59 Years of Medicare: Five Medicare Facts Wealth Managers Need To Know

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Happy 59th Birthday, Medicare! 

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That’s right, Medicare, the federal, national health insurance plan signed into law by President Lyndon B. Johnson in 1965, is nearly old enough to start withdrawing from its retirement account without penalty. 

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Medicare has changed a lot since its inception, but I’m not here to share fun facts about the history of Medicare. Instead, here are five facts wealth managers need to know to help their clients prepare for and optimize their Medicare coverage so you can show clients that you are taking a holistic view of everywhere they spend money. 

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1. Income plays a role in Medicare

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Let’s start with an easy one. The income-related monthly adjustment amount (IRMAA) is based on: 

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• Your client’s tax filing status. 
• The current year’s adjustment amount. 
• Your client’s modified adjusted gross income from two years prior. 

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We don’t yet know what IRMAA will be for 2025. For 2024, the standard base monthly premium for Part B is $174.70. For Part D, clients will pay the chosen plan’s premium, plus a potential income adjustment of up to $81. To calculate your client’s 2024 IRMAA, which is added to these base premiums, the Social Security Administration (SSA) will look at their modified adjusted gross income from 2022. Their Medicare premiums and IRMAA determination are sent to them annually in the fall, typically in November. Below is a table of expected total costs, which include both the base amount and IRMAA charge:

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Why wealth managers need to know this: These costs impact your client’s financial plan, so it’s better to be proactive and plan for them in advance. Clients mostly appreciate the advanced notice, instead of being surprised by the notice in the fall, even in situations where they can afford the increased premiums. You can even take things a few steps forward and help them appeal their IRMAA determination if they’ve had a qualifying life-changing event, like retirement, since 2022. 

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2. Original Medicare doesn’t cover 100% of beneficiaries' needs

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Original Medicare is made up of Parts A and B, which cover 80% of the costs for most medical services. This means that beneficiaries are responsible for the remaining 20%. If the beneficiary needs medical treatment, they’ll be responsible for 20% of the cost. If they need medical treatment or a medical device not covered by Medicare Part A or B, such as hearing aids, the beneficiary would be responsible for 100% of the cost. In both cases, this is where Medicare Supplemental plans, also known as Medigap, come in. Medigap plans are meant to “fill in the gaps” by covering the 20% coinsurance as well as some of the other medical costs Original Medicare doesn’t cover. For example: 

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• Medigap Plans C, D, F, G, M, and N cover skilled nursing facilities.
• Medigap Plan K covers 50% of skilled nursing facilities and Plan L covers 75%.
• Medigap Plans A and B do not cover skilled nursing facilities. These plans are not to be confused with Parts A and B.

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You can learn more about Medigap plans and how to help clients determine their best option in this blog.

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Why wealth managers need to know this: Knowing how Medigap plans work, and which ones best fit your client's needs and preferences, will: 

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1. Ensure clients aren’t picking plans blindly without understanding the benefits covered.
2. Provide a unique value-add service to help improve client satisfaction and retention. 

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3. Clients can choose between Original Medicare or Medicare Advantage

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Original Medicare includes Parts A, B, D, and a Medicare Supplemental (“Medigap”) plan, whereas a Medicare Advantage plan is a single, all-in-one plan that covers Parts A & B, and often D, too, from a single private insurance company. While Medicare Advantage plans are simpler to manage, they might not be the right choice for certain clients. For example, Advantage plans operate with strict provider networks, and will be responsible for the full cost of services if a client wants to see a doctor that isn’t within network (if they don’t have a PPO Advantage plan). For a longer list of key differences between Original Medicare and Medicare Advantage, check out this blog.

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Why wealth managers need to know this: This point is especially important for clients first enrolling, as it becomes challenging (and in some cases impossible) to reverse this decision later in life. Clients will need to go through medical underwriting and could get denied for a Medigap plan if they initially choose a Medicare Advantage plan and later want to switch to Original Medicare. The additional out-of-pocket expenses they might incur on an Advantage plan could significantly impact their financial plan.

4. Medicare coverage doesn’t apply to dependents or spouses who are under 65

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Unlike employer-sponsored health insurance or Marketplace health insurance, Medicare coverage is only for individuals. Even if a married couple is the same age and Medicare-eligible, they have to enroll in Medicare coverage separately. If you have clients who are enrolling in Medicare soon with a spouse under 65 or a child they were covering through their employer plan, you’ll want to work with them to find alternative coverage options. Employer-sponsored healthcare coverage, Marketplace coverage, and COBRA are all potential options depending on each client’s situation. 

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Why wealth managers need to know this: Knowing this important fact will ensure you and your clients avoid a potentially stressful situation (a spouse and/or dependent losing healthcare coverage) and will show clients that you are a proactive, comprehensive wealth manager.

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5. 2024 is the last year Medicare beneficiaries won’t have a cap on their out-of-pocket prescription costs

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Many have called for Medicare Part D to cap out-of-pocket prescription costs, and finally, it’s happening. In 2025, Medicare beneficiaries won’t pay more than $2,000 in out-of-pocket costs for covered medications thanks to a provision in the Inflation Reduction Act of 2022. But for 2024, the Medicare “Donut Hole” still applies. 

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Sadly, it’s not an actual donut. 

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In a nutshell, drug costs vary throughout the year depending on how much they’ve spent on drugs and the cost of those drugs.

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Why wealth managers need to know this: Medicare is always changing. Notifying clients of these critical changes will reinforce that you’re looking out for them and are mindful of their overall finances. Confirm that you have adjusted their financial plan to include any potential changes to their current drug costs, but also don’t assume that they might not take medications that aren’t covered by Medicare, impacting their out-of-pocket spending. 

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Final Thoughts

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There’s a lot more I could say or teach you about Medicare, but the last thing I’ll leave you with (until the next blog!) is some homework. Open your CRM and look at all your clients turning 65 in the next 12-18 months. Since 4.1M Americans will turn 65 in 2024, and the average age of new wealth management clients is 56.4, it’s safe to assume most wealth managers have several clients who are nearing Medicare eligibility. Consider reaching out to these clients to ask them if they have questions about Medicare or want help signing up. It’s imperative to your success as a comprehensive wealth management professional to understand the basics of Medicare so you can confidently guide clients through Medicare coverage decisions, and you might be surprised by their response!