As you approach your 65th birthday, you likely have a lot on your mind, and understanding Medicare can feel like deciphering a complex puzzle. You’ve worked hard, saved diligently, and now it’s time to ensure your healthcare is as robust as your retirement plans.
A clear understanding of Medicare options, what they cover, and how they work together is essential for a retirement healthcare plan. With this knowledge, you can ensure that your medical needs are met without unnecessary expense.
Original Medicare: Parts A and B
At its core, Medicare is a federal health insurance program for people 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease. The original Medicare program consists of two main parts: Part A and Part B. These are the building blocks and understanding them is crucial before exploring other options.
Medicare Part A: Hospital Insurance
Think of Medicare Part A as your hospital insurance. It helps cover the costs associated with inpatient care in hospitals, skilled nursing facilities, hospice care, and some home health services.
Part A covers:
- Inpatient Hospital Stays. This includes semi-private rooms, meals, general nursing, drugs as part of your inpatient treatment, and other hospital services and supplies. It does not cover private duty nursing or personal care items.
- Skilled Nursing Facility Care. If you need skilled nursing care after a hospital stay, Part A can cover a semi-private room, meals, skilled nursing care, physical and occupational therapy, and medications. This is typically for rehabilitation, not long-term custodial care.
- Hospice Care. For individuals with a terminal illness, Part A covers services like pain relief, symptom management, and emotional support.
- Home Health Services. In specific circumstances, Part A can cover medically necessary part-time or intermittent skilled nursing care, physical therapy, occupational therapy, and speech-language pathology services.
Most people don’t pay a monthly premium for Part A because they or their spouse paid Medicare taxes through their employment for at least 10 years. However, Part A does have a $1,676 deductible for each benefit period in 2025. A benefit period begins the day you’re admitted as an inpatient in a hospital or skilled nursing facility and ends when you haven’t received inpatient hospital care or skilled nursing facility care for 60 days in a row. This structure means you might have several benefit periods in a year.
In addition to the deductible, you may also owe daily coinsurance for long hospitalizations. These costs vary based on the length of your hospital stay. If your stay lasts between 60 and 90 days, you will owe $419 per day. For stays longer than 90 days, you begin to use your lifetime reserve days, which incur a daily coinsurance amount of $838. These costs are for 2025 and are subject to inflation adjustments each year.
Medicare Part B: Medical Coverage
Medicare Part B is your medical insurance. It covers medically necessary services and supplies used for diagnosing or treating your health conditions, as well as preventative services to help you stay healthy.
Part B covers:
- Doctor’s Services. Visits to your primary care physician and specialists.
- Outpatient Care. Services you receive in an outpatient setting, like emergency room visits if you’re not admitted to the hospital, observation stays, and diagnostic tests.
- Preventative Services. Medical care that is crucial for maintaining your health, like annual wellness visits, certain vaccinations, and screenings for cancer, diabetes, and cardiovascular disease.
- Durable Medical Equipment. Equipment like wheelchairs, walkers, oxygen equipment, and hospital beds prescribed by your doctor for use in your home.
- Other Medical Services. Lab tests, X-rays, mental health care, ambulance services, and some home health services not covered by Part A.
Unlike Part A, most people pay a monthly premium for Part B, which is deducted from their Social Security benefits. The base cost in 2025 is $185 per month, but high earners will owe more due to the Income Related Adjusted Amount [IRMAA].
In addition to the monthly premium, you will also owe a $257 annual deductible in 2025 which must be paid before Medicare begins to cover your costs. A 20% coinsurance amount also applies after you meet your deductible and is owed for most doctor’s services, outpatient therapy, and durable medical equipment.
Beyond Original Medicare: Expanding Your Coverage
While Parts A and B provide a strong foundation, many people find that they don’t cover all their healthcare needs, or the out-of-pocket costs are unmanageable. This is where Medicare Advantage, Part D, and Medigap plans come into play, offering additional choices and flexibility.
If you choose to buy supplemental coverage, you must choose between Medicare Advantage and Medigap with the option to add Part D coverage to your Medigap plan. With either choice, you must have your red, white, and blue Medicare card before you can add supplemental coverage. That means you must be enrolled in Medicare Parts A and B, and have received proof of your enrollment, before you can apply for Medicare Advantage or Medigap.
Medicare Part C: Medicare Advantage Plans
Medicare Part C, also known as Medicare Advantage, is an alternative way to receive your Medicare benefits. These plans are offered by private insurance companies who administer your benefits.
Along with the standard benefits of Part A and Part B, Medicare Advantage plans often offer additional coverage. The particulars vary by plan but can include assistance with prescription drug costs, and even coverage for vision and dental care.
While there are many benefits to a Medicare Advantage plan, most also have a crucial downside that you should consider. These plans feature a network of covered doctors that you agree to use unless an emergency arises.
Medicare Part D: Prescription Drug Coverage
If you choose to stay with Part A and Part B instead of Medicare Advantage, you’ll likely want to enroll in a separate Medicare Part D plan for prescription drug coverage. These plans are offered by private insurance companies that are approved by Medicare and help cover the costs of your prescription medications.
You pay a monthly premium for your Part D plan, which varies based on the plan you choose, and could also owe IRMAA based on your income. Most plans have a deductible of up to $590 in 2025 and copayments or coinsurance for your prescriptions that are calculated based on the “tier” of the drug. These costs can add up quickly, and Medicare introduced a $2,000 out-of-pocket maximum beginning in 2025.
Medigap Plans: Filling in the Gaps
If you’ve opted for Medicare Part A and Part B, you may find that the coinsurance for Part B services and the Part A deductible can derail your budget. This is where Medigap policies, also known as Medicare Supplement Insurance, come in. These plans are sold by private insurance companies and help pay some of the healthcare costs that Parts A and B don’t cover.
Most plans help cover out-of-pocket costs like:
- Part A and B deductibles
- Part A and B coinsurance or copayments
- Part B excess charge (the difference between what your doctor charges and what Medicare covers)
- Up to 3 pints of blood
- Foreign travel emergency care
Medigap policies are standardized, meaning a Plan K from one insurer offers the same basic benefits as a Plan K from another. However, there are many types of Medigap plans, and each offers a different blend of benefits.
While Medigap covers many costs, it generally does not provide long-term care, vision insurance, dental coverage, or private-duty nursing. It also doesn’t cover medical aids like eyeglasses or hearing aids. Finally, this type of plan doesn’t cover prescription drugs, so you’ll still need Part D coverage.
Medicare coverage options are complicated and can be confusing even after explanations. Review the chart below for an overview of the different parts and what they cover.
Taking the time to research, compare plans, and consult with a knowledgeable financial advisor can help you confidently choose the Medicare coverage that will support your well-being in the years to come. Your hard work has brought you to this exciting stage of life – so it’s wise to ensure your healthcare planning is just as robust as your financial planning.
Prepare for A Happy, Healthy Retirement with Help from Meld Financial
At Meld Financial, our team of specialists can help you understand your Medicare options and how the cost of various types of coverage fits into your financial plan. Our wholistic approach to financial planning includes your health coverage and many other aspects that are vital to your wellbeing.
We bring together the most important parts of your financial life into one easy to understand plan called Financial Fingerprint®. This nimble plan is the first step toward a financially secure retirement.
To learn more about Financial Fingerprint® or discuss your personal situation, contact a member of our team today.
