Medicare is often an essential component of one’s retirement plan, especially as healthcare costs continue to increase. Its many complex offerings can be challenging to navigate for retirees and those approaching retirement.

Ari Parker, co-founder and head Medicare advisor for Chapter and author of It's Not That Complicated: The Three Medicare Decisions to Protect Your Health & Money, highlights essential elements to consider when signing up for Medicare or evaluating existing Medicare coverage.

The A and Bs of Medicare

Specific coverage under Part A and Part B:

Medicare Part A: Hospital Insurance (Inpatient)

  • Inpatient hospital care
  • Inpatient mental health care
  • Skilled nursing facility care
  • Home health care
  • Hospice
Premiums: Typically, full prepaid		 Medicare Part B: Medical Insurance (Outpatient)

  • Doctors’ visits
  • Lab work, x-rays, MRI/CT scan
  • Durable medical equipment
  • Preventative services (flu shots, certain disease screenings, etc.)
Premiums: You must pay monthly premiums to the government

Original Medicare includes both Part A and Part B, combining hospital insurance and medical insurance. It does not cover long-term care, defined by the activities of daily living, such as eating, bathing, or dressing oneself. And, while Medicare pays 80% of your medical costs under Parts A and B, you are responsible for the other 20%, with no maximum out-of-pocket costs.

Medicare Part D: Prescription Drug Coverage

Prescription drug coverage is purchased through a private insurance company. Parker suggests prescription drug coverage for the following reasons:

  • To avoid lifetime late enrollment penalties
  • To cover existing prescription costs

Three main improvements to Medicare Part D take effect on January 1, 2026.

1. Maximum annual out-of-pocket costs will be capped at $2,100. Once you reach $2,100 in costs, you pay $0 for covered prescription drugs for the remainder of the year.
2. For those who reach the $2,100 Part D out-of-pocket maximum, your copays will be smoothed out over the course of the year. For example, if your drug costs reach the $2,100 maximum out-of-pocket, you will only owe $175 in copays each month.
3. Medicare Negotiated Drugs will be covered at lower costs. Medicare has selected 10 prescriptions for negotiations and imposed maximum fair prices for this subset.

How Can I Achieve Comprehensive Coverage?

Parker explains different options to secure comprehensive coverage that covers the 20% of medical costs not supported by Medicare.

Sign Up For or Keep Original Medicare and Add Medigap + a Standalone Part D Plan

Enroll in Original Medicare and have the flexibility to add a Medicare Supplement, also known as Medigap. This plan is designed to last a lifetime—your benefits remain unchanged year-over-year. If you choose this route, you:

  • Do not worry about whether your doctor is in-network
  • Have the freedom to see any specialist you want nationwide without a referral
  • Do not have bills or copays to deal with as long as you meet the Part B annual deductible and pay your premiums on a timely basis
 Replace Original Medicare

Medicare Advantage, or Part C, replaces Original Medicare, which is administered by a private insurance company. It works similarly to work-provided coverage, has HMO- and PPO-like features, and is subject to prior authorization. This plan:

  • Often includes additional benefits, such as prescriptions or dental and vision insurance
  • Sets restrictions on which doctors you can see and may offer fewer choices in care
  • Has premiums as low as $0, but there is potential for high out-of-pocket costs

Open Enrollment Ends December 7

From now until December 7, you can:

  • Sign up for or change a Medicare Advantage Plan
  • Switch from a Medicare Advantage Plan back to Original Medicare, or vice versa
  • Sign up for or change a Medicare Prescription Drug (Part D) Plan

It is critical to review your coverage annually to determine if adjustments to your plan are necessary. Premiums and costs, benefits, and physician networks are a few elements that may change each year or even mid-year.

Resources

Each client’s circumstances are different, and William Blair is pleased to provide general insights and new perspectives on the fundamental elements of Medicare. For questions regarding your particular circumstances, please contact your William Blair wealth advisor to access the webinar link or additional resources.

Disclosure

This content is for informational and educational purposes only and not intended as advice or a recommendation. Recommendations can be provided only after careful consideration of an individual’s specific personal situation and needs. The factual statements herein have been taken from sources believed to be reliable, but such statements are made without any representation as to accuracy or completeness and are subject to change.