Medicare Made Simple: Understanding the Basics and Upcoming Changes in 2025

Medicare Made Simple: Understanding the Basics and Upcoming Changes in 2025 – (0:00)

Carson Johnson: Welcome, everyone. Thank you all for joining us. We’ll give it just a minute while everyone gets connected.

Isn’t it a beautiful fall afternoon today? This is one of my favorite times of the year, with the leaves changing and the chance to enjoy the nicer weather. Hopefully, you all have some fun plans for the upcoming holidays.

Before we get started, just a couple of quick housekeeping items. There is a Q&A feature in Zoom located at the bottom of the Zoom application on your computer or whatever device you’re using. Please feel free to ask any questions throughout the session. I have my colleague, Daniel Ruske, here with me. He’s a Certified Financial Planner and one of our lead advisors. He’ll be monitoring the questions, and if there’s one that’s relevant to everyone, we’ll address it during our discussion today.

At the end of today’s presentation, there will also be a survey. Thank you to all of you who have been filling out these surveys. Your feedback has been incredibly helpful for us, both to gain insights and to gather suggestions on topics that are top of mind for you.

With that said, let me go ahead and introduce myself. For those of you who don’t know me, my name is Carson Johnson. I’m a Certified Financial Planner and one of the lead advisors here at Peterson Wealth Advisors.

Also joining me today is Shane Morris. Shane is a licensed Medicare agent and the owner of Medicare Advocates. He has over 13 years of experience advising retirees about Medicare and helping them find the plan that best suits their needs. Shane, thanks for joining us today and helping us tackle some of the more challenging questions.

Shane Morris: Thanks, Carson. I appreciate it. Couldn’t have said it better myself.

Carson Johnson: Perfect. Let’s talk about today’s agenda.

If my computer cooperates here… So, what we’ll cover today are some important Medicare enrollment tips, understanding the costs associated with Medicare and how to minimize them, and comparing the differences between Medicare Advantage and Medicare Supplement plans, which I know is a big question for many of you. We’ll also touch on some upcoming changes to Medicare that will take effect in 2025.

Medicare Basics (3:00)

I want to start today with a question: How many of you have ever tried assembling a piece of furniture from scratch?

That’s kind of a rhetorical question, as I’m sure many of you have experienced this at some point. Whether it was a bookshelf or a table, you opened the box, dumped out all the pieces, glanced at the instructions, and thought, “This might as well be in a different language!” So you decided to just figure it out yourself, thinking, “How hard can this be?”

But as you dive in, by the time you get to step four, you’re scratching your head thinking, “I’m missing some screws here. Something’s just not quite right.” What should have taken 30 minutes ends up taking hours of your day, right?

Navigating Medicare can feel like a similar experience. There are many pieces, and at first glance, it may seem simple from a big-picture perspective. But if you miss a couple of important details, it can cost you time, money, and even your health.

Today, I want to focus on creating that “Medicare assembly manual” for you. Shane and I will work together to help build a solid foundation for your healthcare in retirement and to help you avoid some of the common pitfalls we see.

When it comes to Medicare, most people give very little thought to healthcare costs while they are still working. Healthcare costs often aren’t factored into their retirement income plan. Additionally, some people mistakenly believe that Medicare will cover all of their healthcare costs. For those who are wondering, that couldn’t be further from the truth. There are deductibles, co-payments, and co-insurance costs that will fall on your shoulders unless you plan effectively.

The truth is, Medicare is not free, nor is it automatic. There is a lot of information out there about Medicare, but it is a massive program—just like Social Security. What’s unique about Medicare is that it varies from state to state and depending on where you’re located.

Common Medicare Questions Retirees Ask

We want to address some of the common pain points that retirees face. Here are a few examples of questions we often hear:

• When should I enroll in Medicare to avoid penalties?
• Should I enroll in Medicare if I’m still employed?
• Should I choose Original Medicare or a Medicare Advantage plan?
• What is not covered by Medicare?
• Will Medicare cover long-term care costs?

We’ll keep these questions in mind and address them throughout our discussion today.

So, let’s start with the basics.

Who is eligible for Medicare?

Medicare is available to anyone over the age of 65. I think most people are familiar with that part. This includes all U.S. citizens and legal residents who have lived in the U.S. continuously for at least five years.

There are some individuals under the age of 65 who can qualify for Medicare because they receive Social Security disability benefits. But for our discussion today, we’re going to focus on the main group—those over 65. If you are part of that smaller group, it’s especially important to work with someone who can help guide you through the planning process.

Understanding the Four Parts of Medicare

Many retirees don’t realize that Medicare is divided into four parts:

• Part A is hospital insurance, which covers inpatient hospital care, skilled nursing facility care, hospice, and so forth. Most people don’t have to pay a premium for this part, as long as you or your spouse have 10 years’ worth of work history paying into Medicare taxes. For most people, this part is free.
• Part B covers some of the costs of medical services, such as doctor visits, procedures, diagnostic tests, and other outpatient care. There is a premium associated with Part B, and it can be confusing for some retirees if they don’t fully understand how it works. We will cover that in more detail later.

Parts A and B together are known as Traditional or Original Medicare. One of the common myths we hear from retirees is that Parts A and B will cover all or most of their retirement healthcare expenses. Unfortunately, that’s not the case. You’ll still have copays, deductibles, prescription costs, and other out-of-pocket expenses.

In fact, according to the Center for Retirement Research at Boston College, they estimate that the average person covered by Medicare will pay more than $4,300 per year—or $8,600 per couple—annually for out-of-pocket expenses. So, there will be costs, and the way you cover those is through what’s called supplemental coverage from private insurance companies, which is where Parts C and D come into play.

• Part C, also known as Medicare Advantage, is an alternative way to receive Medicare benefits. I like to think of it as a “one-stop shop” that bundles all four parts into a single package offered by private insurers. It often includes prescription drug coverage, making it a convenient option for some retirees.
• Part D is strictly prescription drug coverage, offered by private insurers who contract with Medicare. Each prescription drug plan is different, depending on where you live and the providers in your area.

It’s important to consider getting a Part D plan early on, even if you don’t currently take any prescription drugs. We’ll discuss why that might be a smart decision in just a moment.

When it comes to enrolling in Medicare, many people end up increasing their retirement medical expenses right from the start. This often happens when retirees either don’t enroll in Medicare on time or fail to get the related insurance policies on time, which results in higher premiums and other unwanted consequences.

So, let’s understand some of the fundamentals of enrollment that you should be aware of. The biggest takeaway is that, unless you are covered by an employer group plan, you should enroll in Medicare as soon as you turn 65. I know this isn’t new information for most of you—age 65 is the milestone for enrolling.

However, some people get confused when they’re still on an employer plan and think, “Well, I shouldn’t enroll in Medicare because I’m covered by my employer’s insurance.” As with any rule of thumb, there are exceptions. For instance, when you turn 65, some employer plans will designate Medicare as your primary insurer, meaning your bills need to go through Medicare before the employer plan kicks in. If you don’t enroll in Medicare, your employer plan may refuse to pay any expenses until Medicare processes the claim first, leaving you responsible for the entire bill.

So, it’s crucial to review your employer plan carefully to understand how Medicare will coordinate with your existing coverage.

What if you don’t enroll in Medicare on time? What are the consequences?

I’ve narrowed it down to three main issues:

1. Late Enrollment Penalties: The longer you go without enrolling in Medicare, the higher the penalty can be, and it continues for the rest of your life. It’s a permanent increase, so it’s important to get this right from the start.
2. Uncovered Healthcare Expenses: As I mentioned earlier, Medicare is often the primary payer in many situations. If your employer plan expects you to be enrolled in Medicare and you’re not, your healthcare costs might not be covered at all, leaving you responsible for the entire bill.
3. Coordination Issues with Employer Plans: Not enrolling in Medicare on time can lead to unexpected coverage gaps if your employer plan doesn’t pay until Medicare pays first, which could create a costly oversight.

So, it’s essential to review your enrollment options and make sure everything is aligned, whether you are transitioning from an employer plan or signing up for Medicare directly at age 65.

I have a quick story about this. I had a client who believed that since he was covered by an employer plan, there was no need to enroll in Medicare—at least not in all parts of it. He was still working, and last year, he had an accident that required a trip to the emergency room.

After his visit, when they were sorting out the insurance details, the hospital informed him that his employer plan was refusing to cover some of the hospital expenses. The reason? The plan indicated that since he was now eligible for Medicare, Medicare should be the primary payer for his hospital expenses.

As a result, he ended up with a much larger hospital bill than he had anticipated. If he had enrolled in just Part A (hospital insurance) and not necessarily the other parts of Medicare, this issue could have been avoided.

So, the takeaway is: be sure you understand how your employer plan works and how it coordinates with Medicare.

Shane, do you have any other insights to add on that point?

Shane Morris: No, I think you covered it really well. It’s unfortunate when this happens. I had a similar case with a farmer in southern Utah. He decided not to enroll in a prescription drug plan because he wasn’t taking any medications at the time. Five years later, I met with him, and he faced a five-year penalty. He was shocked, saying, “You mean to tell me the government can penalize me even though I didn’t need any prescriptions?” It was a tough conversation, but yes, that’s exactly what happens. It’s definitely a complicated process, like assembling that piece of furniture we mentioned earlier.

Carson Johnson: Exactly. We also had a good question come in just now: “Can you explain the enrollment penalties further? What are the penalties if a person doesn’t enroll in Medicare Part A?”

If Medicare Part A is free for you, there’s no penalty for not enrolling on time. However, there are late enrollment penalties for Part B and Part D—which cover medical costs and prescription drugs, respectively. Shane, correct me if I’m wrong, but I believe the penalty is 10% of the premium amount for every year that enrollment is delayed. Is that right?

Shane Morris: Yes, that’s correct. It’s a 10% annual penalty on the premium for each year you delay enrolling in Part B or Part D. It’s even broken down into a monthly percentage, like 1% per month. But the key point is that this penalty is permanent—it’s not a one-time fee. You’ll pay it for the rest of your life.

That’s the surprising part for many people. They think it’s just a one-time fee, but it’s not. Unfortunately, I haven’t seen anyone successfully appeal this penalty. Once it’s applied, it’s very hard to get it overturned. I’ve never seen a case where they’ve waived that penalty, no matter the circumstances.

Carson Johnson: Good to know. Another consequence of not enrolling on time is that your private insurance options may become limited. If you’re in poor health or have a pre-existing condition, insurance providers that coordinate with Medicare have to accept you during your initial enrollment period, even if you have health issues. But if you don’t enroll during the appropriate time and try to apply for supplemental coverage later, you may be denied or charged a higher premium due to those conditions.

So, it’s essential to enroll at the right time to avoid these complications.

Understanding When to Enroll in Medicare (15:38)

Let’s talk about when it’s the appropriate time to enroll. There are essentially three key enrollment periods you need to be aware of to avoid these penalties.

Initial Enrollment Period

This period is for those approaching age 65. It’s a seven-month window that includes the three months before you turn 65, the month you turn 65, and three months after. The timing of when you enroll within this period determines when your coverage begins. If you enroll before the month you turn 65, your coverage will begin in the month you turn 65. If you enroll after your 65th birthday, your coverage will be delayed accordingly.

One nuance to keep in mind is if your birthday falls on the first day of the month. In that case, everything shifts one month earlier. For example, if you turn 65 on November 1st, your Medicare start date is actually in October. The three-month enrollment period before and after will adjust accordingly. So, just be mindful of that if your birthday is on the first of the month.

Special Enrollment Period

This is for those who are still working and covered by an employer plan past the age of 65. You have an eight-month window to enroll in Medicare once your employment or coverage ends, whichever happens first.

General Enrollment Period

If you miss the initial or special enrollment periods, the general enrollment period runs from January 1st to March 31st each year. However, coverage won’t start until July 1st of that year, and you may incur penalties.

Should You Enroll in Medicare if You’re Still Working?

Another question we often hear is: Should I enroll in Medicare, or parts of Medicare, if I’m still working and covered by an employer plan?

Generally, yes. Most people should enroll in Part A if it’s free, as it provides additional coverage and doesn’t interfere with most employer plans. However, check with your HR or benefits office to see how your plan specifically coordinates with Medicare. There may be exceptions, and it’s best to understand those details before making a decision.

One exception to that rule, which is important to be aware of, is if your employer plan is a high-deductible plan paired with an HSA (Health Savings Account) that you are actively contributing to. In this case, you may not want to enroll in Medicare right away, or you may want to stop your HSA contributions. The reason is that once you enroll in Medicare, you can no longer contribute to your HSA. There are penalties associated with contributing to an HSA while enrolled in Medicare, so it’s a critical caveat to keep in mind.

The second enrollment period is called the Special Enrollment Period. This period typically applies after age 65 for anyone who is still covered by an employer plan and decides to retire. There are actually separate special enrollment periods for Part B and Part D (prescription drug coverage).

• For Part B, the special enrollment period is a seven-month window that starts when your employer group coverage ends.
• For Part D, the window is much shorter—only 63 days after your coverage ends.

As a best practice, make sure you enroll in time and allow yourself enough lead time to get your coverage in place. You don’t want to be scrambling at the last minute or risk missing the deadlines.

I mentioned earlier that there might be a situation where it makes sense to get a prescription drug plan even if you currently don’t take any prescription medications. The reason for this is to avoid late enrollment penalties specific to prescription drug coverage. There might be a low-cost or even zero-premium prescription drug plan available that you can sign up for just to maintain coverage and avoid future penalties. It might not provide the best coverage initially, but it protects you from future expenses. Later, you can always switch to a more comprehensive plan if needed.

The last enrollment period is for those who don’t qualify for the first two periods. This is known as the General Enrollment Period, which occurs every year from January 1st to March 31st, with coverage beginning the month after you enroll.

So, to recap, these are the three enrollment periods you need to be aware of as you navigate Medicare.

Daniel Ruske: Carson, if you have a moment, I’d like to ask a question that I think would be extremely helpful to address.

Carson Johnson: Absolutely, go ahead.

Daniel Ruske: The question is: “Is it best to sign up for everything at age 65 to avoid penalties, even if you’re still working?”

Carson Johnson: Great question. And Shane, feel free to share your thoughts on this as well. The answer is: it depends. Each situation is unique depending on your employer plan and your personal circumstances.

If your employer plan provides good coverage, including doctor visits and other medical services, and Part A is free for you, you might not want to enroll in Part B because you already have sufficient coverage through your employer. In that scenario, you could enroll in just Part A and wait to pick up the other parts of Medicare later when your employer plan ends and you retire.

I wouldn’t recommend enrolling in everything at age 65 if you’re still working and have good coverage, as you might end up paying the Part B premium unnecessarily. It’s all about evaluating your current coverage and how it coordinates with Medicare. Shane, any additional thoughts?

Shane Morris: That’s exactly right. Everyone’s situation is unique, so it’s not a one-size-fits-all approach. We need to compare your current plan to Medicare’s options. Some people continue working just for health insurance, and once they realize they can have comparable or even better coverage through Medicare, they might choose to retire earlier.

Another factor is the cost. If the cost of Medicare’s Part B premium is less than what you’re paying through your employer plan and the coverage is better, it might make sense to switch to Medicare, even if you continue working. But if your employer plan is more affordable, it’s probably best to delay enrolling in Part B until you leave your employer’s coverage.

Additionally, if you have a spouse who still needs coverage, staying on your employer plan might be necessary to ensure your spouse is covered. Switching to Medicare prematurely might leave your spouse without adequate insurance, which is a factor that’s often overlooked. There are so many variables to consider, and it really comes down to your specific circumstances.

Carson Johnson: Some of you might also be eligible for retiree medical benefits through your employer plan, which adds another layer to the decision-making process. We won’t dive too deep into that today since it’s a complex topic on its own. However, I do have a one-page document that highlights some key considerations if you have retiree medical benefits. If that applies to you, feel free to send us an email, and we’d be happy to send that resource over.

To wrap up, here are a couple of key points to remember about Medicare enrollment:

1. Make sure you avoid late enrollment penalties by signing up during the appropriate enrollment period for your situation.
2. Avoid gaps in coverage by planning ahead and being proactive with your enrollment timing.

You definitely don’t want a situation where your employer coverage ends, and then you have a month or two gap before your Medicare coverage kicks in, right? If you have that gap and something happens during that period, you could be entirely responsible for those medical costs. So, plan ahead and make sure that your coverage overlaps to avoid any issues.

How Do You Sign Up for Medicare?

Signing up for Medicare is fairly straightforward. There are a couple of different options:

1. Online: You can go to www.medicare.gov, click on “Get Started,” and it will walk you through the online application process. It’s pretty easy to complete.
2. Phone or In-Person: Some of you may prefer not to use technology or deal with the hassle of online forms. In that case, you can call Social Security and schedule an appointment to do it over the phone, or you can go to a local Social Security office and complete your application in person.
3. Through an Agent: You can also work with an agent who can help you with the application process.

Enrolling in Medicare (24:34)

We’ve talked about enrolling in Original Medicare. The next step is to make sure you have the right supplemental coverage. Let’s go through a two-step process to ensure you have the appropriate coverage:

Step 1: Enroll in Original Medicare.

• Part A: This is hospital insurance, and it’s usually free for most people.
• Part B: This covers medical services, but it has a premium associated with it, which is something worth discussing.

I’ve included a table that outlines the Part B premiums. Note that your premiums for both Part B and Part D (prescription drug coverage) are determined by your income. Many people don’t realize that the amount of income you report on your taxes determines what you’ll pay in premiums.

For example, your 2024 Part B and D premiums are based on your income reported in 2022, using a two-year lookback. Individuals with income under $103,000, or married couples filing jointly with income under $206,000, will pay the standard monthly premium of $174.70 per person.

These premiums typically adjust for inflation, and we should have the updated numbers for 2025 soon.

Medicare Premium Surcharges

You’ll notice there are different income thresholds, and Medicare refers to these as “surcharges.” The higher your income, the higher your monthly premium will be. In some cases, it can be as high as $594 per month per person if you’re in the highest income bracket.

Since your Medicare premiums are based on your income, it’s important to be mindful of any financial events that could cause your income to increase and push you into a higher premium bracket. This includes:

• Roth Conversions
• Selling investments that generate capital gains
• Selling an investment property

All these events could increase your taxable income and consequently raise your Medicare premiums.

Requesting a Premium Adjustment

If your Medicare premiums are based on your income from two years prior, you might be thinking, “That’s not fair if I’m currently earning much less!” This is especially true for those who are in their highest earning years just before retirement. Fortunately, Medicare recognizes this and offers a relief process.

You can file a form called SSA-44 to request that Medicare reduce your premiums due to a qualifying life-changing event, such as:

1. Marriage
2. Divorce
3. Death of a spouse
4. Work Stoppage (retirement)
5. Work reduction
6. Loss of income-producing property
7. Loss of pension income
8. Employer settlement payment

If you experience one of these events—especially retirement—you can request that Medicare use your estimated income going forward, which is typically lower after you retire. This will potentially lower your Medicare premiums.

Example: I had a client last year who was an airline pilot for Delta. During the last few years of his career, he was earning over $750,000 annually. When he retired, he received a letter from Medicare stating that his premiums would be $594 per month per person for both him and his wife.

We talked to him about the SSA-44 form, filled it out, and estimated what his income would be now that he was retired, which was significantly lower. Medicare accepted the adjustment, and his premiums were reduced accordingly.

Keep in mind that these are estimates, so if your income ends up being higher than expected, Medicare will catch that and adjust your premiums again. But for most people, this is a great way to save on premiums by simply filling out the form.

We were able to reduce his premiums from $594 per month per person down to $244.60 per month per person. This resulted in savings of around $8,000 just by filling out a form.

If you are in your highest earning years prior to retirement, like this individual, definitely take advantage of this form—it can be very beneficial.

Moving on to the next question: What does Medicare not cover? If you were to read the entire Medicare pamphlet, there are over 20 pages that detail what Medicare covers, but only one page that outlines what it doesn’t.

I’ve highlighted a few services that Medicare doesn’t cover here. Some of these, like cosmetic surgery or acupuncture, might not be of concern. However, there are other services that you may find important, such as dental care, vision care, and hearing aids.

From the beginning of retirement, these services might be ones you want coverage for. This is where supplemental insurance comes into play, covering those additional services not covered by Medicare.

Another important point: Medicare does not cover care delivered outside of the United States. If you’re like many of our clients—members of the Church of Jesus Christ of Latter-day Saints—who plan to serve a senior mission, you should be aware that Medicare doesn’t provide international coverage.

The Church provides its own coverage for senior missionaries. Therefore, you may need to pause your Medicare plan while serving internationally and switch to the Church’s insurance. Then, when you return home, you can re-enroll in Medicare. The Church does assist with guidance on this process, but it’s helpful to work with an advisor or agent, like Shane, who knows how to navigate pausing and reactivating Medicare.

Finally, there’s the topic of long-term care. There’s a common misconception that Medicare serves as a long-term care plan. Unfortunately, that’s not true. Medicare may provide limited skilled nursing facility coverage, but it’s not a comprehensive long-term care plan. Shane could provide more details, but I would recommend having a separate plan in place to cover potential long-term care needs as part of your retirement strategy.

Medicare and Private Insurance (32:14)

Now that we’ve discussed Step One—obtaining Original Medicare—let’s move on to Step Two, which involves private insurance options.

There are two primary options for obtaining private insurance or supplemental coverage. The first option is a Medicare Supplement Plan, also known as a Medigap policy. The purpose of these plans is to help cover some of the out-of-pocket costs or services not paid for by Medicare.

According to a recent 2022 study, Medicare only covers about two-thirds of medical expenses, leaving retirees responsible for the remaining third. This is where Medigap policies become essential.

If you choose a Medigap policy, you would also need to get a separate prescription drug plan (Part D) to cover your medication costs.

The second option is to enroll in a Medicare Advantage Plan. As discussed earlier, these plans act as a one-stop-shop by bundling all the different parts of Medicare into a single package. Medicare Advantage Plans vary by state, usually include prescription drug coverage, and may offer additional benefits like vision, dental, and gym memberships.

Medicare Advantage can simplify the Medicare process, but it’s not always the best fit. To provide some perspective, a recent AARP study found that a little over 50% of Medicare participants are on an Advantage Plan. This indicates it’s about a 50-50 decision—many people choose Medicare Advantage, while many opt for Medigap. The best option really depends on your unique situation.

I’ve prepared a slide summarizing the differences between the two plans. I’ll highlight a few of the main points, and then I’ll ask Shane to share his experience on this topic.

First, Medicare Supplement Plans have no network restrictions, meaning you can receive coverage across the United States without needing to see a specific doctor or physician. In contrast, Medicare Advantage Plans do have network restrictions, and you may need referrals to visit certain specialists.

Medicare Advantage Plans typically have lower monthly premiums, making them more cost-effective, but they might not provide the same comprehensive coverage as a Supplement Plan.

With a Medicare Supplement Plan, you might get more comprehensive coverage compared to a Medicare Advantage Plan. However, Medicare Advantage Plans are generally more cost-effective and include additional benefits like gym memberships, dental, and vision coverage.

Medicare Advantage Plans typically bundle prescription drug coverage into the plan. In contrast, with a Supplement Plan, you would need to purchase a separate Part D plan for prescription drug coverage, which can involve a bit more administrative work.

When deciding between the two, consider your specific needs. If you’re a retiree with chronic health conditions and high annual medical expenses, a Supplement Plan might be a better choice because it offers more comprehensive coverage. On the other hand, if you’re a retiree who plans to travel frequently, having the peace of mind that a Supplement Plan provides—due to the lack of network restrictions—might make it worth the extra cost.

For younger retirees who are relatively healthy and more concerned about managing cash flow, a Medicare Advantage Plan could be a good fit because of its lower premiums and additional benefits, which might be sufficient for your needs.

Shane, could you share some insights or best practices you’ve seen with clients facing this decision?

Shane Morris: It’s not always a straightforward choice. If someone is value-driven and wants to get the most out of their money, a Medicare Advantage Plan might be the better option. But if someone is looking for more flexibility and wants the best coverage available, I always recommend a Medicare Supplement Plan with a separate Part D plan. For extra benefits not covered, they can also add a separate dental, vision, and hearing plan. That’s what I’d consider the “Cadillac version” of Medicare.

Now, the cost for a Supplement Plan may be higher, but if affordability isn’t an issue, it could be the better choice for individuals who prioritize having more options and comprehensive coverage.

If someone wants the freedom to go to a hospital in any state or to have access to more doctors without network restrictions, a Supplement Plan is ideal. We often discuss this with clients who travel frequently. In such cases, the Supplement Plan makes more sense than a Medicare Advantage Plan.

Each person’s situation is unique, so it’s crucial to consider all factors to ensure they get the coverage they need without unnecessary complications.

Daniel Ruske: Shane, I have a couple of questions here that are often asked: Can you switch between Supplement and Advantage Plans from year to year?

Shane Morris: Yes, but there are a few conditions. When you initially turn 65 or during your first enrollment period, you can choose a Medicare Supplement or Medicare Advantage Plan without any medical underwriting. This initial period is called a “guaranteed issue” period, which also applies when you retire, regardless of age. However, if you’re past this period, switching to a Medicare Supplement Plan later may require you to answer medical questions, and you might not qualify.

You can switch to a Medicare Advantage Plan at any time during the annual enrollment period, but going back to a Supplement Plan could be more challenging depending on your health situation.

Carson Johnson: Okay, now I’d like to wrap up by addressing some of the significant upcoming changes to Medicare next year.

Some of you may already be familiar with this, but a little background: In 2022, the Inflation Reduction Act was passed, which introduced several important changes to Medicare, particularly around prescription drug plans.

One of the biggest changes is the new $2,000 out-of-pocket limit for prescription medications. This is a landmark change for Medicare, as it’s the first time there has been a cap on prescription drug costs. Previously, Medicare included a “donut hole” in its prescription coverage, which meant there was a gap where beneficiaries were responsible for a significant portion of their drug costs after reaching a certain threshold.

Imagine a donut—there’s a large hole in the middle. Medicare would cover a portion of prescription costs up to a certain amount, and then there was a gap where you’d be responsible for all expenses. Once you hit a catastrophic limit, Medicare would kick back in and cover more of the costs.

With the new out-of-pocket limit, there’s no more “donut hole,” which is a significant win for retirees.

Additionally, there’s now a monthly payment option for prescription drug plans. I won’t dive too deeply into this, but it does provide flexibility for managing drug costs if they arise.

Another update is that Medicare Advantage plans will now be required to send out a mid-year statement detailing any unused benefits. So, if you’re enrolled in an Advantage Plan and not utilizing benefits like dental, vision, or hearing aids, you’ll receive a statement notifying you of these unused benefits.

One of the most significant changes is that drug plans and manufacturers will be required to cover a larger share of the costs, rather than relying solely on the Medicare program.

You might be thinking, “These changes sound great, Carson!” But you may also be wondering, “What’s the catch? Who’s going to pay for these increased costs?”

When insurance companies are required to cover more costs, they often respond by making adjustments. This could come in the form of increased premiums, higher co-payments, or reductions in other services that are currently available.

These adjustments can also appear in other ways, such as reduced benefits. For example, insurance companies might dial back on optional services, like cosmetic surgery coverage, or narrow the network of providers available to you.

I need to provide a quick disclosure: Insurance companies are still working through how these additional requirements will impact them. Depending on your location and the companies in your area, there might be minimal changes or there could be significant shifts in coverage. It really depends on your specific situation and the local plans available.

Shane, do you have any additional insights on what to expect next year?

Shane Morris: Yes, these changes are real, and companies are already reacting. Many plans for 2025, especially Medicare Advantage Plans, are now adding prescription deductibles up to the $590 maximum allowed. This will be a new change for many states where deductibles didn’t exist before, and it could catch some people off guard.

For example, someone expecting a typical tier three drug cost of $45 might be surprised in January when they see a $450 deductible added, making their total out-of-pocket $500 for that prescription. This could be a shock for those not expecting it.

These adjustments are being made as companies look to recoup some of the costs we’ve discussed, and it’s creating a lot of changes across the Medicare landscape.

Some companies have even exited counties or states entirely, reducing their footprint to manage these new costs more effectively. There are also a few companies in the news facing financial challenges and scaling back their plans, which will impact some beneficiaries.

It’s a dynamic environment right now, and everyone is trying to adjust to these major changes coming next year.

Working with a Medicare Agent (44:51)

Carson Johnson: Thank you, Shane. Just to wrap up, as you can see, Medicare planning can be quite complex. It’s like assembling furniture from scratch—you have a lot of different pieces and steps to navigate.

You could handle it all on your own, but I suggest working with an agent. Agents don’t charge you; they’re paid by the insurance carriers, so there’s no out-of-pocket cost to you. The key is finding an agent who has your best interests in mind.

Some agents are restricted to selling only certain policies, while others, like Shane, can lay out all your options. This is crucial because having a comprehensive view of all the plans available helps ensure you choose the right one for your needs.

A good Medicare agent is familiar with common issues and can resolve them more efficiently. They can also help you as you transition through different plans over the years, making the process smoother.

Let’s summarize the key takeaways from today:

1. Enroll in Medicare on time—make sure you do it during the appropriate enrollment period.
2. Shop carefully for private insurance—whether you choose a Supplement Plan or a Medicare Advantage Plan, evaluate your needs and compare options.
3. Even if you’re satisfied with your current Medicare plan, it’s always a good idea to review your plan documents for any upcoming changes. There could be unexpected cost increases or reduced benefits that might surprise you.
4. Lastly, estimate your healthcare costs for the coming year and factor them into your overall plan. Consider working with an agent who can help navigate any potential changes.

That wraps up the presentation portion. Before we dive into questions, I want to address a common inquiry: Is there a way to share the retirement book we’ve written with others?

If you know someone who might benefit from our book, which covers a simple investment plan, retirement planning, and tax strategies, feel free to reach out to us at marketing@petersonwealth.com. You can provide us with the recipient’s name and address, and we’ll send it directly to them. Alternatively, if you’d like to hand it out yourself, just provide your own address, and we’ll mail it to you.

Thank you! I’ll leave our contact information at the end of this session, so you can reach out to either Shane or myself if you have specific questions related to your unique situation. Now, we’ll jump into some of the questions that have been coming in.

Medicare Question & Answer (47:20)

Daniel Ruske: There have been a lot of great questions so far. I’ve done my best to answer them, but for some, I might need Shane’s input or your expertise. Let’s go through a few of them.

One question from Kevin is about the pros and cons of leaving a Medicare Advantage Plan at age 70 for a group employer plan as a new hire. Essentially, Kevin is 70, has been on Medicare, and is now considering moving to an employer plan.

Carson Johnson: Shane, I’ll let you take this one since you see these scenarios more frequently.

Shane Morris: Sure, that’s a good question. It’s more common to see the reverse—moving from an employer plan to Medicare—but going from Medicare to an employer plan does happen. It really comes down to comparing costs and benefits. You need to evaluate what the employer plan offers compared to what Medicare Advantage currently covers to see where the most value is.

If the employer plan makes more sense, you could switch to that and possibly keep just Medicare Part A (hospital insurance) while pausing Part B to avoid duplicating coverage. But it depends on the value comparison. Sometimes, staying on Medicare Advantage is a better option. It’s really a case-by-case decision.

Daniel Ruske: Great. Another common question we get is: When is the best time to fill out the SSA-44 (the Life-Changing Event Form) relative to the date of retirement?

Carson Johnson: My recommendation is to wait until you receive a notice from Medicare indicating that your premiums are higher due to previous income levels. If you submit the form too early, Medicare might be confused as to why you’re submitting it, which could lead to delays.

So, wait until you get a notice, then send in the SSA-44. You generally don’t need to file it every year unless your income changes. However, keep an eye on your premiums, and if they don’t adjust as expected, go ahead and re-submit the form.

Daniel Ruske: Here’s another good one: Is there any benefit to choosing a Medicare Advantage or Supplement Plan if someone spends over $20,000 a year on medications, given the new $2,000 out-of-pocket limit?

Shane Morris: The new $2,000 cap applies whether you’re on a Supplement Plan with a standalone Part D or a Medicare Advantage Plan that includes drug coverage. Since the maximum is the same in both cases, there’s no distinct advantage to either plan for someone with high medication costs.

Daniel Ruske: Another question came in: If you’re serving an international mission when you turn 65, can you enroll in Medicare and immediately pause it once you’re covered by the Church’s insurance?

Carson Johnson: Yes, you can do that, but the real question is whether it makes sense to enroll at all. The Church’s insurance is considered “creditable coverage,” similar to an employer plan, so you’re protected from Medicare penalties if you delay enrollment.

If there’s a gap between ending your current employer coverage and the start of your mission, enrolling in Medicare might make sense as a temporary solution. Otherwise, you can wait to enroll until you return from your mission.

If you’re leaving your employer plan and going directly into a mission, I would suggest not enrolling in Medicare at all and simply enrolling once you return. The Church’s insurance qualifies as credible coverage, so you won’t be subject to penalties. When you’re about three months away from returning home, you can start the Medicare enrollment process so you’re ready to go when you get back.

Daniel Ruske: Now, Shane, here’s a question for you: What if I’m enrolled in Part A and I’m making HSA contributions? What should I do to avoid penalties? Can I unenroll from Part A?

Shane Morris: Once you’re enrolled in Part A, it can be difficult to disenroll, but it is possible. You would need to show proof of alternative coverage and request to be disenrolled from Part A. Ideally, if you’re aware of the situation ahead of time, it’s best not to enroll in Part A until after you’ve stopped making HSA contributions.

If you’ve already contributed to your HSA while enrolled in Part A, you’ll need to remove those contributions. It can be a bit of a hassle, but it’s necessary to avoid penalties.

Daniel Ruske: Here’s a question from Chuck: Is there any problem returning to Original Medicare after being on a Medicare Advantage Plan?

Shane Morris: Yes, you can switch back to Original Medicare, but there are specific times of the year to do so. The primary period is during the Annual Enrollment Period from October 15th to December 7th. There’s also a Medicare Advantage Open Enrollment Period from January 1st to March 31st.

Before making the switch, make sure to weigh the pros and cons of returning to Original Medicare. Sometimes, it makes sense, such as if you’re entering hospice care or have unique healthcare needs. In other situations, staying with a Medicare Advantage Plan might be more beneficial.

Daniel Ruske: That wraps up our questions. Thank you all so much for your participation.

Carson Johnson: Thanks, Shane, and thanks everyone for joining us today. We appreciate you all for participating and asking great questions. If you have any additional questions, feel free to reach out to us directly.

Shane Morris: Thanks, guys.