Helping Clients Avoid Costly Medicare Mistakes

Medicare typically covers around half of retirees' healthcare expenses, yet medical costs remain the second-largest expense in retirement, just behind housing. A 2025 study by Fidelity Investments estimates that a healthy 65-year-old couple will need approximately $345,000 to manage healthcare costs throughout their retirement (excluding any long-term care needs).

Clients may seek your guidance during the Medicare enrollment process, as there are many factors to consider when making their election choices. To avoid lifelong financial penalties, it’s important that individuals enroll within the proper timeframes, which depend on age, Social Security status, and existing coverage.

If any of your clients are looking to adjust their Medicare selections, now is the perfect time. Medicare open enrollment takes place from October 15 to December 7 each year. This is an opportunity for individuals to switch their Medicare elections, whether they are interested in changing their Original Medicare selection (Parts A and B) to include Part D, switching to Medicare Advantage (Part C), or vice versa for the next calendar year.

Let’s walk through the fundamentals of Medicare, as discussed in a webinar led by our Product Marketing Manager, Alexus:

Which expenses does Medicare cover?

A breakdown of the different parts of Medicare

Medicare is divided into four distinct "parts,” which we review below.

Medicare Part A - Hospital Insurance

Medicare Part A generally comes with no out-of-pocket premium, but it does require both a deductible and coinsurance. It primarily covers hospital care, provided the patient is admitted under a doctor’s official order. A stay of 1-60 days must meet the $1,676 deductible. Days 61 to 90 have no additional deductible, but there’s a $419 per day coinsurance. Days 91-150 come with an $838 per day coinsurance for lifetime reserve days. After day 150, no costs are covered by Medicare. This means that a 90-day stay could cost your client $14,246.

Medicare Part A also covers a skilled nursing facility stay for a limited time and under certain conditions after hospitalization. Days 1-20 cost $0, with days 21-100 incurring a cost of $209.50 a day. Anything beyond 101 days, even for care under the right conditions, will not be covered.

Certain home health care services can be covered completely by Medicare Part A, with a coinsurance of 20% of the Medicare-approved amount for durable medical equipment. It is important to note that it covers home health care services, and not homemaker services, which involve daily activities such as cooking, shopping, and cleaning, unrelated to the care plan.

Nursing home care is not covered under Medicare Part A, but skilled medically necessary nursing care administered in a nursing home can be covered.

Medicare Part A covers hospice care, or end-of-life care for terminally ill patients. Once activating hospice care, Medicare Part A will not cover any treatments toward curing the terminal illness nor any room and board unless the hospice team determines a need for short-term inpatient or respite care. Any outpatient prescription drugs can incur up to a $5 copay and any inpatient respite care can incur a coinsurance of 5% for the Medicare-approved amount.

Medicare Part B - Medical Insurance

Medicare Part B provides coverage for non-hospital medical services, excluding vision and dental unless the beneficiary has opted in. This includes expenses related to items such as ambulance services, durable medical equipment (DME), and oxygen equipment. Beneficiaries face an annual deductible of $257 and a 20% coinsurance on general costs for medical services (as long as the doctor “accepts assignment” or the Medicare-approved amount for that service), inpatient, and outpatient care. Income related monthly adjustments (IRMAA) apply to Part B premiums. These income related monthly adjustments look at a client’s taxable income from two years prior. Premiums range from $185 to $628.90, depending on income.

Medicare Part C - Medicare Advantage

Medicare Advantage includes all the benefits of Part A and Part B but is administered by private companies that contract with Medicare. Optional add-ons such as vision, dental, and hearing coverage are available, making Medicare Advantage a potential all-in-one solution for some clients. Premiums vary by plan and are higher than just the Part B premiums.

Medicare Part D - Prescription Drug Coverage

Medicare Part D coverage varies depending upon the plan selected, but the deductible cannot be higher than $590, after meeting the deductible and out-of-pocket spending reaches $2,000, then catastrophic coverage starts. At that point, covered Part D drugs come at no extra cost. Income related monthly adjustment amount (IRMAA) also impacts Medicare Part D. IRMAA increases range from $13.70 to $85.80 plus the unique plan’s premium.

Medicare and Inflation Reduction Act of 2022 Changes

The Inflation Reduction Act of 2022 has significantly shaped the landscape of healthcare planning. One key benefit is the $35 monthly cap on insulin, which helps limit price surges for this vital medication. Additionally, starting in 2025, drugmakers are required to provide rebates to Medicare if there are sudden spikes in drug prices that are higher than inflation, allowing retirees to have more predictable medical expenses. Other changes included capping out-of-pocket expenses for beneficiaries (effective 2025), and allowing the government to negotiate prescription drug prices, further controlling costs (majority slated to start 2026).

Medigap supplemental plans

Beneficiaries of Original Medicare have the option to sign up for Medigap plans, a supplemental insurance provided by private companies. Medigap can be combined with Parts A, B, and D to fill gaps in Medicare coverage. However, it cannot be used alongside Medicare Part C (Medicare Advantage), as both are private insurance plans, and their coverage would overlap.

Now, with these main program offerings for Medicare and those four parts, we also have to understand what other programs are out there, which are very popular options to also be leveraging, which are MediGap plans. This is a supplemental insurance plan that covers gaps in Medicare. So these are typically leveraged with A, with D, and with B, to cover some of those gaps that can be available, such as getting additional dental, vision, or hearing, or filling in some of the different gaps that we just covered.

With this particular option, this is going to be a wide ranging MediGap plan option because it is offered by private insurance companies. Keeping in mind, it must be paired with original Medicare and not Medicare Advantage, which is part C, so we must also be leveraging just Medicare part A, B, or D.

With that being said, from the 2018 study that was happening in regards to the most popular plan options for MediGap, we have a couple higher contenders here, but Medicare Plan F was one of the most popular ones in the 2018 election percentage. A couple of these have shifted gears in terms of what's available for some of the younger future Medicare filers, but for right now, these are the ones that are available, and some of them are pretty popular because they can cover more of those costs and cover some of the gaps that can happen, especially when we were looking at that donut hole gap. A lot of these were covering that gap, so certain elections might be changing in the future for some of these plans. But for now, these are what's available, and it's a very popular option to combine with original Medicare to ensure that we're meeting the full needs of healthcare costs that we're expecting in retirement.

What influences Medicare decisions?

Health and lifestyle

The chart above highlights health and lifestyle scenarios that may apply to your clients. For instance, retirees who travel frequently might prefer Original Medicare, as it provides flexibility to visit doctors wherever they are, without being restricted to a specific network, unlike Medicare Advantage. This may be less of a concern for those planning to stay local.

Clients who require more frequent doctor visits or have more complex health needs might consider adding Medigap to their Original Medicare coverage. While it comes with higher premiums, it provides more predictable out-of-pocket costs, helping to manage ongoing medical expenses.

Retirement income

Medicare Part B and D premiums are determined by your retirement income. With RightCapital, you can develop a retirement drawdown strategy that provides your clients with more tax-efficient distributions or look at performing Roth conversions during lower tax bracket years to optimize tax-free ending wealth. Our platform helps assess the impact of these tax-smart strategies on Medicare Part B and D premiums, particularly when aiming to avoid Income-Related Monthly Adjustment Amounts (IRMAA), which can be triggered by actions that raise taxable income such as Roth conversions. Taking it a step further, RightCapital can run a dynamic calculation of performing Roth conversions without triggering IRMAA, or to certain premium brackets.

Tax-efficient retirement account withdrawal strategies as shown in RightCapital screenshot

When should clients enroll in Medicare?

Enrolling at the wrong time can lead to higher premiums. The initial enrollment period begins three months before a client turns 65 and lasts a total of seven months. If your client is already collecting Social Security by their 65th birthday, they'll automatically be enrolled in Medicare Parts A & B. With the RightIntel business intelligence dashboard (included in Premium and Platinum subscriptions), you can choose to receive notifications when clients are approaching 65, enabling you to proactively assist them with Medicare enrollment.

If the client or their spouse is still working at age 65 and covered by a comprehensive employer-sponsored health plan, they may be able to delay enrollment in Part B and Part D. The special enrollment period to re-enroll in Part B extends for eight months after the employer policy ends, while the special enrollment window for Part D (with creditable coverage) is 63 days after the end of the policy.

How can RightCapital help with Medicare decisions?

RightCapital streamlines the Medicare planning process for both advisors and their clients through a dedicated Medicare module. This space allows you to easily review key factors such as a client's traveling habits, health status, and premium risk tolerance, ensuring that Medicare filing decisions align with their unique needs.

In addition to assessing these important considerations, the module guides you through any factors that might lead to a non-standard enrollment period, with a helpful breakdown of the client's specific timeline. To further simplify the Medicare filing process, we've included a "Tips" tab that highlights important points to watch out for, such as no longer being able to contribute to an HSA once taking Medicare. Additional resources can be easily found within this tool such as direct links to the Social Security Administration and Medicare websites for easy access to information.

Our goal is to make Medicare decisions easier and more manageable for your clients, demystifying what can often seem like a complex process.

RightCapital Medicare Dashboard screenshot showing location, health, and risk considerations

RightCapital offers additional features to account for Medicare planning. Here's Alexus once again, explaining how to navigate and address the specific nuances that may arise in various client scenarios:

If we're looking to ensure that we are capturing healthcare costs accurately, or we're just looking at changing what's happening for the healthcare picture in RightCapital, we'd want to navigate to the profile section. We can either go to Blueprint and goals, but in this case I'm going to go to profile and goals, and we'd want to click into the annual retirement healthcare cost card. With the annual retirement healthcare cost card, this is going to be focusing on those retirement healthcare costs.

With this card, there are two main facets to how we incorporate this into the plan. The first field here, we're going to see a field for client and co-client, because we know it can be unique for each instance. The first field is going to address when this cost should start. So especially if we have the instance in which somebody is going to be delaying enrollment in Medicare, or these certain healthcare costs, we can change the timeframe as needed. But for me, the default is just retirement, so we can leave that as is.

And then from there we have three different options for how we'd indicate the cost for healthcare in retirement. Whether we just want to use the national average that's available — particularly useful for somebody that's younger, where we maybe don't know all the information yet. But in the instance where we're trying to have a little bit more of a detailed approach, especially when we're looking at those two different Medicare parts that are subject to IRMAA, or income related monthly adjustment amounts, that is when we would select detailed estimate.

With detailed estimate, we're going to see four fields populate. The first one is a pre-Medicare field. The pre-Medicare field is only going to be applicable if we have this cost starting prior to age 65. In the event that it's starting prior to age 65, we'd see this pre-Medicare cost kick in at that time. Once they turn 65, we then see Medicare part B and D premiums be automatically calculated based off of AGI. We are, of course, considering the two year lookback that's applicable for this calculation for Medicare Part D.

In the circumstance where we are not enrolling, or not going to be paying for Medicare Part D premiums, that is when we would select not enrolled, and we can change that selection. There are very few circumstances in which we are not enrolled, but most often, if we're not paying for it, we can make that indication from here.

We also have a field for out-of-pocket costs. So let's say we are enrolling in original Medicare part A, part B, and part D, and we also choose a MediGap coverage plan. We have that additional out-of-pocket cost to assist in paying for dental, vision, and some of those other aspects that's not necessarily covered fully by the original Medicare options. That is when the out-of-pocket cost comes into play. We'd enter what that cost is, on top of the Medicare part B and D premiums, in this field, and we'd hit save.

The third option here is to enter a customized dollar amount. So if we know exactly what they're going to be paying — let's say they're going to be looking at Part C, Medicare Advantage, and we know they're going to be paying $3,000 a year for that program — we'd enter that into this field right here.

I see a couple questions about how do we ensure that we're capturing those IRMAA adjustments that will be happening. This would be how we can account for some of those different Medicare part B and D adjustments.

Navigating Medicare decisions can be challenging and overwhelming, especially as clients face significant life transitions such as moving from the workforce into retirement. At this stage, securing the right healthcare coverage becomes a top priority. Post-Medicare filing is an important phase of a client’s life, so it is important to be able to capture the nuances of Medicare Part B and D premiums that can account for the impacts of your proposed plans.

RightCapital simplifies this process by helping advisors address questions about Medicare plans, guiding clients through their enrollment periods, and offering peace of mind when they need it most.