This article will focus on helping clients to understand the complexities of Medicare, including the implications of IRMAA and the differences between traditional Medicare and Medicare Advantage plans.

Parts of Medicare: Parts A, Part B, supplemental insurance (Medigap) and Part D

Part A, (Original Medicare) pays for:

• inpatient care in hospitals
• skilled nursing facility care
• hospice care
• home health care.

Part B was added to help pay for:

• Services from doctors and other health care providers
• Outpatient care
• Home health care
• Durable medical equipment (wheelchairs, walkers, hospital beds, and other equipment)
• Many preventive services (screenings, shots or vaccines, and yearly “Wellness” visits)

Once enrolled, Part B plans typically continue without the need for annual re-enrollment. Part B operates like the health coverage that most employees receive from their employer. Costs are covered substantially, but not always 100%. Because of this, many people covered by Medicare choose to buy supplemental insurance.

Medicare Supplemental Insurance (Medigap)

Original Medicare (Part A and Part B) pays about 80% of covered health care costs. Because the remaining 20% can be expensive, many people buy additional coverage. Policies are standardized, and in most states named by letters, such as Plan F, G or Plan K. The benefits in each lettered plan are the same, although the premiums can be different based on the percentage of coverage provided.

Part D helps cover the cost of prescription drugs (including many recommended shots or vaccines). Plans that offer Medicare drug coverage are run by private insurance companies that follow rules set by Medicare. You can join a Medicare drug plan in addition to Original Medicare, or you can get drug coverage by joining a Medicare Advantage Plan (see the section on Part C).

Part D has been affected by the Inflation Reduction Act (IRA) legislation. Therefore, it is important to review Part D plans every year to confirm that your prescriptions will be covered in the drug formularies of your plan. You have the option each fall to change to a different part D plan during open enrollment, if you wish.

Medicare Advantage Plan (Part C)

Medicare Advantage is a type of Medicare-approved health plan from a private company that you can choose to cover most of your Part A and Part B benefits instead of Original Medicare. It usually also includes drug coverage (Part D).

Medicare Advantage operates like Health Maintenance Organizations (HMOs) such as Kaiser.  Like HMOs, Part C plans usually have slightly lower costs and roll all of the parts of Original Medicare including the supplemental insurance into one payment for the Part C plan. For individuals on a tight budget who want simplicity, this can be an advantage.

Medicare Advantage plans have potential drawbacks. Provider choices are limited to the plan’s network. The risk of not being able to access nationally-known medical experts or institutions to resolve a complex medical issue may not be worth the financial savings. While Medicare Advantage might be suitable for those with financial constraints, traditional Medicare offers more flexibility.

Enrolling in Medicare  

Unless you already have retirement or disability benefits from Social Security (or the Railroad Retirement Board), you will have to sign up for Medicare when you turn 65 if you are not covered by a “creditable” employer plan. If you are still working, you need to have HR verify the plans creditable status. If your employer plan is not creditable, the financial penalties for delaying your enrollment in Part B are substantial. Once you get approved for Social Security or Railroad Retirement Board benefits, you will automatically get Part A coverage (without having to pay a premium for it) when you are eligible for Medicare.

Impact of IRMAA on Medicare premiums

The Income-Related Monthly Adjustment Amount (IRMAA) has a significant impact on Medicare premiums for higher-income individuals. IRMAA can substantially increase monthly costs, making it crucial for clients to understand their financial obligations under Medicare.

Your SSI payment will be reduced by Medicare Part B, which covers you for care provided outside of the hospital, Part B IRRMA (Income Related Monthly Adjustment Amounts) if your MAGI (modified adjusted gross income) for the two years prior is more than $106,000 (for 2025), Part D, which covers prescription drug expense, and the Part D IRRMA. The standard Medicare Part B premium is $185. Part B IRRMA ranges from $74 to a high of $443.90. Part D insurance can vary substantially by plan. Part D IRRMA ranges from $13.70 to a maximum of $85.80. Thus, instead of paying $185/month, you might be paying as much as $713/month for your total Medicare premiums. Additionally, you will be paying a monthly premium for your Medigap insurance, which will likely be in the range of $120-150/month. The amounts and income brackets for IRRMA are updated every year.

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