By Steve Allender, CRPC®
It’s a well-known fact that Medicare plays a pivotal role in the healthcare strategies of many people across the United States. Originally introduced in 1965, Medicare’s revenue reached an impressive $988 billion in 2022, providing its benefits to over 65 million individuals. Remarkably, nearly 96% of Americans aged 65 and above currently rely on Medicare for their healthcare needs.
Despite the effect that Medicare can have on your financial future, many people lack a comprehensive awareness of the full spectrum of options available within this government program. The consequences of not clearly understanding how the Medicare system works and the intricacies of your benefits can leave lasting financial consequences. If you’ve ever attempted to navigate the complexities of Medicare by yourself only to feel overwhelmed and confused, you are a perfect candidate 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 projected 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 to 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.
- 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-December enrollment period.
Feeling Overwhelmed? We Can Help
If you’re feeling a bit overwhelmed and unsure about Medicare, rest assured you’re not alone! Confusion is a normal response that often sets in when our clients begin to explore their Medicare options. That’s precisely why we’re here to lend a hand.
At Acute WealthCare, our goal is to empower Medicare recipients to approach their plan decisions with confidence. Whether you have questions about your existing Medicare plan or need guidance during the enrollment process, don’t hesitate to get in touch with us today. Schedule a 15-minute introductory phone call and let’s work together to simplify your Medicare journey.
Steve Allender is a partner and wealth advisor at Acute WealthCare, an independent, fee-based comprehensive financial services firm. Steve is a Chartered Retirement Planning Counselor℠ who spends his days helping women in healthcare professions build a secure financial future through investment management and financial planning. Steve loves building long-term relationships with his clients and helping them address financial burdens so they can focus on what they love and how they want to spend their time. While Steve has officially been in the financial industry for over 20 years, he became hooked on learning about finances as a child when his parents taught him the basics of saving, spending, and giving. Steve enjoys all the outdoor activities living in Colorado provides, and you can often find him backpacking, snowshoeing, rafting, mountain biking, fishing, and exploring old mining communities. His claim to fame is that he is a Colorado Trail thru-hike completer, covering 486 miles of the most beautiful country on earth. Steve also enjoys a good book about Lincoln and the Civil War and is committed to his community, mentoring through Save Our Youth and helping the elderly and single moms with household maintenance through the Minute Man Ministry. Learn more about Steve by connecting with him on LinkedIn. You can also register for his latest webinar on What We Do & How We Help.