Medicare may be one of the most important—and confusing—financial decisions you make in retirement.
Between enrollment deadlines, late penalties, Medicare Advantage, Medigap, prescription coverage, and income-based premiums, there are plenty of decisions to navigate. And because some choices can have long-term financial consequences, understanding the basics before you enroll is an important part of wise stewardship.
Eddie Holland, Senior Private Wealth Advisor and Partner at Blue Trust, as well as a CFP®, CPA, and Certified Kingdom Advisor®, recently joined Faith & Finance to help simplify Medicare and explain some of the most important planning considerations.
Understanding Medicare Parts A, B, C, and D
A good place to begin is with Medicare’s different parts.
Medicare Part A primarily covers hospital-related care, including inpatient hospital stays, skilled nursing care, and hospice. For people who have accumulated the required work credits through either their own employment or their spouse’s, Part A generally does not require a monthly premium.
Medicare Part B covers many medical services outside the hospital, including doctor visits, lab work, and outpatient procedures. Unlike Part A, Part B generally carries a monthly premium, and higher-income retirees may pay more.
Medicare Part D covers prescription drugs. Those enrolled in Original Medicare—Parts A and B—can generally purchase a separate Part D prescription drug plan.
Medicare Part C, better known as Medicare Advantage, is offered through private insurance companies. These plans combine Parts A and B and often include Part D prescription coverage as well. Some plans may also offer additional benefits such as dental or vision coverage.
Another option for those using Original Medicare is a Medicare supplement plan, commonly called Medigap. These private plans are designed to help cover some of the deductibles, copayments, and other expenses that Original Medicare does not pay.
Pay Close Attention to Enrollment Timing
Timing matters when enrolling in Medicare.
Your Initial Enrollment Period generally lasts seven months: the three months before the month you turn 65, your birthday month, and the three months afterward.
But turning 65 does not always mean you have to immediately leave employer-sponsored health coverage.
If you or your spouse are still working and you have qualifying employer coverage, you may have access to a Special Enrollment Period, allowing you to delay certain portions of Medicare without facing a late enrollment penalty. Holland notes that employer size and the nature of the coverage can affect how Medicare coordinates with the employer plan.
That makes it important to speak with your employer’s benefits or human resources department before making assumptions about which coverage should come first.
Employer Size Can Make a Difference
If your employer has 20 or more employees, the employer health plan may generally remain the primary payer while you continue working, potentially allowing you to postpone Part B and its monthly premium.
With an employer of fewer than 20 employees, Medicare may become the primary payer once you are eligible. In that situation, failing to enroll in Parts A and B could potentially leave gaps in coverage.
You should also verify whether your employer’s prescription drug coverage is considered creditable coverage for Medicare purposes. That can be especially important if you plan to delay Part D beyond age 65.
The larger lesson is simple: Medicare decisions should rarely be made in isola
