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Sixty-one years ago, Medicare was signed into law, establishing an essential program for Americans aged 65 or older who didn’t have health insurance and medical care. 

It is comprised of four parts: Part A (insurance for hospitalization, home or skilled nursing, and hospice), Part B (medical insurance), Part C (“Medicare Advantage Plans,” which are private options that bundle Part A, Part B, and usually Part D coverage into one plan), and Part D (prescription medications). If you are married, each spouse has to apply individually for Medicare.

When it comes to costs, the Medicare system can be confusing. Most people don’t pay a Part A premium because they paid Medicare taxes while working. If you don’t get premium-free Part A, you pay up to $565 each month.

The cost of Medicare Part B starts at $202.90 per month, with an annual deductible of $283. However, if you have modified adjusted gross income over a certain amount ($109,000 for singles, $218,000 for married filing jointly), you could be subject to additional surcharges.

The extra amount, the Income-Related Monthly Adjustment Amount (“IRMAA”), has been in place since 2007, and affects roughly 8 percent of people with Medicare Part B. The government goes back two years to determine these charges, so for 2026, the reference year is 2024 and IRMAA applies to premiums for the entire year, even if you only go over by one dollar.

Healthcare does not stop at Medicare. According to Fidelity Investments’ annual Retiree Health Care Cost Estimate, a 65-year-old retiring this year can expect to spend an average of $185,500 in healthcare and medical expenses throughout retirement. Medicare, Parts B and D premiums account for 45%; co-payments, co-insurance and deductibles, and excluded benefits like vision and hearing exams are 48%); and out-of-pocket prescription drug costs, 7%). You need to factor in about $600-$700 per month, per person (in today’s dollars) for your future expenses, in order to cover 25 years of healthcare costs during retirement.

These numbers do not include the costs that someone would have to pay for long-term care, medical and non-medical care for people who have a chronic illness or disability. Medicare does not cover long-term care expenses, but purchasing insurance to cover long-term care can be expensive.

Given that about 70% of people turning 65 will need some level of long-term care during their remaining years, some of the stats are sobering. According to the most recent analysis by the government, the average duration of long-term care needed is 3.7 years for women and 2.2 years for men, though about 20% will need care for longer than 5 years. The national median cost for a full-time at-home caregiver is over $75,000 per year, and a private room in a nursing facility will likely run well over six figures, depending on where you live.

Many families shoulder the burden by chipping in to pay for home care, which costs about $38 an hour, according to AARP.

One way to plan for your own future expenses is to use a Health Savings Account (HSA), if one is available through your workplace. Contributions go into the account pre-tax, the earnings grow without taxes, and when you pull the money out later for qualified medical or healthcare expenses, there is no tax due.

If you leave your job, you can take your HSA with you— and even use it decades in the future. If you do not have access to an HSA, you'll have to do it the old-fashioned way — save more, starting now, for yourself and your aging relatives.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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