What does Part B cover?

Medicare Part B generally covers “medically necessary services” & preventive services

• Medically necessary services – services or supplies that are needed to diagnose or treat your medical condition & meet accepted standards of medical practice

• Preventive services – Health care to prevent illness (ex: flu) or detect it at an early stage when treatment is most likely to work best

What can I expect to pay for Part A and Part B (Original Medicare)?

Part A

• Usually you will not pay a monthly premium for Part A coverage (Hospital Insurance) if you or your spouse paid Medicare taxes while working.

Part B

• Most people will pay the standard Part B monthly premium amount of $174.70 in 2024 (a $9.80 increase from 2023)

  • If your modified adjusted gross income (MAGI) is above a certain amount, you may be required to pay an Income Related Monthly Adjustment Amount (IRMAA)

    • Medicare uses the MAGI from 2 years ago in the current year’s calculation

  • Many people already receiving Social Security the last couple of years have paid less than the Medicare standard premium.  This is because of the Hold-Harmless provision when the Part B premium increases more than their cost-of-living increase for Social Security benefits.

• You will pay the standard premium amount (or higher) if you meet 1 of 5 requirements this year

  • Enrolling in Part B for the first time

  • You don’t get Social Security Benefits

  • You are billed directly for Part B premiums

  • You have Medicare & Medicaid, and Medicaid pays your premiums

  • Your MAGI from 2 years ago is above a certain amount

  If you are in 1 of these 5 groups, here's what you'll pay:

Part B Deductible & Coinsurance

• The annual deductible for Part B is $240 in 2024. After this is met, you will typically pay 20% of the Medicare-approved amount for the following:

  • Most doctor visits

  • Most doctor services while you are a hospital inpatient

  • Outpatient therapy

  • Durable medical equipment

What does Part C (Medicare Advantage Plan) cover?

Part C is offered by private companies that contract with Medicare to provide you with all of your Part A & Part B benefits. Medicare Advantage Plans must cover all services that Original Medicare (Part A & Part B) covers, except hospice care, and is provided by private insurance companies.

• In most plans, you will need to use doctors, hospitals & other providers allowable under your specific plan or you will pay more or pay all of the costs

• The plan has the ability to choose not to cover the costs of services that are not medically necessary under Medicare

  • Check with your provider before you get the service if you are unsure whether a service is covered

A helpful resource to compare plan options in your area is the Medicare Plan Finder.

What does Part D (Prescription Drug Plan) cover?

Part D adds prescription drug coverage & is offered by insurance companies and other private companies approved by Medicare. Each Medicare Prescription Drug Plan has a unique list of covered medications. These medications are organized into different “tiers” based on the specific plan with each tier having a different cost.

What does Medicare Supplement Insurance (Medigap) cover?

A Medigap policy is sold by a private company & can help pay some health care costs not covered by Original Medicare (ex: coinsurance, deductibles, medical care when you travel outside the U.S.)

• You must have Medicare Part A and Part B in order to purchase a Medigap policy

How does Medicare work with other insurance?

When you have other health insurance/coverage, each is considered a “payer”. When there is more than one payer, “coordination of benefits” rules apply to decide which one pays first.

• Primary payer pays up to the limits of its coverage

• Secondary payer then pays if there are uncovered costs remaining that the primary insurer did not cover

  • The secondary payer may not pay all of these uncovered costs

• If your employer insurance is secondary, you may need to enroll in Medicare Part B before that insurance will pay anything

Are there any unique/special Circumstances?

Special rules apply to those with Railroad Retirement Board (RRB) benefits and/or disability benefits, in addition to other things. Contact your financial planner if you think you might have a special circumstance.

Check out these additional sources of information from The Center

• Navigating the Medicare Maze Webinar

• The Official National Medicare Handbook

• Hold-Harmless Provision Blog

What is a Health Savings Account (HSA)?

A health savings account, or HSA, is a type of account that can be created for the purpose of paying certain medical expenses in a tax-efficient manner.  To be eligible to contribute to an HSA, you must be covered by a qualified high deductible health insurance plan.

What are the advantages of using an HSA?

HSAs, when used properly, are tax advantaged vehicles for paying qualified medical expenses. Contributions to HSAs are tax-deductible and grow tax deferred (like an IRA). If the funds are used to pay for qualified medical expenses, distributions are tax-free (like a Roth IRA). Unlike a flexible spending account (FSA), the funds are not “use it or lose it”. Meaning, if dollars are left unused at year-end, the funds remain in your account for future use. The ‘triple tax savings’ of an HSA (deductible contributions, tax deferred growth, and tax free withdrawals) is unique to HSA plans:

How much can I contribute?

Contribution limits can change from year to year, www.IRS.gov publishes these changes as soon as they’re available.  An important item to be aware of – you are no longer eligible to contribute to an HSA once you turn 65.  Please see the helpful chart below that outlines contribution limits and deductible requirements for HSAs:

What if I withdraw funds for uses other than medical expenses?

If you make a withdrawal that is considered “non-qualified”, you will be subject to taxes and a 20% penalty on the amount you withdraw. As always, you should consult with your financial advisor, tax professional, or health account specialist to verify which expenses are considered "qualified medical expenses" (see link #1 below). It’s also important to note, you may use HSA funds to pay directly for certain insurance premiums; like Medicare, long-term care, COBRA insurance premiums.

What if I never need to use these funds for medical expenses?

Although the list of qualified medical expenses is quite extensive, if you have funds leftover after retirement that you haven’t used, a beneficial rule is in place.  If you have attained age 65, you are able to withdraw funds from your HSA for any reason and avoid the 20% penalty – even if the dollars aren’t used for medical expenses.  

Similar to a Traditional IRA or 401(k), however, distributions from the HSA would be taxable.  This presents a great opportunity for clients who have already contributed the maximum amount to their 401(k) or IRA plans for the year, to defer additional dollars into an HAS.  Doing so would allow one to reduce their current tax liability and save for future medical expenses in a tax-efficient manner.  

Some clients may even elect to accumulate dollars within their HSA plan and pay for medical expenses outside of the account.  The goal of this strategy is to preserve and grow the HSA balance as much as possible to take full advantage of its “triple tax advantage” attribute for medical expenses in retirement.