Managing Medicare - Understanding Options for Parts, Premiums, & Plans

Every day, around 10,000 new people become eligible for Medicare. Medicare, the federal health insurance program for people 65 and older (as well as for some younger individuals with disabilities) is divided into several parts, each covering different aspects of healthcare. And while the sprawling program can sometimes be confusing – we hope this simple guide will help.

Understanding the Different Parts of Medicare

Part A: Hospital Insurance – Covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. Most people don’t pay a premium for Part A if they or their spouse have paid Medicare taxes for a certain amount of time.

Part B: Medical Insurance – Covers certain doctors’ services, outpatient care, medical supplies, and preventive services. Part B comes with a standard monthly premium, which most people pay. For 2025, the standard Part B premium is $185 per month.

Part C: Medicare Advantage – An alternative to Original Medicare, these are private plans that can cover all Part A and B services and potentially include additional benefits like vision, dental, and hearing. Premiums vary by plan.

Part D: Prescription Drug Coverage – Helps cover the cost of prescription drugs. This coverage is available through private Medicare-approved plans, with premiums varying by plan.

Determining Your Premiums

The most important thing to remember is that your Medicare Part B and Part D premiums can be higher based on your income. This adjustment is known as the “Income-Related Monthly Adjustment Amount” (IRMAA for short). IRMAA income as reported on your tax return. However, it is important to note that your IRMAA is not based on your most recent tax return, but your tax return from 2 years ago. Because of this delay, if your income has decreased significantly due to a life-changing event such as retirement, you can appeal the decision with the Social Security Administration.

2024 MEDICARE COSTS

https://www.medicare.gov/publications/11579-medicare-costs.pdf

Part B Premiums

Part D Premiums

Tips for Managing Premiums

Enroll on Time – Avoid late enrollment penalties by signing up during your Initial Enrollment Period, which typically begins three months before you turn 65 and ends three months after your birthday month.

Review Annually – During the Annual Election Period from October 15 to December 7, review your health needs and compare plans to find one that suits your financial and medical needs.

Manage Your Cash Flow – When selling an investment with gains or taking a big withdrawal from your IRA, be sure to take Medicare premiums into account. If you can keep your income under a certain threshold by waiting until next year, you may save big on Medicare premiums 2 years down the line.

Navigating Medicare premiums doesn’t have to be a daunting task. With the right information and a bit of planning, you can find a plan that not only meets your healthcare needs but also fits your budget. As always, if you have any questions about Medicare and how it fits with your own financial plan, please don’t hesitate to give us a call.

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