Medicare is a program that has been a key player in the healthcare plans of countless retirees in the U.S. since its debut in 1965. Clocking in at a whopping $988 billion in revenue in 2022 and benefiting over 65 million individuals, Medicare has become the go-to for almost 96% of folks aged 65 and above.
Understanding the ins and outs of Medicare is crucial for your financial well-being, yet it’s no walk in the park for many. Without a clear grasp of how the system works and the specifics of your benefits, there could be significant financial consequences. If you’ve taken a solo dive into the complexities of Medicare and found yourself drowning in confusion, fear not—you’re the perfect fit for a Medicare assessment.
What Is Medicare?
Medicare is a health insurance program provided by the federal government for people over the age of 65 as well as disabled individuals. As mentioned, it plays a key role in covering healthcare costs in retirement, but it is not meant to cover everything. Understanding its coverage and its limitations is a crucial part of being prepared for retirement.
Medicare is divided into four parts: Part A, Part B, Part C, and Part D. There are also supplemental coverages to consider. Here is an overview of the different options to review as you approach retirement:
- Original Medicare is a package that includes Part A and Part B, with the optional add-on of Part D.
- Part A covers hospital services. If you or your spouse paid Medicare payroll taxes during your working years for at least 10 years, Part A is free for you. If you didn’t, you can still get coverage by paying a monthly premium.
- Part B covers doctor visits and other outpatient services. Even if you or your spouse paid Medicare payroll taxes, Part B comes with a monthly premium.
- Part D is an optional add-on that includes drug coverage.
- To help with Medicare costs such as copayments, coinsurance, and deductibles, many retirees will purchase Medigap insurance from private insurance companies to supplement their Original Medicare plan. Some Medigap plans also cover additional services not covered by Part A or Part B, but typically exclude services such as dental, vision, and hearing visits.
- Medicare Advantage, also known as Part C, is an alternative to Original Medicare that is offered through Medicare-approved private companies. This plan bundles Part A and Part B and often includes Part D as well. Medicare Advantage plans may cover additional services, including vision, hearing, and dental visits, but it is dependent on the terms of each plan and you will have to read the coverage details carefully. Medigap policies cannot be combined with Medicare Advantage.
- You may pay an extra charge added to your Part B premium called an Income Related Monthly Adjustment Amount (IRMAA). In short, if your modified adjusted gross income as reported on your IRS tax return from two years ago is above a certain amount, you’ll pay the standard premium amount plus an IRMAA charge. For 2024, the IRMAA additional premiums are:
Keep in mind that basic Medicare does not cover long-term care, dental care, vision or hearing care. This includes Medigap supplemental coverage. You may think that you’re getting additional services when you enroll in Medigap, but that is not the case. Medigap only helps out with deductibles and copays, it will not provide additional services that Medicare does not cover. If these expenses are not properly planned for, it can be detrimental to your overall retirement plan.
What to Expect?
What to expect depends on which stage of the Medicare process you’re in.
If you’re a pre-retiree thinking about enrollment, you should expect to sign up in the six months surrounding your 65th birthday (three months before and three months after). If you’re receiving Social Security benefits at that time, you will be automatically enrolled in Medicare Part A and Part B. Additional coverages like Part D, Medigap, and Medicare Advantage will have to be enrolled separately. If you’re not receiving Social Security when you turn 65, you will have to apply for Medicare through the Social Security Administration website.
If you’re retired and already enrolled in Medicare, you should expect to review your benefit options every year. This year, Medicare open enrollment began on October 15th and remains open through December 7th. The decisions you make during this period will affect your 2024 Medicare coverage. It’s a daunting task, but Medicare costs and coverage levels change annually so it’s important that you stay up to date.
If you are already enrolled in Medicare, here is what you can do with your Medicare coverage during the enrollment period:
- If you have Medicare Parts A & B,you can switch to Part C.
- If you have Medicare Part C, you can switch back to Original Medicare or change to a different Medicare Advantage Plan. Beware! Once you are past your one-time Medigap open enrollment period and you want to switch back to Original Medicare, you may not be able to qualify for an affordably priced Medigap plan.
- If you have Part D, you can switch to a different Part D plan or drop your prescription drug plan.
Don’t get this confused with the Medicare Advantage open enrollment period that occurs from January 1st to March 31st, where those with Part C can change to a different Part C plan or switch to Parts A and B. Any other changes need to happen in the October-to-December enrollment period.
We Are Here to Help
Feeling a bit overwhelmed with all things Medicare? You’re not the only one! When it comes to understanding the intricacies of Medicare, it’s normal to feel confused.
At Premier Planning Group, we support our clients in making sense of all the details, so you can feel confident in your plan decisions. Whether you’re scratching your head about your current Medicare plan or need a hand with the enrollment process, we’re here to make it all a breeze. Give us a call at (443) 837-2520 or email my executive assistant, Talia Grover, at firstname.lastname@example.org to set up a complimentary consultation. Your peace of mind is our priority!
Brion Harris is the CEO, founder, and managing partner of Premier Planning Group, an independent financial firm specializing in working with pre-retirees and retirees, helping them create customized wealth preservation and retirement distribution strategies. With over 20 years of experience, Brion has developed deep knowledge and skill in helping his clients simplify their finances and find confidence in their financial future. Brion and the Premier Planning team are known for their unparalleled client service and their dedication building long-lasting relationships with their clients. As a result, Brion has been the recipient of the #1 Advisor Leadership Award* at Summit Brokerage Services for eight years running and has a reputation as one of the top retirement advisors in the business.
Brion is a proud 20-year resident of the Annapolis community, where he resides with his wife, Elizabeth, their three children, Addison, Jay, and Scarlett, and their two dogs, Pepper and Coco. When he’s not working, you can find him boating, skiing, traveling, and enjoying good food and music with his family. If you want to learn more about Brion, connect with him on LinkedIn.
*The #1 Advisor and Leadership Award is based on production data while at Summit Brokerage Services, Inc. Brion Harris received the award in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. This award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.