Medicare is often an essential component of one’s retirement plan, especially as healthcare costs continue to rise. Its many complex offerings can be challenging to navigate for retirees and those approaching retirement.

Ari Parker, co-founder and head Medicare advisor for Chapter, a leading Medicare advisory practice, and author of It's Not That Complicated: The Three Medicare Decisions to Protect Your Health & Money, highlights important elements to consider when signing up for Medicare or evaluating existing Medicare coverage.

The A and Bs of Medicare

Specific coverage under Part A and Part B:

Part A: Hospital Insurance (Inpatient)

  • Inpatient hospital care
  • Inpatient mental health care
  • Skilled nursing facility care
  • Home health care
  • Hospice
If you or your spouse has worked 10+ years and paid federal payroll tax, Medicare Part A is premium-free to you.		 Part B: Medical Insurance (Outpatient)

  • Doctors’ visits
  • Lab work, x-rays, MRI/CT scan
  • Durable medical equipment
  • Preventative services (flu shots, certain disease screenings, etc.)
Medicare Part B covers any outpatient needs with a monthly charge. Most Americans will pay $185 per month.

Original Medicare does not cover long-term care, defined by the activities of daily living, such as eating, bathing, or dressing oneself. And, while Medicare pays 80% of your medical costs under Parts A and B, you are responsible for the other 20%, with no maximum out-of-pocket costs.

Part D: Prescription Drug Coverage

Prescription drug coverage is purchased through a private insurance company. Parker suggests prescription drug coverage for the following reasons:

  • To avoid lifetime late enrollment penalties
  • Cover existing prescription costs

There are three main improvements to Medicare Part D taking effect on January 1, 2025.

  1. Establishing of maximum annual out-of-pocket costs capped at $2,000. Once you reach $2,000 in costs, you pay $0 for covered prescription drugs for the rest of the year.
  2. Elimination of Medicare Part D coverage gap, also known as the “donut hole.” Now, there is only the deductible, initial coverage phase, and catastrophic coverage (after you reach maximum out-of-pocket). Previously, the “donut hole” meant you could owe up to 25% co-insurance for expensive prescriptions.
  3. Prescription drug costs over the year will be spread out if you opt into the Medicare Prescription Payment Plan. For example, if your drug costs reach the $2,000 maximum out-of-pocket, then you will only owe $166.70 each month.

How Can I Achieve Comprehensive Coverage?

Parker explains different options to secure comprehensive coverage to cover the 20% of medical costs that Medicare doesn’t support.

Sign Up for or Keep Original Medicare and Add Medigap + a Standalone Part D Plan

Enroll, have the flexibility of Original Medicare, and add a Medicare Supplement, also known as Medigap. This plan is designed to last a lifetime—your benefits do not change year-over-year. If you choose this route, you:

  • Do not worry about whether your doctor is in-network
  • Have the freedom to see any specialist you want nationwide without a referral
  • Do not have bills or copays to deal with as long as you meet the Part B annual deductible and pay your premiums on a timely basis
 Replace Original Medicare

Medicare Advantage, or Part C, replaces Original Medicare administered by a private insurance company. It works similarly to work-provided coverage, has HMO and PPO-like features, and is subject to prior authorization. This plan:

  • Often includes additional benefits, such as prescriptions or dental and vision insurance
  • Sets restrictions on which doctors you can see and may offer overall less choice in care
  • Has premiums as low as $0, but there is potential for high out-of-pocket costs

Open Enrollment Ends December 7

From now until December 7, you can:

  • Sign up for or change a Medicare Prescription Drug (Part D) Plan
  • Sign up for or change a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan back to original Medicare, or vice versa
    • In 46 states, enrolling in a Medigap plan may be subject to underwriting if it is outside of your Medigap Open Enrollment Period, which is a six-month period that starts with your Part B effective date

It is important to review your coverage each year to decide if you need to adjust or reconfirm your plan. Premiums and costs, benefits, and physician networks are a few things that may change each year or even mid-year.

Resources

Each client’s circumstances are different, and William Blair is pleased to provide general insights and new perspectives on the fundamental elements of Medicare. For questions concerning your particular circumstances, please contact your William Blair wealth advisor to access the webinar link or additional resources.

Disclosure

This content is for informational and educational purposes only and not intended as advice or a recommendation. Recommendations can be provided only after careful consideration of an individual’s specific personal situation and needs. The factual statements herein have been taken from sources believed to be reliable, but such statements are made without any representation as to accuracy or completeness and are subject to change.