By Donald Albach
For many Americans, turning 65 marks the transition from employer-provided health insurance to Medicare. While Medicare is a vital benefit, it can also be complex, with distinct parts, coverage limits, and enrollment rules that can easily overwhelm retirees. Understanding the basics now can help you avoid costly mistakes later in your retirement.
What Medicare Is and What It Covers
Medicare is the federal health insurance program for people age 65 and older, certain younger individuals with disabilities, or specific medical conditions. It is administered by the Centers for Medicare & Medicaid Services (CMS) and has several parts, each covering different services:
- Part A (Hospital Insurance): Covers inpatient hospital care, limited stays in skilled nursing facilities, hospice care, and some home health services.
- Part B (Medical Insurance): Covers doctor visits, outpatient services, preventive care, and durable medical equipment. In 2025, the standard premium is $185 per month, though higher-income retirees may pay slightly more due to an income-related surcharge (see below for more information).
- Part C (Medicare Advantage): It is an alternative to Medicare (Parts A and B) and is offered by private insurers. It includes everything in A and B, but also prescription drug coverage and potentially dental or vision care.
- Part D (Prescription Drug Coverage): Helps pay for prescription medications, shots, or vaccines. It is offered as a stand-alone plan or built into Medicare Advantage.
Retirees who choose Medicare plans A and B may also purchase Medigap, a supplemental insurance policy, to help cover deductibles, copays, and coinsurance that Medicare does not.
Enrollment and Timing
The Initial Enrollment Period begins three months before a retirees 65th birthday, including their birthday month, and ends three months after. Missing this window may result in late enrollment penalties unless one qualifies for a Special Enrollment Period, such being covered under an employer’s health plan.
If one misses both their Initial and Special Enrollment Periods, they may sign up during the General Enrollment Period (January 1–March 31 each year), but coverage will not begin until the 1st day of the following month. Also, the Open Enrollment Period (October 15-December 7, 2025) allows beneficiaries to enroll in new plans, switch plans, or drop their current coverage.
What Medicare Does Not Cover
While Medicare is essential, it does not cover everything. A common exclusion for basic plans include long-term custodial care, which helps those with bathing, dressing and other activities of daily living. It also excludes most dental, vision, and hearing services, and care received overseas. Because of these gaps, retirees often need additional insurance or savings strategies to avoid unexpected expenses.
The Cost Factor and IRMAA Surcharges
Even with Medicare, retirees are responsible for premiums, deductibles, and coinsurance depending on which parts they are enrolled in. For example, the annual deductible for Part B is $257 and Part A is often premium-free if the retiree (or their spouse) paid Medicare taxes while working. However, Part A still has a deductible of $1,676 for every visit to the hospital. For Medicare Part D, legislation enacted via the Inflation Reduction Act places a cap on annual out-of-pocket prescription drug spending at $2,100. Also, higher-income retirees may face IRMAA (Income-Related Monthly Adjustment Amount) surcharges on Parts B and D. These surcharges are based on a retirees adjusted gross income from two years prior, meaning decisions made in the past can affect their costs well into retirement.
Why Planning Matters
Health care is one of the largest expenses in retirement. A 65-year-old couple retiring today may need more than $320,000 over their lifetimes ($160,000 separately), to cover health care costs, not including long-term care. Without careful planning, gaps in Medicare coverage or unexpected surcharges could significantly affect one’s retirement budget.
How Millstone Financial Group Can Help
At Millstone Financial Group, we believe Medicare should not be viewed in isolation but as part of your broader retirement strategy. Here is how we can help:
- Guidance through enrollment: We can ensure you do not miss critical deadlines and avoid unnecessary penalties.
- Plan evaluation: We help you compare plans to find options that align with your needs and financial goals.
- Tax and income planning: Our advisors can work with you to structure withdrawals and manage income in ways that may minimize IRMAA surcharges in the future.
- Integration with your retirement plan: We incorporate health care costs, Medicare premiums, and coverage gaps into your overall financial strategy so you can retire with greater confidence.
Bottom Line: Waiting to plan could mean facing a retirement full of surprises, but an appropriate strategy today can help you secure your tomorrow.
Schedule a complimentary consultation by calling (732) 385-8544 or emailing info@millstonefinancial.net.
Disclosure:
Insurance products and services and Advisory services offered through Millstone Financial Group Limited Liability Company dba Millstone Financial Group, an Investment Advisor in the State of New Jersey. Millstone Financial Group is not affiliated with or endorsed by the Social Security Administration or any other government agency.
Advisory services are offered through Millstone Financial Group Limited Liability Company, a Registered Investment Advisor in the State of New Jersey. Insurance products and services are offered through Millstone Financial Group Limited Liability Company.
All material discussed is for informational purposes only. Opinions expressed are solely those of Millstone Financial Group Limited Liability Company and staff. All topics covered are believed to be from reliable sources; however, Millstone Financial Group Limited Liability Company makes no representations as to its accuracy or completeness. Investing involves risk including the loss of principal.
This article shall in no way be construed as a solicitation to sell securities or investment advisory services to residents of any state other than New Jersey, or where otherwise permitted. All information and ideas should be discussed in detail with your individual adviser prior to implementation.
Millstone Financial Group Limited Liability Company dba Millstone Financial Group does not offer tax planning or legal services but may provide references to tax services or legal providers. This material is intended to provide general financial education and is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Millstone Financial Group may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters. You should always consult with a qualified professional before making any tax or legal decisions.
Sources (in order of use):
- Parts of Medicare, 2025
- What You Will Pay for Medicare in 2025
- Medicare Social Security Administration, 2025
- Medicare Open Enrollment, 2025
- What Does Medicare Not Cover? Eight Things You Should Know, 2025
- What does Medicare Cost, 2025
- Fidelity Investments® Retiree Health Care Cost Estimate, 2024
