drugs. Monthly premiums and medications not covered by your plan do not count toward that limit. Once you reach the cap, you pay nothing for covered Part D drugs for the rest of the calendar year.

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