Episode 13: Medicare 2025

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Medicare is exciting! Well, it can be. It depends on where you are in your life stage how exciting it really may be. But we’re going to try to make it as exciting as possible for everyone by talking about some of the important basics of Medicare. 

And while this isn’t an exhaustive presentation (we will have one of those available to you, if you are interested), we're going to touch on some things that you need to be aware of and that you should have in the back of your mind when considering Medicare. 

People think, just the basics? When it comes to Medicare, if you don't understand the basics, it can cause difficulties for you. 

So let’s begin with the ABCs of Medicare. 

When you look at Medicare there are four parts that you need to consider. Parts A, B, C, and D… like the Jackson 5…almost. Part A covers your hospital stay, and your inpatient care. This is the coverage that you've been paying into throughout your working career earning you credits for enrollment eligibility. If you haven't earned enough credits, then you actually do have to pay a premium for Part A. Most of the time, if you've worked enough credits, your Part A does not cost a premium. But remember, you’ve already paid for it up until this point, right? So it's not actually free, you just don't have to pay an additional premium. 

Part B is your outpatient care. It's for regular checkups, you're annual physical, those sorts of things. You will have to pay a premium for this coverage. Once you enroll in Medicare, specifically Part B, you'll be paying a monthly and annual premium, which is subject to change every year. 

Part D is designed specifically for prescription drug coverage, whatever your needs may require. 

And combining these coverages together make up Part C, which is the Medicare Advantage plan. 

Medicare Advantage plans allow you to get more holistic coverage that's going to help you afford the many different aspects of specialized doctor's visits, lengthy hospital stays, as well as drug coverage that some determine is the right amount of coverage to manage their overall medical needs. 

Now that you know the 4 types of Medicare, the next thing you’ll need to know is how to get what you need. The answer is to enroll, but of course, it’s not as simple as you might think. 

There are technically four different enrollment periods with Medicare. 

The main one is the initial enrollment period. And you want to make sure that you're keeping on top of this timing and following the rules to complete this enrollment correctly, if possible. With Medicare, your initial enrollment happens around age 65. 

It has often been confused with Social Security eligibility. Folks will say, “I'm not eligible for Medicare until 66 and 8 months.” Well, no, that's your full retirement age in Social Security. That can change. But the age for Medicare initial enrollment is still 65. 

The initial enrollment is really the one that you want to take advantage of. It's a seven-month period of time, so they've given you plenty of time leading up to and following the month of your 65th birthday so that you can enroll in the coverage that you need. The seven month period is the three months prior to your birth month in which you'll turn 65. The fourth of seven is the month that you turn 65. And then the remaining three months are the three months following it. 

If you miss that, then you have to sign up during the General Enrollment period, which happens annually starting January 1st and goes until March 31st. 

You don't need to enroll during this period of time if you are enrolling during your initial enrollment period. 

However, it’s important to note that you do not necessarily have to enroll fully at initial enrollment if you're still working. You’ll want to talk to your Human Resources representative at your company or reach out to Medicare if you’re still planning to work past 65, because you may not necessarily have to enroll, but they may have recommendations for you. This is also good to note if you're part of your spouse's plan. You may not have to initially enroll. As long as you can establish that you have creditable coverage, if you choose not to take Medicare at initial enrollment, you will avoid penalties for not enrolling. You will just have to document that you had coverage during the time that you said, no, at 65, and waived Part B and/or Part D. Whether you’re still covered through your employer or your spouse’s, you just need to avoid any gaps in coverage. 

This is also a basic but important point. You want to make sure that you're watching when you go from maybe your group plan to Medicare, your Part B and D, so you are making that jump seamlessly. When does the coverage stop for your group plan and when is it going to start based upon your enrollment over at Medicare? 

Often, people say, “well, it's going to be okay. I'm not worried about it. Nothing's going to happen to me.” We call that the Bulletproof Syndrome. When people think nothing's ever going to happen. Well, you don't know when something might happen. So, it’s important to always be covered and to make sure that you enroll properly both at initial enrollment and at general enrollment if you’ve delayed due to extended employment coverage. 

Another enrollment period for Medicare is the Open Enrollment or what may be called the Annual Enrollment. It happens October 15th through December 7th. This set time applies to what you're doing as far as an Advantage Plan (Part C), a Prescription Plan (Part D), and whether you have a Medicare Supplement Plan or what used to be called a Medigap Plan. 

Now, one of the things to note regarding a Medicare Supplement Plan is, at your initial enrollment you can enroll in a Medicare Supplement Plan, not an Advantage Plan, but a Supplement Plan or a Medigap Plan without any evidence of insurability. You won’t be required to provide medical documentation of eligibility for coverage. You can be very sick and still qualify 100% with no underwriting into a Medicare Supplement Plan. So if you've had chronic illnesses and health issues that concern you, the better plan in the initial enrollment may be to supplement your Part B and D. Or consider the Medigap Plan that many of our parents and grandparents enrolled in, as opposed to an Advantage Plan. Often with the Medigap Plan or the supplement, you can go wherever you want or need to go for care. There aren't any restrictions or requirements for referrals and things like that. So if you need to travel away from home to a specialist across the country, it may be good to look into the options with a supplement plan. 

This will all depend on your situation. Identifying your unique needs and evaluating your options from there. What do you want to do? What's important to you? What prescriptions are you on? With these answers, you’ll want to make sure, in the initial enrollment, that you look at whether an Advantage Plan or a Medigap Plan is going to be the best option. 

The next thing to note is that Medicare is not a “set it and forget it” benefit. During the open enrollment and the annual enrollment you will want to review your selections. You’ll want to look at your Advantage Plan, your Part C, and your Prescription Plan, to determine if there are any changes to your coverage that might impact you. Because these plans can change.   

So the annual open enrollment period, October 15th through December 7^th, is an important time to remember as that chance to review and make sure that your plan is still the best plan for you, and if not, you can make changes during this time. 

The fourth enrollment period is called special enrollment. It doesn’t really tie to a calendar, it ties to an event. For example, if your medical coverage changes at your place of employment and you’re going to lose adequate coverage. Or if you’re making a big change like moving to a new state. These are things that can qualify immediately for special enrollment in Medicare or maybe into another plan. That's relating to the Advantage Plan and the Supplement Plan. 

One of the things that folks do get excited about is moving to Florida in retirement. They want to live in a warmer climate and enjoy the benefits of the Sunshine State. While it’s a great time for fun in the sun and decorating a new home, it’s important to remember all of the changes that need to be made, including changing your Medicare Supplement or your Medicare Advantage Plan and your Prescription Plan. You need to be sure all of your coverage still applies and let your plan provider know about your address change so they can keep you informed and ensure that nothing is nullified by your new location.   

Each of these enrollment periods are critical and making sure that you don't have any gaps in coverage. 

And we’ve mentioned these Part C options, the Medicare Advantage Plan and the Supplement Plan. How do you know which one to choose? It depends. 

The Advantage Plans are very attractive. Why are they attractive? They're usually low to no premium. So you may be thinking that the most important factor in making this decision is the cost, or lack of cost for coverage. It sounds pretty good to have a zero premium insurance policy. But does it provide you with the coverage that you need for your unique situation? It’s best to make sure. 

You’re going to incorporate your choices into your financial plan. When is your enrollment and are you going to enroll fully or defer until you’re finished working? When is your spouse going to leave his or her employer? When you turn 65, it’s imperative that there are absolutely no gaps in your coverage time - that you coordinate everything to the best of your ability. 

There are health insurance professionals that can assist you with this, and you can also consider speaking to your HR or Benefits representative at your company, to make sure that you're picking out the right program for you. When you're making the decision between your many Medicare Advantage Plan options, and the Supplement or Medigap Plans, you don't want to be penny-wise and pound-foolish. You don't want to just say, “hey, this is no premium. I'm going to take that because it's free to me.” Well, it may not be the best coverage. 

That's why we suggest that you want to work with a professional. You want to have a discussion with them about your specific needs. Share your prescriptions list. Determine if you anticipate needing new prescriptions or perhaps if you have any medical procedures that you're looking to pay for in the coming year. You want to be as proactive as you can about this to get the appropriate coverage. Even if it means you're paying a premium, the appropriate coverage can save you a lot of money if you get it set up. 

It's important to make your selections correctly the first time. If you decide to take an Advantage Plan in initial enrollment and after you've been in Medicare for a couple years, you decide you want a Supplement Plan, you're going to have to go through underwriting. That could be more challenging, depending on what your health situation is. Please plan carefully. 

Also, if you're still working at 65, you may think the coverage that you have through work is your primary coverage. Medicare takes the backseat to that. Well, you need to know the details of your current company plan. And you may need to talk to someone in HR to confirm. Because if your company plan is set up for a company with 20 or more employees, then it is treated as the primary coverage and supersedes Medicare. However, if you work for a smaller company with less than 20 employees, your group plan through work is the secondary coverage. And you have to enroll in Medicare.  20 employees may seem like an arbitrary number, but that’s Medicare’s definition. So make sure you know your company’s employee count because if you assume and are wrong and delay enrolling, then you can face some permanent penalties on the premium that you're going to have to pay. 

When you're sitting down and developing your financial plan, a major factor will be your medical costs both currently and also in the future. At Rinvelt & David, we’ve labeled this as Medical Armageddon. We assess with you whether we think costs for medical premiums and maybe out-of-pocket costs are going to go up or they're going to go down.  And anyone can answer that with a strong degree of certainty. They're going to go up, right? The question is really just how fast. 

We discuss the Medicare trust fund, specifically the health insurance side of the fund. The Medicare Board of Trustees frequently assess the longevity of the fund and the expectation in 2024 is that the trust fund is going to be depleted by 2036. That's not far away. Throughout the 1990s, it was projected that this trust fund was going to be depleted within 10 years. That was in the 90s. In 2009, they projected it would be depleted in 10 years. Fast forward to 2018 through 2023, it was projected again that this trust fund was going to be depleted within 10 years or less. Well, now they say it's going to e 12 years. 

Ultimately, all we can be certain of is that the funding is a moving target. You've got to be prepared. And it’s a little bit tough when there isn’t certainty that the money will always be there. 

So what should you be doing? You should really be planning for the worst-case scenario. What does that cost look like if you’re paying it at probably the highest inflation rate? The average has been five and a half percent. There's another study that said six percent. At Rinvelt & David, we are running it now at eight percent, because we don't think it's going to go down. It’s important to factor this cost into your financial plan early to help you see how long to keep working or how your lifestyle may have to change in order to manage these costs.

 Probably one of the saddest things that we hear from retirees is that they had to go back and get part-time jobs to cover medical expenses. 

When you’re planning for retirement, please don't just focus in on the vacations and the travel and entertainment and the fun stuff. Make sure that you're prepared for your medical premiums, and out-of-pocket costs. When you're coordinating all of these different expenses, the timing of enrollment, and the right choices for you, that's when you know you're truly bringing life and finances together. 

Thanks so much for reading and for learning about Medicare with us. For questions about our financial services or finances in general, please send us an email or give us a call.