Published On: December 2, 2020

Written by: Ben Atwater and Matt Malick

Last week, amid continuing political drama and the massive coronavirus spike, we wrote you about Health Savings Accounts (HSAs).  Today, in our third installment of our healthcare series, we will focus on the basics of Medicare.

Medicare is vital for Americans after age 65. Knowing the basics of Medicare is important not only for seniors, but also for their children – and even their grandchildren – as relatives often need assistance navigating the system.

Whether you are approaching Medicare age, currently enrolled in Medicare, or simply looking for more information to help friends and family, we believe this information will be useful to you. 

Americans qualify for Medicare at age 65. You must enroll in Medicare beginning in the three months before your 65th birthday, the month of your birthday or the three months following your birthday. If you do not sign-up for Medicare during this window, you will face a lifetime penalty on your premium.

However, if you are still employed and your employer provides your insurance, then the lifetime penalty likely will not apply and you can probably wait to sign-up for Medicare, but we will discuss Medicare and work in a more detailed note next week. 

Medicare Part A:

  • You are automatically enrolled in Medicare Part A if you are receiving Social Security.  If you are not getting Social Security, then you will need to sign-up for Medicare Part A.
  • Most Americans who have worked for at least ten years will have accumulated enough credits to receive their Part A premium at no cost.
  • Part A covers inpatient hospital care, skilled nursing facility and home health care (for up to l00 days per benefit period and only for temporary conditions), and hospice care.

Medicare Part B:

  • Medicare bases Part B premiums on income levels.  The below Medicare table outlines the 2021 income-based premiums. 
  • Part B covers portions of doctor’s services, outpatient hospital care, lab tests, outpatient physical and speech therapy, home health care, ambulance services, and medical equipment and supplies.

Medigap/Supplemental Plan:

  • Recipients should pair a Medigap or Supplemental Plan with Part B.
  • There are ten types of these plans (Plan A through Plan N) that each have slightly different coverage schemes.  Please see the below Medicare table summarizing coverage. 

* Plans F and G also offer a high-deductible option in some states. With this option, you must pay for Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of $2,340 in 2020 ($2,370 in 2021) before your policy pays anything. (Plans C and F are not available to people who were newly eligible for Medicare on or after January 1, 2020.)

** For Plans K and L, after you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.

*** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that do not result in inpatient admission.

  • Private insurance companies offer these policies according to a diligent set of government mandated standards, but pricing and service can vary widely.

Medicare Part C:

  • Part C is better known as a Medicare Advantage Plan.
  • This is used as an alternative to Medicare Part A and Part B (and Medigap). 
  • Private insurance companies offer these plans.
  • If you are in good health, need limited medical services and generally stay within one geographic area, these plans are worth a look as you can potentially save money on premiums. 
  • If you have a large Health Savings Account (HSA) balance, you may want to favor a Medicare Advantage Plan as you can pay premiums from an HSA as a qualified expense. 
  • Medicare regulates these plans, but the plans are not standardized and require careful shopping.
  • Part C plans include a drug coverage component, effectively bundling Part D with Parts A and B (and Medigap).

Medicare Part D:

  • Part D plans are independent of Part A and Part B plans.
  • This is the prescription drug benefit.
  • You can choose your plan from private insurance companies.
  • There are a variety of Part D plans available, the more comprehensive the prescription coverage, the higher the premium. There is also a premium adjustment for higher income earners.
  • You cannot enroll late without facing a lifetime penalty on your premiums.

Even for the wealthy, healthcare is an important aspect of retirement planning.

Under current law, clients over 65 years of age can rely on Medicare to cover most of their doctor and hospital expenses. Over one’s lifetime, the premiums, deductibles and co-pays for Medicare will add-up, but Medicare offers relatively comprehensive coverage at affordable prices.

Fidelity estimates a couple living into their 90s will spend $280,000 in healthcare expenses during their retirement, mostly on Medicare and associated premiums.  This amount is in today’s dollars and not adjusted for inflation.

If you need assistance selecting your Medigap, Part D, or your Part C, we can offer you a trusted referral.

Additionally, the Medicare website is incredibly well organized and offers a great resource:

Finally, online Medicare applications are available at

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