By Steve Kim CFP®
If you are nearing retirement, you have probably thought about Medicare. While at first glance it may appear the program covers all healthcare costs, the truth is more complicated. Upon receiving this information you might be wondering what services are included under Medicare, and what add-ons could be right for you.
What does the original Medicare program cover, and when can you enroll? Medicare is broken up into parts A,B,C, and D. Parts A and B make up the core offering. Part A is the only portion that does not require a monthly premium; if you or your spouse has paid into social security for at least ten years, you are automatically eligible for part A. Part A pays for hospital care and rehab, but it does not cover long term care such as that received in a nursing home. If you have not worked and paid into Medicare for the minimum ten years, you can pay a premium to receive part A. As for enrollment, the initial period is three months before turning 65, the month of the 65th birthday, and 3 months after. The annual enrollment period is from mid October to early December.
So, what costs does part A not cover? There are deductibles and copays for hospital stays. This year, the deductible is $1,676 for an inpatient hospital stay. However, this deductible is not annual— it starts upon hospital admission and resets after you have been out of the hospital for 60 consecutive days. Thus, you may have to pay multiple deductibles within one year if you have more than one hospital visit. You will also have a copay. For the first 60 days in the hospital, the copay is zero; from there, copays increase.
What does part B cover? Outpatient care, lab tests, and doctor’s services are included. Unlike part A, part B requires monthly premiums. In 2025, the standard monthly premium is $185, but those earning over $106,000 individually or $212,000 jointly pay more based on income. This sliding scale is known as IRMAA, or income related monthly adjustment amount. The IRMAA amount is calculated based on your tax return from two years prior: the higher the income, the higher the premium. Other factors, like a large IRA or RMD, could also trigger an IRMAA premium. The IRMAA premium applies to both parts B and D. With proper forecasting and planning, clients can minimize IRMAA premiums.
As you can imagine, healthcare costs even with parts A and B can rapidly build. Medigap is one option to cover the gaps in Medicare’s coverage. Medigap is sold by private companies to supplement parts A and B; the beneficiary must have both an A and B to qualify. Medigap only fills in the gaps in services Medicare partially covers— it cannot be used to cover a service not included under Medicare. For example, Medigap helps cover Medicare’s deductibles, coinsurance, and copayments. Medigap is widely accepted and is not limited by network.
Medigap is different from a Medicare Advantage plan, also called Medicare part C, which too helps cover Medicare’s gaps. An Advantage plan combines part A and part B’s benefits, and frequently part D, as well: prescription drug coverage. Despite this combination, you still must pay the part B premium. Advantage plans work much like a plan many have through a company: they generally have a primary care physician, deductible, copay, coinsurance, and care networks. Buyers should be aware of which doctors, hospitals, and medications are covered by their plan. Another perk of Advantage plans is that they put a maximum on out-of-pocket payments. However, a client in an Advantage plan may have difficulty moving back to a Medigap plan. This highlights the need to choose the right plan from the beginning. In addition, if a client moves, they need to enroll in a new plan, as plans differ by location. Advantage plans have an annual enrollment period from mid October to early December, and during this period participants can change their Advantage and part D plans[SK1] . Participants can also make changes to these choices from January to the end of March.
The right Medicare plan is very personal to you and your needs. When considering Medigap, a Medicare Advantage plan, or simply Medicare, it is important to consult your Medicare insurance specialist. They are indispensable in helping you choose the right plan for you.
All matters discussed here are for informational purposes only. Opinions expressed are solely those of Brady Associates Financial Services and staff. All topics covered are believed to be from reliable sources; however, Brady Associates Financial Services makes no representations as to its accuracy or completeness.
Securities and investment advisory services are offered through Gradient Securities, LLC (Arden Hills, MN 866-991-1539). Member FINRA/SIPC. Gradient Securities, LLC (a SEC Registered Investment Advisor) offers investment advisory services under the d.b.a. of Gradient Wealth Management. Gradient Securities, LLC, and its advisers do not render tax, legal, or accounting advice. Insurance products and services are offered through Brady Associates Financial Services is not affiliated with Gradient Securities, LLC.
