Medicare Alphabet Soup: Letters A, B, C, D, and More

October 28, 2023

by Maryann Keith, CFP®, CIMA®, CDFA®

A, B, C, D, E – What’s right for U? In the world of Medicare alphabet soup, it’s hard to know what all these letters mean. In this blog, we’ll cover the basics and explain why it makes sense to contact an expert to learn more. Let’s start with vocabulary!

Part A – This covers your hospital insurance. Many people think it’s free, but that depends on your definition of free! Did you know that you paid for your Part A insurance during your working years? In most instances, no premiums are due when you start using Medicare Part A.

Part B – This covers many services not covered by Part A, like doctor’s visits, medical equipment, preventative care, and more. Enroll too early and you could lose access to making HSA contributions if you’re still working, enroll too late and you may face a late enrollment penalty that will follow you for life.

Part C – This is Medicare Advantage. It’s a plan that typically bundles Parts A, B and D and has received both good and bad press over the years. Like anything, it works well for some and not for others.

Part D – Drugs, donuts or both? Part D covers your prescriptions. The danger lies in what it doesn’t cover. After you and your plan spend $4660 on covered drugs in 2023, you could enter the “donut hole” and be responsible for up to 25% of the cost of your prescriptions until your spending reaches $7400.  1

IRMAA – Not to be confused with the name of a person, IRMAA, the Medicare Income-Related Monthly Adjustment Amount is something that should send you running to your financial and tax advisors. Your MAGI (modified adjusted gross income) is used to determine your Part B & D premiums, which means it’s not just your earned income and IRA distributions that factor into this calculation – capital gains, tax-exempt interest income and other items are included into this figure. For example, if the income of a married couple filing jointly has an increase in MAGI above $194,000 by as little as just $1, their Part B premium goes up by $65.90 per month per person. That’s an extra $1581.60 per year! 2 Note that there are additional increases at higher income levels. Keeping your finger on the pulse of your distribution strategy is key to managing your monthly premium expenses.

Medigap – This is an optional supplement that can be purchased through private insurance companies to cover some of the costs that your base coverage does not.

After nearly two decades working in the financial services industry, thousands of hours of study and many professional credentials later, Medicare remains one of the most complex things I advise on. I find it incredibly valuable to introduce my clients to trusted Medicare brokers who are experts at finding the right solution. Writing the best recipe for your own Medicare alphabet soup involves taking into consideration what prescriptions you take, what doctors you see, where you draw your income from, your work status and so much more. As they say, “don’t try this at home!” and reach out to a professional today for guidance. The Beden Wealth Management team remains at your service and ready to help.

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