Medicare is divided into four parts, each covering different services at different costs. Most retirees need to understand all four — and make active enrollment decisions — to avoid coverage gaps, late enrollment penalties, and unexpected out-of-pocket expenses.

Part A covers hospital inpatient care, skilled nursing facility stays, hospice, and some home health care. Most people pay no premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years.

Part B covers outpatient care, doctor visits, preventive services, and medical equipment. The standard 2024 premium is $174.70/month — but higher-income retirees pay more through IRMAA surcharges that can push that premium to $594/month or higher.

Part D covers prescription drugs. Premiums vary by plan and income. Higher earners also pay IRMAA surcharges on Part D. Choosing the wrong plan — or missing enrollment — can cost thousands in penalties and coverage gaps.

Part C (Medicare Advantage) is an alternative to traditional Medicare offered by private insurers. It bundles Parts A, B, and usually D into one plan — often with lower premiums but narrower provider networks and potential coverage limitations.

Medicare does NOT cover long-term care, dental, vision, or hearing — four of the most significant healthcare expenses retirees face. These gaps require separate planning through supplemental insurance (Medigap), standalone dental/vision plans, or long-term care insurance.

Enrollment timing is critical. The Initial Enrollment Period is the 7-month window around your 65th birthday. Missing it without qualifying for a Special Enrollment Period results in permanent late enrollment penalties — 10% per year for Part B and 1% per month for Part D — added to your premiums for life.

• ✓Medicare starts at 65 — if you retire before then, you need a bridge plan to cover the gap.
• ✓Missing enrollment deadlines results in permanent premium penalties added to your costs for life.
• ✓Higher retirement income triggers IRMAA surcharges — your Medicare premiums are based on income from two years prior.
• ✓Medicare does not cover long-term care, dental, vision, or hearing — these require separate planning.
• ✓A healthy couple retiring at 65 can expect to spend $300,000+ on healthcare costs not covered by Medicare.

Part A — Hospital Insurance: Covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health. Most people pay $0 in premiums. Deductibles and coinsurance apply per benefit period.

Part B — Medical Insurance: Covers outpatient services, doctor visits, preventive care, lab work, and durable medical equipment. Standard premium: $174.70/month in 2024. Subject to IRMAA for higher-income retirees. Annual deductible plus 20% coinsurance applies after deductible is met.

Part C — Medicare Advantage: Private insurance alternative that replaces original Medicare. Often includes drug coverage and extras like dental and vision. Lower premiums but narrower networks. Requires careful comparison of plans in your area.

Part D — Prescription Drug Coverage: Standalone drug plans or included in Medicare Advantage. Premiums vary. Subject to IRMAA surcharges for higher earners. Late enrollment penalty: 1% of national base premium per month you went without coverage.

Medigap (Supplemental Insurance): Private policies that fill the gaps in original Medicare — covering deductibles, coinsurance, and copayments. Works alongside Parts A and B. Cannot be used with Medicare Advantage. Best purchased at age 65 during the guaranteed issue window before health conditions can affect eligibility.

• ✗Missing the Initial Enrollment Period at 65 — late enrollment penalties are permanent and add up significantly over time.
• ✗Assuming Medicare covers everything — dental, vision, hearing, and long-term care are all excluded and need separate plans.
• ✗Not planning for IRMAA — a large IRA withdrawal, Roth conversion, or asset sale can spike your income and trigger higher Medicare premiums two years later.
• ✗Retiring before 65 without a bridge healthcare plan — COBRA, marketplace coverage, or a spouse's plan must fill the gap until Medicare begins.
• ✗Waiting too long to purchase Medigap — after the guaranteed issue window at 65, insurers can deny coverage or charge higher premiums based on health conditions.

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