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Second to income replacement, healthcare coverage is one of the more important planning opportunities to consider as you transition to retirement. Whether you’re working or already retired, this post is designed to give you a high-level overview of Medicare, what Original Medicare covers (and what it doesn’t), and your options around supplemental policies.

What is Medicare?

This is a federally funded health insurance program that provides coverage to people who are 65 or older, as well as those with certain disabilities or end-stage renal disease. It consists of several parts, including Part A, B, and D, each covering different aspects of healthcare services. Understanding the various components is essential to ensure you have comprehensive healthcare coverage in your retirement years.

What does Original Medicare include?

Part A

Part A covers hospitalization expenses, including inpatient care, skilled nursing facilities, hospice care, and some home healthcare services. The premium for Part A is usually not paid by individuals who have paid into Medicare or are eligible for Social Security benefits. However, there is a deductible of $1,600 that applies before the coverage kicks in.

Part B

Part B covers doctor bills, surgeries, and medical procedures, including preventive services and outpatient care. The premium for Part B starts at $164.90 per person per month and may increase based on your Modified Adjusted Gross Income (MAGI) on a two-year lookback. This additional amount based on income is called the income-related monthly adjustment amount (IRMAA). It’s important to calculate your Part B premium using the calculator provided by (if you’re concerned about Medicare premiums, check out our post on appealing these surcharges). Apart from the premium, Part B also requires individuals to pay a 20% coinsurance for services, and there is no limit to out-of-pocket expenses. For example, if you undergo a heart procedure costing $150,000, you would be responsible for $30,000 in coinsurance.

Part D

Part D covers prescription drugs, helping individuals afford the costs of medications. The premium for Part D is determined by the plan you choose, and it’s crucial to shop for a plan that suits your specific prescription needs. There are relatively inexpensive Part D plans available for those without chronic conditions or extensive medication requirements. Similar to Part B premiums, Part D premiums are also affected by IRMAA rates.

What role do supplemental policies play?

While Original Medicare provides coverage for many essential healthcare services, there are gaps in coverage and potentially high out-of-pocket costs. This is where supplemental policies, such as Medigap policies and Medicare Advantage plans, play a crucial role in ensuring comprehensive coverage.

Medigap policies

Medigap policies are provided by private insurance companies and are designed to fill the gaps in Original Medicare coverage. These policies work in conjunction with parts A, B, and D. While the coverage provided by Medigap policies is standardized across the country, the premiums vary based on your location. It’s important to compare different plans and their associated costs carefully. To estimate the costs of Medigap policies in your area, you can visit In addition to the premiums, Medigap policies may also have copays and deductibles that vary depending on the chosen plan.

It’s worth noting that you must sign up for Medigap coverage within six months of becoming eligible for Medicare, or you may not be eligible for it in the future. Plan F is considered one of the most comprehensive Medigap plans available, but the premiums for this plan range from $159 to $989 in Oregon, not including Part B premiums. Medigap policies generally offer better coverage than Medicare Advantage plans as long as you can afford the higher premiums.

Medicare Advantage (also known as Medicare Part C)

Medicare Advantage plans, also known as Medicare Part C, are an alternative to Original Medicare. These plans replace Original Medicare and provide all-in-one coverage that includes parts A, B, and often D. Medicare Advantage plans are offered by private insurance companies approved by Medicare. The premiums for these plans vary based on the coverage provided, ranging from $0 to $300 per month. However, it’s important to consider that Medicare Advantage plans may have high costs for non-covered items, and each plan has different levels of coinsurance and deductibles. It’s essential to note that Medicare Advantage plans can have narrower provider networks, potentially reducing benefits and increasing premiums over time. Nevertheless, they often include additional benefits like gym memberships and other incentives. Medicare Advantage Plans are available to everyone, regardless of when they sign up.

How do I estimate my costs for Medicare?

When estimating your costs, it’s crucial to consider various factors. According to estimates, a 65-year-old couple is projected to spend around $315,000 on healthcare expenses throughout retirement. However, understanding how these costs may impact your day-to-day financial life can be challenging, especially if you currently have employer-provided coverage with deductible premiums. To get a realistic sense of your total healthcare costs, you need to add up the premiums and supplemental insurance, as well as out-of-pocket costs for non-covered services. Additionally, it’s important to account for inflation, as healthcare expenses typically increase by an average of 4-6% annually. Long-term care needs, including skilled nursing, assisted living, and memory care, should also be considered when estimating healthcare costs in retirement.

How do I find unbiased advice about how to navigate my options for Medicare?

When seeking unbiased advice on how to navigate your options, it’s essential to consult with professionals who can provide impartial guidance. While agents who sell specific policies may have a vested interest in your decision, licensed independent insurance agents or CERTIFIED FINANCIAL PLANNER™ professionals are excellent resources to turn to for unbiased advice. They can help you evaluate your options, compare plans, and choose the best coverage for your needs. You might also check out the Medicare Community Podcasts, where you can find podcasts for any topic you may be wondering about.

In conclusion, understanding Medicare and its various components is crucial for a smooth transition to retirement. From the coverage provided by Original Medicare (Parts A, B, and D) to the supplemental policies such as Medigap and Medicare Advantage (Part C), there are several options available to ensure comprehensive healthcare coverage. By estimating your costs, considering long-term care needs, and seeking unbiased advice, you can make informed decisions about your coverage that aligns with your financial goals and healthcare needs. As always, I welcome a conversation about your unique situation.

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