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What You Need to Know About Medicare Thumbnail

What You Need to Know About Medicare

Medicare plays a crucial role in the healthcare plans of many U.S. retirees. Since its inception in 1965, Medicare has grown significantly to serve more than 66 million people. Today, almost 96% of individuals aged 65 and older depend on Medicare as an essential component of their financial plan.

However, many retirees aren’t fully aware of the wide range of options Medicare offers. Without a clear understanding of how the system works, you could face costly mistakes. If you’ve ever felt lost trying to navigate Medicare’s complexities, a Medicare assessment might be just what you need.

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 to fill in any gaps not covered in the four main parts. Here is an overview of the different options to review as you approach retirement:

  • 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 included at no additional cost 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 that also comes with a monthly premium. Starting in 2025, those with Part D plans will not have to pay more than $2,000 per year in co-pays, deductibles, and coinsurance. The cap could rise, though, and will be indexed to the growth of the per capita Part D costs each year. 
  • Original Medicare is a package that includes Part A and Part B, with the optional add-on of Part D. A new change that was implemented in 2024 is the Guiding an Improved Dementia Experience (GUIDE) program which provides 24/7 support, medical and community-services assistance, and caregiver training to help dementia patients and their caregivers, along with $2,500 in financial assistance for at-home, overnight, or adult day care expenses. This program’s coverage will expand four-fold in 2025 to help more patients (only those enrolled in Original Medicare) across the country. 
  • 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. Also, if you’re enrolled in Medicare Advantage and you switch to Original Medicare, you may not automatically qualify for a Medigap policy and could face additional underwriting. 

Income Related Monthly Adjustment Amount (IRMAA)

Regardless of whether you have Original Medicare or 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 (MAGI) 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 example, in 2025 if you’re a single taxpayer and your MAGI is between $106,000 and $133,000, your projected IRMAA charge is $71.00. Expect to pay the same $71.00 per person ($142 per couple) if you’re a married couple filing jointly and have a MAGI between $212,000 and $265,000.

 Here’s another example. Let’s say you’re a single taxpayer with a MAGI between $199,000 and $500,000. Your projected 2025 IRMAA monthly charge is $396. Similarly, if you’re a couple filing jointly with a MAGI of between $398,000 and $750,000, you’ll pay the same $396 IRMAA adjustment per person ($792 per couple).   

 (You can find 2024 premium costs here). Keep in mind, no form of Medicare covers long-term care. If these expenses are not properly planned for, it can be costly and detrimental to your overall retirement plan.

What to Expect

Medicare enrollment begins three months before your 65th birthday and extends three months after. If you’re receiving Social Security benefits, you’ll automatically be enrolled in Parts A and B. For Medicare Part D, Medigap, and Medicare Advantage, enrollment is separate and optional.

 Each year, the open enrollment period (from October 15 to December 7) allows you to make changes to your coverage. During this time, you can switch from Parts A & B to Part C, change from Part C back to Original Medicare, or update your Part D plan. Be aware that Medicare costs and coverage may change annually, so staying informed and reviewing your options each year is essential. Changes made during open enrollment will take effect on January 1 of the following year.


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