Let’s Talk Medicare
Did you know that a 65-year-old couple retiring today could spend as much as $683,306 on healthcare costs throughout their retirement—and that doesn’t include potential long-term care expenses that 70% of retirees are projected to face?
Have you started thinking about how to manage your healthcare in retirement? Do you know how much Medicare will cover, and what your total healthcare costs might be? These are critical questions that every retiree must address, ideally long before transitioning into retirement.
Understanding Medicare options, costs, and how it integrates with your broader retirement plan is a crucial step toward achieving financial security and peace of mind. Let’s explore the basics of Medicare and discover how you can make informed decisions for your future.
What Is Medicare?
As you may already know, Medicare is a federal health insurance program primarily for people aged 65 and older, though younger individuals with certain disabilities or conditions may also qualify. It’s designed to cover hospital stays, medical services, and prescription drugs.
But how does it work? Medicare becomes the primary medical insurance for most Americans aged 65 and older. Once you enroll, it takes on the primary responsibility for covering your healthcare costs before any other insurance you might have. This is a significant shift for many people who have been covered by a private employer-sponsored plan as their sole insurance. As the primary insurer, Medicare pays for covered services, and any secondary insurance, such as a Medicare Supplement (Medigap) plan or employer-sponsored coverage (if applicable), helps cover non-covered services or remaining out-of-pocket expenses like deductibles or coinsurance.
While Medicare functions similarly to private insurance in many ways, for example, it provides coverage for doctor visits, hospital stays, and preventive care, it also has key differences. Unlike most private plans, Medicare has no annual out-of-pocket maximum, meaning there is no cap on what you could pay for uncovered expenses in a given year. Additionally, services like dental and vision are not typically covered. Understanding these differences is crucial to ensure a smooth transition to Medicare and avoiding gaps in coverage that could lead to unexpected costs. Supplemental coverage and careful planning is essential to address these nuances and ensure comprehensive protection in retirement.
Do I Have to Enroll in Medicare at Age 65?
It’s understandable if you’re hesitant about transitioning to Medicare. You may really like your current insurance plan or worry that a government-run program won’t measure up to the coverage you’re used to. However, Medicare is not inferior to private insurance; in fact, for many retirees, it offers broad and reliable coverage at a more affordable cost. One of the key advantages of Medicare is its widespread acceptance. Most doctors and hospitals across the U.S. accept Medicare. Additionally, Medicare Part A, hospital coverage, is typically premium-free for those who have worked and paid Medicare taxes, while Part B premiums are often much lower than private insurance plans. Medicare also offers predictable costs through standardized benefits and the ability to add supplemental plans, such as Medigap or Part D for prescription drugs, to customize your coverage.
If you are transitioning from employer-sponsored insurance, Medicare will likely feel comparable in terms of access. And with proper planning through a qualified Medicare expert in your state, you can gain a solid understanding of your options. You will likely find Medicare can be effective at supporting your healthcare needs in retirement.
Of course, as with most government programs, Medicare can be complicated, and if you are not guided properly through the maze of options, you could find yourself paying more than necessary, missing critical coverage, or facing penalties for delayed enrollment.
Can I Do This on My Own?
About six months before you turn age 65, you can expect to be bombarded with Medicare solicitations. You will get flyers, emails, phone calls, and maybe even texts. It can feel overwhelming, if not annoying. It’s no surprise that many people feel pressured to make a quick decision, including going online to enroll on your own. With over thirty years of retirement experience, I believe selecting the right Medicare professional is one of the most important health care decisions you’ll make as you approach retirement. You’ll need help carefully evaluating your options.
While the ads you receive might promise simple solutions or perfect plans, remember that Medicare is not one-size-fits-all. You have many choices, designed to support your unique health care needs, financial situation, and future goals. Yes, it’s entirely possible to navigate the Medicare process on your own, however, does it make sense? After all, the options can be confusing. Therefore, to simplify the process, help you compare plans, understand costs, and ensure your coverage aligns with your specific needs, reach out to a specialist. Not only will a good broker assist in evaluating the right kind of plan for you, but they will maintain a relationship with you and help remind you of important open enrollment dates, ensure your prescription drug plan covers your medications, especially as your needs change, as well as avoid penalties or prevent gaps in coverage resulting in unexpected costs.
That said, be wary of those solicitations you receive. It may be tempting to respond to the endless flood of flyers, emails, and phone calls you get, but it’s important to approach these solicitations with caution. Many of these offers come from companies with a vested interest in selling specific plans or focus on volume business over providing quality guidance. Instead of responding to unsolicited advertisements, it may be wise to take control of the process by finding someone on your own.
I’m Turning 65. What Do I Need to Know?
Turning 65 often raises a big question: Do you have to enroll in Medicare now, or can you stick with your current health insurance plan? The answer depends on your situation and the type of coverage you already have. For most, enrolling in Medicare during the Initial Enrollment Period is essential to avoid penalties and ensure uninterrupted coverage. However, there are scenarios where delaying Medicare might be the right move.
If you’re uninsured or have an individual health plan through the marketplace, enrolling in Medicare at 65 is typically mandatory. Failing to do so could result in gaps in coverage and lifetime penalties. Similarly, if you’re covered by an employer-sponsored plan but the company has fewer than 20 employees, Medicare will generally become your primary insurance. In this case, you must sign up for Medicare when you turn 65 to avoid unexpected medical bills and penalties.
On the other hand, if you have health insurance through a large employer with 20 or more employees, you can often delay Medicare enrollment without penalties. Employer-sponsored plans in this category remain your primary coverage, and you can sign up for Medicare later during a Special Enrollment Period. The same rules apply if you’re covered under a spouse’s employer plan that meets the criteria for delaying Medicare.
Even if you delay filing, however, you may still want to enroll in Part A. It’s free so long as you have worked and paid Medicare taxes for at least 10 years, and it can provide additional hospital coverage at no cost. Before you decide not to enroll in Parts B and D, a word of caution - confirm whether your current insurance is considered “creditable coverage” by Medicare to avoid late enrollment penalties.
That’s because for every 12-month period you delay enrollment, you will incur a 10% penalty added to your Part B premium – for the rest of your life. The penalty will continue to compound each year filing is delayed so a little planning can save you from lifelong penalties and financial stress.
What Does Medicare Cover?
Medicare covers a range of services, often referred to as the alphabet of coverage, but keep in mind, it’s still not comprehensive. Original Medicare (Parts A and B) covers hospital stays, doctor visits, and preventive care, but it doesn’t include dental, vision, hearing aids, and so on. For prescription drugs, you’ll need a Part D plan. You might expect that Medicare will cover all of your medical needs, but as you read on you will learn more about Medicare’s limitations and gaps as well as the supplemental plan needed to help cover costs like deductibles and coinsurance.
Medicare Options: The Alphabet
As already noted, Medicare is not a one-size-fits-all program. You have choices to make, and these choices can significantly impact your health care costs and coverage. You’ll need to purchase supplemental coverage to fill in the many gaps of Medicare. That’s because there are significant gaps that can leave you exposed to high out-of-pocket costs.
If you are still working, your employer-sponsored medical plan can become your supplement. Speak with your HR team to discuss your options before you file for Medicare.
When you apply for Medicare, the first decision you’ll need to make is whether to enroll in Original Medicare or choose a Medicare Advantage plan. This choice is crucial because it determines the structure of your coverage, your healthcare providers, and your potential out-of-pocket costs.
Original Medicare includes Parts A and B. It offers broad flexibility, allowing you to visit any doctor or hospital nationwide that accepts Medicare. However, it does not include benefits like dental, vision, or prescription drugs, and it leaves gaps in coverage for deductibles, coinsurance, and out-of-pocket expenses, which can be addressed by purchasing a Medigap plan or, as noted, using your employer plan as supplemental coverage.
Or, instead, you could select Medicare Advantage, known as Part C, which is provided through private insurance companies. Medicare Advantage bundles Parts A, B, and often D (prescription drug coverage) into one plan. It’s easy, it’s convenient, and Medicare Advantage plans frequently include extra benefits, such as vision, hearing, and dental. It’s also generally significantly lower in cost.
What’s the trade off? You cannot go to any doctor or hospital you want, but rather only use a network of providers. In exchange for lower costs, you will have limited provider options under the Advantage plan. It’s similar to HMOs (Health Maintenance Organizations), though the specifics depend on the type of plan you choose. In general, you must use a network of doctors, hospitals, and other healthcare providers to receive full coverage and if you go out of network, your care may not be covered except in emergencies.
With Medicare Advantage, pre-authorization is often required for services, procedures, or medications, which means your doctor’s recommendations must first be approved by the plan’s administrators or board before you can proceed with treatment. Some find this management oversight may delay care or lead to denials if the service isn’t deemed medically necessary under the plan’s guidelines. However, the Kaiser Family Foundations reports that about half of retirees have selected Medicare Advantage plans as of 2024 data and ssa.gov expects that number to grow in the years ahead.
And, finally, unlike Original Medicare, which provides nationwide coverage, Medicare Advantage plans typically restrict coverage to their service areas. So, if you travel frequently or spend part of the year in another state, you may face coverage challenges with a Medicare Advantage plan. In fact, one of the key criticisms of Medicare Advantage plans is that they give insurers more control over your healthcare decisions.
Original Medicare: Parts A, B, and D
With roughly half of those age 65 and older selecting original Medicare, it might be helpful to understand how it works. It consists of three key components:
Part A (Hospital Insurance)
Part A covers inpatient hospital stays, skilled nursing facilities, hospice care, and some home health care. Most people don’t pay a premium for Part A if they or their spouse paid Medicare taxes while working. However, there’s a deductible of $1,676 in 2025 for each benefit period and coinsurance costs if your stay extends beyond certain limits.
Part B (Medical Insurance)
Part B covers outpatient care, doctor visits, preventive services, and some medical equipment. There’s a monthly premium for Part B, which starts at $185 in 2025 but can increase based on your income due to the Income-Related Monthly Adjustment Amount (IRMAA). The annual deductible for Part B is $257, and after meeting it, you’ll generally pay 20% of the Medicare-approved amount for services.
Part D (Prescription Drug Coverage)
Part D helps cover the cost of prescription medications. Premiums vary by plan, as do deductibles, copayments, and the infamous “donut hole” coverage gap. The average monthly premium is estimated to be $46.50, although actual premiums can vary based on the specific plan you select and its coverage details. Additionally, higher-income beneficiaries may be subject to an Income-Related Monthly Adjustment Amount (IRMAA), which adds a surcharge to the standard premium. For example, individuals with a modified adjusted gross income (MAGI) above $106,000, and married couples filing jointly with a MAGI above $212,000, will pay increased premiums based on their income levels. Finally, skipping Part D if you need it can lead to late enrollment penalties, so it’s essential to evaluate your options carefully.
Medicare Supplement Plans: Bridging the Gap
If you choose Original Medicare, you’ll likely face gaps in coverage, such as deductibles and coinsurance. This is where Medicare Supplement , or Medigap, plans come in. These plans, also offered by private insurers, help cover costs that Original Medicare doesn’t. Again, here you will find another alphabet of options.
Plans A, B and D
Plans A, B, and D are designed to offer varying levels of basic coverage, with Plan A being the most minimalistic option and Plans B and D expanding only slightly on the benefits provided. These plans are generally more affordable in terms of premiums, making them attractive for those with fewer healthcare needs. However, it’s important to weigh the trade-off because while you may save on premiums, you could face higher out-of-pocket costs if you require extensive medical care or have unexpected claims.
Plan G
Plan G is the most popular option for those enrolling today. Known for its comprehensive benefits, it is ideal for those looking to minimize out-of-pocket expenses while maintaining predictable healthcare costs. Plan G strikes a balance between robust coverage and manageable premiums, making it an attractive choice for retirees who want peace of mind and financial stability when it comes to their medical needs. Its widespread popularity reflects its ability to provide strong protection without overcomplicating the decision-making process.
Plans K, L, and M
Plans K, L, and M offer more cost-sharing options, making them more affordable in terms of monthly premiums but requiring beneficiaries to take on higher out-of-pocket responsibilities when accessing care. These plans are well-suited for individuals who want to balance upfront affordability with coverage tailored to less frequent or lower-cost healthcare needs. For those who anticipate fewer medical claims or are comfortable managing a portion of their healthcare expenses, these plans provide an opportunity to save on premiums while still maintaining a safety net for significant or unexpected medical costs.
Plan N
Plan N is a popular choice for its affordability, providing many of the same benefits as Plan G. It incorporates cost-sharing through copayments for certain services, such as $20 for doctor visits and $50 for emergency room visits, which helps keep monthly premiums lower. However, Plan N, like all the other options other Plan G, does not cover Part B excess charges, meaning beneficiaries could be responsible for additional costs if their provider charges above the Medicare-approved amount.
Should I Choose Original Medicare or Medicare Advantage?
Medicare Advantage is growing in popularity, however, choosing between Original Medicare and Medicare Advantage depends on your preferences, budget and needs.
Original Medicare offers flexibility to see any provider nationwide that accepts Medicare and arguably allows you to have greater control over your health care, but you’ll need a Medigap or supplemental plan to cover costs like deductibles and coinsurance, as well as dental, vision, hearing, etc. so the total out-of-pocket could be quite costly. By comparison, Medicare Advantage plans bundle all the insurance coverage under one plan, and generally even includes extras like dental or vision. However, they limit you within a network of providers and hospitals, and you may relinquish some control of your health care decisions.
Clearly, it’s crucial to weigh the trade-offs and consider how each plan’s restrictions might affect your ability to access care when and where you need it. Medicare Advantage can be a good choice for those who are comfortable with managed care, don’t mind the network restrictions, and are looking for lower premiums. If you prefer more freedom to choose providers and direct your healthcare decisions, Original Medicare with a Medigap plan might be a better fit.
How Much Will Medicare Cost?
Costs for Medicare depend on the parts you choose and your income level. Part A is usually premium-free, but Part B has a monthly premium starting at $185 for 2025. With original Medicare you’ll want a Medigap policy to help with deductibles, copays and co-insurance for more predictable costs, and original Medicare does not generally include dental or vision, so you will want to consider added costs for insurance or out of pocket expenses you may face throughout retirement. Plan conservatively; depending upon where you live and which supplemental plan you select, all-in costs can range extensively.
Medigap or Medicare supplemental premiums vary widely depending on your age, location, and insurer. Between Part B, D and Plan G premiums, total costs could range $350 to $600 per month in many areas.
Typically, we use a budget of $8,000 to $12,000 a year per person in our planning when our clients opt for the original Medicare plan. Of course, this is generally higher than initial total out of pocket costs, but we encourage allowing a generous budget for contingencies, as well as Medicare surcharges (IRMAA) which may apply for those with higher savings. This is especially true when RMDs commence. Although it is alleged that less than 10% of retirees pay the Medicare surcharge, more than half of our clients (typically with liquid net worths ranging from about $2-$5 million) are projected to have Medicare surcharge costs in the future.
Medicare Advantage plans generally only require Medicare Part B and D costs, although IRMAA still may apply. Generally, for our clients who select Medicare Advantage Plan, we budget about $4,000 to $6,000 a year per person.
Of course, our planning is based on extensive experience and research, and is specific to our client’s state, zip code or county, as well as allows consideration for any employer-paid or government-provided insurance plans they may be eligible for. The bottom line is to be sure to do your homework to get an accurate budget for your situation.
Health Care Planning: Costs and Inflation
Further, health care costs in retirement are a moving target. Medicare premiums, deductibles, and out-of-pocket expenses often rise faster than general inflation. For example, Part B premiums have increased by an average of 7% annually over the past two decades. Supplemental plan costs also increase. For this reason, incorporating health care inflation into your retirement plan is essential to avoid surprises down the road.
As a separate issue, long-term care (LTC) costs ought to be considered into any sound financial plan before you transition into retirement. Although LTC is not typically a part of a health insurance or medical care plan coverage (since most long term care is not often medically necessary), it can be a major expense you risk facing in your later retirement years. Long term care warrants a separate consideration and might be a discussion for a later time, but we believe all plans should be tested against the risks, potential costs and options to manage these expenses including but not limited to self-insurance.
The Medicare Surcharge: IRMAA
As a brief introduction, higher-income retirees are subject to increased Medicare premiums through the Income-Related Monthly Adjustment Amount (IRMAA). Individuals with a modified adjusted gross income (MAGI) above $106,000, and married couples filing jointly with a MAGI above $212,000 for 2025 will pay additional surcharges on top of the standard premiums for Medicare Parts B and D. Depending on income levels, surcharges can increase the total monthly premium to amounts ranging from $259.00 to $628.90 per person. This is just for Part B premiums, not including the added costs for Part D and supplemental coverage.
Keep in mind, MAGI includes all adjusted gross income plus tax exempt interest. That means if you realize a long term capital gain (by selling appreciate shares of stock or real estate), take large distributions from your traditional IRA or 401k, receive an inheritance (such as an IRA) or have sizeable pre-tax retirement account balances, these surcharges can significantly impact your retirement budget. Therefore, it is essential to plan strategies to manage taxable income in retirement. By effectively controlling your MAGI, you may reduce or avoid IRMAA surcharges, thereby preserving more of your retirement income.
Does Medicare Cover Long-Term Care?
One common misconception about Medicare is that it covers long-term care. In reality, Medicare only covers short-term stays in skilled nursing facilities under specific conditions. It doesn’t pay for custodial care, which includes assistance with daily activities like bathing or dressing. Given that statistics report that roughly 70% of retirees will require some form of long-term care over their lifetime, exploring long-term care insurance or alternative strategies such as self-insurance, is a critical part of retirement planning.
You don’t want to be blindsided by the costs of assisted living and its doubtful you can count on governmental assistance for this kind of care unless you are poor. That means you must first spenddown most of your assets, leaving little to nothing for your surviving spouse or family before you can qualify for federal assistance. Therefore, the expense and potential financial strain underscores the importance of early planning.
How to Find a Trusted Medicare Specialist
Medicare brokers are licensed to conduct business state by state, so it’s crucial to choose someone who is not only knowledgeable about Medicare but also well-versed in the rules and plans available in your state.
A good place to start may be by asking for referrals from friends or family who already have Medicare. Or reach out to other trusted advisors such as your property and casualty insurance agent, CPAs or your financial advisor. Still, be sure to verify the broker’s credentials and licensing through your state’s insurance department and ask the tough questions. I’ve noted some below that you may want to consider using in your search.
Look for someone who represents multiple carriers, as this indicates they can provide objective advice rather than pushing a specific plan. Keep in mind, brokers receive commissions from Medicare and supplemental plans. In California, my broker will get paid $780 per person for the first year of enrollment and about half of that for yearly renewals so, rest assured, they get paid to help you on an ongoing basis.
Key Qualities of a Good Medicare Broker
A good Medicare broker demonstrates expertise, transparency, and a client-centered approach. Here’s what to look for:
- Knowledge and Experience: Look for at least five years of experience specializing specifically in Medicare – be sure they know the rules, plan options, and stay update-to-date on regulations. I prefer to work with someone who only focuses on Medicare since it is a niche product, rather than a professional who juggles a wide array of financial products or services. If you opt to work with someone who offers a range of different financial services, make sure they are not using Medicare as the catalyst to sell other services.
- Plan Variety: Ideally, you will want a specialist who represents multiple carriers, ensuring a wide range of options and unbiased recommendations, and can help you shop your options at yearly renewals.
- Listening and Understanding: Clearly, you will want someone who takes the time to understand your healthcare needs, budget, and preferences, explaining options clearly and patiently. Be wary of anyone looking to provide an immediate quote and sign you up.
- Honesty About Costs: Costs can vary so you will want a transparent breakdown of premiums, deductibles, and out-of-pocket expenses, along with help finding a plan that fits your financial comfort zone.
- Proactive Communication: You will want someone who will follow up with you during Medicare’s Annual Enrollment Period to review your plan and ensure it still meets your needs. This is very important for long-term plan viability. This is where experience and expertise will show.
- Credential Verification: You will certainly want to verify their licensing and credentials with your state insurance department and check to make sure they don’t have any disputes or complaints on their records. They also should be upfront about how they are compensated.
- No Pressure Tactics: Finally, you will want someone who prioritizes your needs over making a sale. They should give you the time and space you need to make a confident, informed decision.
A broker who checks these boxes is likely a reliable partner in navigating the Medicare process. By choosing someone trustworthy and experienced, you can simplify the complexities of Medicare and feel confident in your coverage decisions.
Asking the Tough Questions
To help you conduct your due diligence, I’m providing a list of important questions to ask before you engage a specialist to help you with your health care needs.
- How long have you been licensed?
- What other credentials do you have?
- How many clients do you have?
- How many companies do you work with?
- What other products do you sell besides health insurance?
- How do you support and service your clients?
- How often will you help me review my plan? Do you reach out to me, or do I have reach out to you?
- How will you ensure I stay informed about Medicare changes?
- How will you support me if I encounter issues with my plan?
Beyond proper licensing, you might also want to look for certifications to support their qualifications as a Medicare expert. For instance, the AHIP Certification (America’s Health Insurance Plans) is a specialized credential for agents and brokers selling Medicare Advantage and Medicare Part D plans, whereas the National Medicare Training Program (NTP) offered by the Centers for Medicare & Medicaid Services (CMS) program provides comprehensive training on Medicare coverage, rules, and processes. While these are not the only certification programs, such credentials can be important.
Final Thoughts: Make Medicare Work for You
Medicare is more than just health insurance—it’s the foundation of your retirement healthcare plan. Choosing between original Medicare with a Supplement plan or a Medicare Advantage plan is a decision that will impact not just your healthcare experience but also your financial security. Take time to evaluate your options thoughtfully, and consider your health needs, financial resources, and future goals. Medicare decisions are not one-size-fits-all, but with the right guidance, you can find a plan tailored to your situation.
When you retire, you may leave your role as a CPA, executive, HR manager, IT specialist or other profession, but these days, no one gets to quit working entirely. Instead, we step into the role of CEO of our retirement - managing our spending and cash flow, investment portfolio, taxes, estate plan and, yes, even health care. These all becomes a top responsibility for retirees who don’t want to risk running out of money. Like any effective CEO, you will need a trusted team of advisors and specialists to rely on for guidance; people who can keep you informed, guide you through complex decisions, and help you make the best choices to meet your unique needs. Retirement is not a do-it-yourself approach anymore so start planning today to ensure you have your financial plan in place and that includes the health care coverage you need, so you can enjoy the peace of mind you deserve in retirement.
Retirement isn’t a solo act—it’s your next big leadership role. Build your team, lock in your financial and health care strategy, and take charge as CEO of your future. Start planning today so you can retire right!