Annual Open Enrollment & Medicare Options in Retirement

As mentioned in our last episode, our firm is currently hard at work conducting our second annual strategy meetings with clients, serving real people just like you and doing important planning for their retirement, their income, taxes, investing, estate planning, and making important decisions such as Medicare enrollment and Social Security claiming. Therefore, we're bringing you another encore episode today in honor of Medicare Open Enrollment, which kicks off every year on October 15th and runs through December 7th.

Medicare Open Enrollment is the annual period where people with Medicare can make changes to their Medicare health plans and prescription drug coverage for the following year. Any changes you make during this period take effect January 1st of the next year. So if you make changes now, the new coverage won't start until January of 2026. During this open enrollment window, you can make changes to some of your Medicare options if needed, and this means you can switch between original Medicare, which is Parts A and B, and Medicare Advantage. Or you can sign up for a new Medicare Advantage or prescription drug plan, also known as Part D.

You can also join, switch or drop a Part D drug plan if you're on original Medicare. Now I want to clear up a major misconception that trips people up every single year. This fall Open Enrollment window is not a time to enroll in a Medicare supplement plan, also known as a Medigap plan, without any health questions asked, or sometimes we call that underwriting. You may still be able to buy a Medicare supplement policy to help cover your original Medicare costs to depending on the state you live in, but this is not a guarantee that they will. Issue you the coverage. Most people will have to answer health questions and they can be declined.

[00:01:58]
So if we can't do that, why does this period exist? Well, it's because Medicare Advantage and drug plans can make changes each year and they often do. Things like cost coverage, drug formularies, which is essentially the list of drugs that is covered by a plan and what providers and pharmacies are in the networks. So in other words, the plan you currently have may not be the same plan come January 1st when it comes to the prescription drug plans and the Medicare Advantage plans. If you're already on Medicare, here's what you need to do: Review the materials that your plans send you, such as the evidence of coverage and the annual notice of change Medicare insurance carriers must send send them to you by September 30th each year. So it's important not to throw these away. You want to read them, and if you can't find them, call your provider for another copy.

And if your current coverage still meets your needs and nothing's changing, then guess what? You don't have to do anything, which is great. That's less homework. But if your medications have changed, your doctors are dropping out of network, or your costs are going up, this is your window to see if you can make a move. You can Compare plans at Medicare.gov or call 1-800-Medicare, or you can even talk to an insurance agent if needed. And if you're looking at a new drug plan, part D, don't just look at the cost of the monthly premium. Be sure to look at the estimated total drug and premium cost because the lowest premium plan may not always be the cheapest, you have to factor in what they cover for certain drugs. In any case, do your homework because the decisions you make during these 54 days will impact your coverage for the entire next calendar year. Okay, without further ado, I'll send you in now for a refresher on your Medicare options in retirement.

[00:04:28]
Welcome to the Retired-ish podcast. As always, I'm your host, Cameron Valadez. Today we are shifting our focus away from investments and retirement income strategies and the like, and we are now going to laser in on one of the most important retirement planning topics, in my opinion, which is your healthcare in retirement. More specifically, I'm talking about Medicare, what it is, how it works, and how to sift through all of the alphabet soup that comes with it. If you've been confused by Medicare, you're not alone. It's a whole new world for most, ut the good news is I'm here to tell you some of what you need to know. So let's get to it.

In summary, Medicare is essentially a US federal health insurance program for people age 65 or older and people with certain disabilities or end stage renal disease. Even though Medicare is generally for those age 65 and older, it doesn't necessarily mean you need to have Medicare coverage once you reach age 65. This will depend entirely upon you and your potential spouse's situation.

So what does Medicare pay for? Well, Medicare pays for hospital stays, medical services, and some prescription drugs. But in general, people who receive Medicare must pay part of their health care costs on their own. And this is a common misconception in which many people think Medicare will pay for everything since they quote, unquote, paid into the system their entire working careers. This just isn't true. Another even more common misconception is that it pays for long term care which is also not true. But I guess that depends on your definition of what long term care is, since Medicare Part A can in fact pay for up to 100 days of what is known as skilled care, typically at a skilled nursing facility if certain conditions are met. Now, skilled care is not the same as long term care or something like assisted living in which assistance is needed to complete non medical daily tasks, and those are also referred to as custodial care. Skilled care is totally different. However, Medicare can help cover some transportation costs to things like doctor's appointments and even some preventative care services which you might actually receive while you're in a long term care facility of some sort. So if you are planning on Medicare to take care of a potentially financially devastating long term care need, you may want to revisit your strategy.

While Medicare doesn't cover everything, it usually ends up being a pretty good deal financially in retirement. Especially at a time when cash flow is typically tighter or more heavily scrutinized. Depending on the types of coverages you ultimately choose, your out of pocket medical expenses can actually be very predictable. This makes it easier to plan your cash flow in retirement by eliminating any possible health issues from the list of sudden and unpredictable emergency expenses.

[00:07:33]
So let me give you a rather quick rundown of the main components of Original Medicare and then we will jump into additional coverage options and some of the pros and cons of each.

The first pieces to understand are Medicare Part A and Medicare Part B, otherwise known as Original Medicare. Generally speaking, original Medicare covers 80% of health care costs after some deductibles, and you are generally responsible for covering the remaining 20%. Part A is for inpatient services, which are for things like emergency hospital visits and even hospice. Part B is for outpatient services which are services or supplies that are needed to diagnose or treat your medical condition, and also preventative services. Think doctor's visits, X rays, et cetera.

Medicare Parts A and B do not cover prescription drugs however. Those are covered separately under Part D, which is also called a PDP plan, short for prescription drug plan or prescription drug benefits can be potentially covered within what is called a Medicare Advantage plan should you choose to enroll in one. But more on Medicare Advantage plans in a minute.

We've already quickly covered the three main components to Medicare, but there are a couple things you should know about the options for additional benefits above and beyond Parts A and B. Let's start with what are called Medicare Advantage plans. These are sometimes referred to as Medicare Part C, but just know that they're the same thing. Medicare Advantage is essentially one of two options, if you will, in order to get additional benefits or coverage that goes above and beyond just parts A and B alone. However, a Medicare Advantage plan is not required whatsoever. The other option for additional coverage is a Medicare supplement plan, which is also sometimes called a Medigap plan. We will cover those next, but just know that Medigap and Medicare supplements are the same thing.

[00:09:41]
So what are Medicare Advantage plans? Medicare Advantage plans are health insurance plans offered by private insurance companies that are approved by Medicare. And just as a side note, just because they are quote unquote approved by Medicare doesn't mean that they're recommended by anybody in particular. This will depend entirely upon your situation, of course, and your specific needs. If you ever begin looking into Medicare Advantage plans or simply do a quick Google search, you will come to find that there are many, many different insurers and plans to choose from. The key to understand is that each one works a little differently. MA plans, which we will call them for short, are designed as managed care plans, kind of like HMOs and PPOs you might be used to hearing about. Medicare Advantage includes Medicare Parts A and B coverage, which is your hospital and your outpatient care, and they usually -- not always -- include Part D as well. Remember, that's your prescription drug coverage.

In summary, you enroll with a private insurance company that is approved by Medicare to manage most of your care, and Medicare Advantage plans are simply a method or product used to obtain that additional Medicare coverage. They're a pretty popular choice due to the fact that they essentially bundle a lot of your health coverage needs and some plans even market having a zero dollar premium. In fact that's getting more and more popular. You're probably seeing commercials and different ads for those kinds of plans all of the time. In most MA plans you need to use the plan specified doctors and hospitals which are referred to as in network providers. Otherwise you will pay more or possibly all of the costs of care. Medicare Advantage plans will cover at least everything that Medicare parts A and B cover. They have to. You get your part A and B coverage through your Medicare Advantage plan. This means that you're covered in an emergency situation or if you are in need of some sort of urgent care. And this is true even if you have to receive care in an area that's not covered under your MA plans network.

[00:11:59]
In addition to the part A and B coverage, these plans will also offer some additional benefits and cost structures. Some examples of those might be something like a gym membership, hearing aid coverage, or dental and vision coverage, for example - and none of these things are covered by original Medicare, which is just parts A and B alone. And of the many MA plan options that are out there to choose from, each will have different flavors of coverages and costs. Just to give you an idea, some of the key differences could be your overall benefits and coverages, the premiums you might pay, co-payments, the different deductibles you may have, and there's different deductibles for different pieces of the MA plans, your share of the costs of care -- this is also called coinsurance (that's the really important one because that is the one that can be somewhat catastrophic if something really bad were to happen to you), and what your out of pocket maximum is, which is basically the most you can be out of pocket before they take over all of the coverage.

Remember, these plans can charge different out of pocket costs and can each have different rules on how you get services. And the rules can change each year. A couple examples of those rules might be whether or not you need a referral to see a specialist, or whether or not you have to go to doctors, facilities or suppliers that belong to the plan for non emergency and non urgent care matters. There are also several instances where you may not want or need a Medicare Advantage plan. Some examples of those are you're not Medicare eligible, so you're not age 65, or you're not over age 65 and leaving your employer's plan. If you are still covered under your employer's group health plan, you likely don't need Medicare yet other than maybe part A, depending on the size of your current employer. Therefore, again, you won't need a Medicare Advantage plan either. You may choose to only have original Medicare, which is just parts A and B, which is your hospital, and your outpatient care may be paired with a separate prescription drug plan. Another comprehensive option is to enroll in parts A, B, D and a Medicare supplement plan.

[00:14:30]
Now to the stuff you really want to know: What does it cost? Costs of Medicare Advantage plans work differently depending on the particular plan and insurer, of course. You may pay a monthly premium for a Medicare Advantage plan that would be in addition to your part B premium. Many plans nowadays advertise having a $0 premium like I said before, but there are always trade offs to be aware of, typically in the form of cost sharing or what we call coinsurance. When enrolled in a Medicare Advantage plan, you will also still have to pay the annual deductible for part B , and your MA plan will likely have its own deductibles as well. Now, most MA plans have separate deductibles for both medical needs and pharmaceutical needs if it were to include the prescription drug coverage. In many plans, you will typically also make co-payments for covered services. Please note that your co-payments cannot be offset by the purchase of a Medicare supplement policy. Again, these are two different types of additional coverage options. You can't have both simultaneously -- it's one or the other. MA plans also have annual out of pocket maximums unlike Medicare parts A and B, which is a good thing. This means that once you reach your plan's maximum, you'll pay nothing more for covered services during the year.

Now, just as a heads up, monthly premiums that you pay for the plan do not count towards your annual out of pocket maximum. In fact, any costs associated with the outpatient prescription drug coverage that the plan might have also do not apply to the annual out of pocket maximum. They have their own out of pocket maximum. And hey, be careful with zero dollar premium plans. This is the hook the insurers are throwing in the ocean. That's why you see this advertised all over tv. When comparing plans. Don't always shop for the lowest premium, although they can definitely make sense for you, Medicare Advantage plans can also just as easily be a classic example of you get what you pay for. For example, if you find a plan with low or no premiums, that could mean that the out of pocket maximums are high or that the plan network includes only one facility to receive care. Those are just a couple of examples, but the point is, be careful. You should review the summary of benefits and evidence of coverage for each plan you are comparing.

[00:17:00]
Okay, moving right along. Let's dive into these Medicare supplement plans I keep talking about, also referred to as Medigap. This is essentially your second option for additional coverage that goes above and beyond just parts A and B alone. And again, you can't have an MA plan and a supplement plan at the same time. It's either or. These are your different options for additional coverage. Medicare supplement plans supplement your original Medicare benefits. Therefore, you have to have Medicare Parts A and B. The main purpose of the supplement plans is to fill the gap and supplement that 20% coinsurance that you're responsible for when it comes to parts A and B. They all cover the 20% under Part A, and most but not all cover the full 20% coinsurance with Part B. They will also cover the Part A annual deductible, which is $1,676 in 2025.

This type of coverage is desirable if you don't want to ever be surprised by a massive, unexpected out of pocket medical bill in retirement. Your health care costs become more predictable when you have one of these plans. As I mentioned earlier, supplement plans do not include prescription drugs. So if you go the supplement route you'll have to sign up for Part D on its own, which is actually really easy to do on Medicare.gov, they have a great system there online and it makes it very easy to compare plans and shop for them. I'll put a link to that in the show notes.

[00:18:41]
In addition, supplement plans also do not include the extra benefits like hearing or dental and vision coverage. This essentially means that if you think you need those coverages, then you'll have to get them directly from insurance carriers who offer them. There are many, so I wouldn't worry too much about that.

Most people think this is a hassle initially because they have all of these moving pieces. But what I found in practice is that when most people look into the costs and the benefits of some of these coverages, they find that it doesn't even make sense to have one or more of them -- I'm referencing the vision or dental coverage. Of course, this will obviously depend upon your individual situation and needs, but I urge you to look into the cost of those coverages and what you're getting for it. Don't just automatically think you need dental and vision coverage because you might have had that while you were working and were covered under an employer plan.

Supplement plans are also offered by private insurance companies but are subject to government regulation. And to make your head spin a little more, there are a total of eight Medicare supplement plans available regardless of what company. They're labeled by an alphabet soup and it starts with plan A, then B, D, G, K, L, M and N. There were 10 plans previously. However, plan F and C are no longer available for people that are new to Medicare as of January 2020. Each lettered plan has different levels of coverage. Some of those key differences are your overall benefits and coverages, premiums that you pay, deductibles, your share of the cost of care, again co-insurance. Although most plans pay the entire 20% of that co-insurance you would otherwise be responsible for, there are a couple that don't pay the entire cost. Your out of pocket maximum can be different. Part B, excess charge coverage, and whether or not foreign travel emergencies are covered, and to what extent.

[00:20:51]
The two supplement plans providing the most comprehensive coverage currently are plans F, G and N. Now I know I said that Plan F is no longer available to people new to Medicare, but if you had a Plan F prior to 2020, you're still able to keep it. There are some key differences to some of these plans that you need to make sure you know before deciding on a plan or comparing it to any other plan. There are some very nice and easy to read charts out there that compare these different lettered plans. In fact I'll include one in the episode Show Notes for today to help you out. One other important thing to understand is that a Plan C is a Plan C, and a Plan G is a Plan G, et cetera. It doesn't matter what private insurer you buy a particular plan from. The types of plans are the same from insurer to insurer and they have this exact same benefits.

So what's the difference between the different companies? Well, literally it all has to do with premium pricing and, what I would say is more importantly service. The service between the different insurance companies can vary dramatically. You might want to look up some reviews from some of the companies or talk to somebody you know that maybe has a Medicare supplement plan to see their experience with that company's service. Another difference that relates to premiums might be that a certain company offers a household discount, so if you and a potential spouse both sign up with that insurer, they might give you an even bigger discount on your premiums.

[00:22:31]
Here are some of the key reasons why someone would explore a supplement plan to begin with.

1. You get to choose. Your health plan doesn't choose. Your doctors, your hospitals, whenever and wherever you want in the entire USA as long as they accept Medicare, which most hospitals do. You don't have to worry about your doctor or hospital leaving a provider network and you never need a referral to see a specialist nor a prior authorization from the plan for a diagnostic procedure or hospitalization.
2. Your coverage is guaranteed renewable, meaning that if you pay the premiums in a timely manner, your benefits cannot be canceled or decreased. You will not be getting a notice that your health plan's benefits have changed or that the plan is terminating.
3. If you relocate anywhere in the USA or you travel often in retirement, you do not need to find a new health plan. All doctors, hospitals and labs in your new or your temporary winter residence remain available to you without any out of network charges.
4. You will have predictable costs, like I mentioned previously. The most popular supplement plans coordinate with Medicare to leave you with little or even no out of pocket costs for any and all Medicare covered medical and hospital services. You need only to pay your monthly premium and a rather small annual deductible for Part B if it's even used.
5. You can customize the drug benefits that best match your usage and your budget. That's essentially because you will be getting part D separately on its own and you will compare your and shop for the different prescription drug plans and some of them are even tied to the specific pharmacy that you like to visit.

This is unlike many MA health plans that actually bundle the outpatient prescription drug coverage with the medical and the surgical coverage. A supplement plan does not bundle the outpatient drug coverage together with the medical or surgical benefits.

[00:24:41]
Okay, so what are the costs of supplement plans? Well, supplement plans have a monthly premium that is paid in addition to your Part B premium and actually potential Part A premium if you don't have enough credits. It is also paid in addition to your Part D premium, which is your prescription drug plan. The costs depend on the method used by the various insurers, but the most common method nowadays by far is what is called the attained age rated method. This simply means that your initial pricing when you sign up for one of the supplement plans is based on your age at the time the policy is signed or issued.

As an example, I will reference the most popular and comprehensive plan available right now for most new people to Medicare, which would be Plan G. Let’s say the initial premium for Daniel, age 65, is $155 a month for a Plan G. Plan G will leave Daniel with little out of pocket for Part A or B services. The biggest expense other than his premiums would likely be his Part B annual deductible if he needed some sort of outpatient care during the year, which for 2025 is $257 for the entire year. Then we need to add in the Part B base monthly premium of $185 a , and a prescription drug plan of, let's just say $40 a month. That would be the plan premium and the average cost of the drugs over the entire year.

[00:26:20]
I also want to note that your part B and Part D premiums could be more, possibly much more if you're a high income earner while on Medicare. This is called the Income Related Monthly Adjustment Amount -- or IRMAA for short. We will dive deeper into this concept in a later episode. Most people however will pay the base premiums for Part B and Part D. Now we're sitting around $380 a month and a possible annual deductible of $257 for very comprehensive coverage with very predictable out of pocket expenses, which for the most part is the premiums and the annual deductible that I just mentioned. The only other possible variable costs would be additional dental and vision or hearing coverages or potential cost sharing with regards to your prescription drug coverage. For example, if you start using a different drug and that drug is very expensive compared to what you've taken in the past, you might have to kind of kick in a little bit more money to help pay for that drug. Even then, there is an out of pocket max for the drugs. In fact, Starting just in 2025, the prescription drug out of pocket max is capped at $2,000 per year, which is huge for those that have heavy prescription needs and possibly need to be taking the brand name version of drugs instead of the generics.

[00:27:53]
To put this in perspective, someone in their 30s currently paying for health insurance through, say, the health insurance marketplace can be paying $300 to $500 a month in premiums for fairly standard coverage with a several thousand dollars deductible. They'll also have to share costs on certain types of care, and they'll have a several thousand dollars out of pocket maximum as well. When you put it in that perspective, you can see that Medicare can be a pretty good deal financially. If we compare your two options that we've discussed, your Medicare Advantage and your supplements, Medicare Advantage actually looks very enticing because everything seems to be bundled together under one plan, which can be easy to manage and track, and you can have dental and vision and hearing care, and again, even a gym membership. And you might possibly pay nothing in premiums. So why not just automatically go with that? Well, I would say don't jump to conclusions just yet because this will depend on your specific circumstances.

Let's go over some of the comparisons between coverage options one more time. So first, most MA plans offer extra coverage such as vision, hearing, dental coverage, even gym memberships and meal delivery or transportation. Supplement plans do not offer these extra benefits. You can still get these benefits, but you'll have to go purchase them separately from the different carriers that offer them. However, it's important to understand that many extra dental and vision plans, for example, are oftentimes HMO type plans, which means they have networks. And the optometrist or dentist that you've gone to for years may not be in that particular network.

[00:29:40]
For example, you get a Medicare Advantage plan and it has dental included. You're excited. You go to see the dentist for preventative care. You hand them your insurance and they say, hey, guess what, we can't take this because the dentist is not in that network, so you want to be careful of that. Another comparison is having to see doctors and specialists in network on an MA plan could potentially be a problem. This can be a very big problem for those of you who are frequent travelers or plan to travel often in retirement or even for snowbirds. Another comparison could be that Medicare plans have bundled services. So it's basically one plan to make manage and that makes things very easy and very nice. You usually deal with one insurance company.

With supplements, you will have Medicare A and B. You'll have your supplement plan and likely a prescription drug plan, and then any other ancillary dental or vision or hearing insurance as well if you've purchased those separately. So this can be many different plans and there can be many different insurance companies that you have to reach out to which could provide different levels of service. Another comparison could be that in MA plans again, you need a referral to see a specialist and they usually have to be in a network. And in supplement plans you don't, you just don't even need a referral to begin with if you want to see a specialist. And while you remain healthy and do not frequently need care, an MA plan could result in significant savings due to the low or no monthly premium, especially when compared to a supplement plan which will have a premium and they're oftentimes higher than the Medicare Advantage premiums. However, I want to be sure you understand this. You'll want to plan for your future long term health and the different possibilities down the road. Don't necessarily look at your health right now and say, oh, okay, I'm really healthy, so I need bare minimum coverage. Remember, we're insuring against a catastrophic potential loss. How bad can costs get when something comes up? Not if, because something will happen. If and when you become very sick. Cancer, diabetes, other diseases. With an MA plan, you will likely begin to bear much higher and more unpredictable costs up to the out of pocket maximums. And this is due to having to pay part of the cost for covered services such as possible coinsurance, co-pays and deductibles. And last but not least, MA plans can choose not to cover the cost of services that aren't medically necessary under Medicare. There's actually a term for that and it's called accepted standards of medicine.

[00:32:25]
Okay. Phew. That was a lot. I know. And as you can tell, choosing between Medicare Advantage and a supplement plan requires you to do your research and know your health and the different possibilities that could arise down the road. This is a major part of your retirement plan. You want to do it right. Even though you can change your mind or it's possible to change coverage types down the road, you can run into obstacles when trying to do so and it can be very cumbersome. You will also need to do somewhat of a self analysis on the likelihood of needing extensive care down the road. One extremely important factor is to know what your pocketbook will look like in a potentially lengthy retirement. The purpose of insurance, again, is to insure the things that can devastate you financially, not necessarily for the little things. This is Risk Management 101.

And as a reminder, plan for longevity medicine has come a long way thus far and likely will not stop advancing. So that's why we have to plan for a lengthy retirement. And if you want to make the whole decision process easier, create a comprehensive financial plan that addresses all areas of your life or get someone to help you develop one. This is crucial to making a well informed decision, especially when it comes to your healthcare. Know what you can afford as far as premium and know if you can afford an emergency and how that may affect your other wants or needs in retirement.

[00:33:52]
That's it for today's show. If you haven't already, subscribe to and follow the show on your podcast app and make sure to find and subscribe to our brand new YouTube channel. That way you can get an alert each time we drop a new video to teach and show you important financial planning topics and top strategies. Just search for Planable Wealth. A link will also be included in the episode Show Notes. Also, be sure to check out our free monthly newsletter to get more useful information on retirement planning, investments and taxes once a month straight to your inbox. Usually in that newsletter, we dive deeper into some of the topics we discuss on the show as well as occasionally offer some guides and charts available for download. As always, you can find the links to the resources we have provided in the episode description right there on your podcast app. pr you can head over to retiredishpodcast.com/81. Thank you for tuning in and following along. See you next time on Retired-ish.

[00:34:11] Disclosures
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific tax issues with a qualified tax or legal advisor.

Cameron Valadez is a registered representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

Neither LPL Financial nor its registered representatives offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation.

Tax and accounting related services offered through Plan-It Business Services DBA Planable Wealth. Plan-It Business Services is a separate legal entity and not affiliated with LPL Financial. LPL Financial does not offer tax advice or tax and accounting related services.