If you’re nearing retirement age, health insurance and Medicare are probably on your mind as well. Do you understand how Medicare works and how the monthly premium is determined? You need to be in the know to avoid making costly mistakes. Here are some tips for potentially lowering your Medicare premiums.

What is Medicare?

Medicare health coverage is provided by the U.S. government to all citizens age 65 or older who are eligible based on their Social Security earnings record as maintained by the Social Security System. But others also qualify without meeting the earnings requirement, such as the spouse of any eligible worker age 65 or older, and anyone under age 65 years who is disabled or has a specific need.

Medicare offers several health plans. Here’s the “alphabet soup” of Medicare coverage:

  • Medicare Part A is referred to as hospital insurance and is usually provided at no cost. 
  • Medicare Part B is the coverage most like private health insurance or the group health plans provided by employers. Part B covers 80 percent of non-hospital costs, such as doctor appointments, tests and x-rays, some medical equipment, outpatient surgery, physical therapy and ambulance services. To receive the benefits in Part B, you have to pay a monthly premium.  
  • Medicare Part C gives you the option to sign up for Medicare Advantage instead of being covered by Medicare Parts A, B, and sometimes D. Not all Medicare recipients will have Medicare Part C. If you are considering Part C, be aware that the various advantage plans pay for different things. 
  • Medicare Part D provides a sharing of the costs of prescription drugs. You’ll need to purchase Part D coverage from a private insurance company.  Approximately 75 percent of the program cost is subsidized by Medicare.
  • Medicare Supplemental insurance, also known as Medigap insurance, is sold by a private insurance company. You can use it to pay medical expenses not covered by Medicare. Medicare supplements also use alphabetical names such as Part F, Part G, or Part N. It’s important to review which plan will be the most cost effective for you based on your personal health, your doctors, medical needs, and prescribed medications.

When You Enroll Matters

Your initial enrollment period is a seven-month period beginning three months before your 65th birthday month and ending three months after. For example, if your birthday is in October, your initial enrollment period starts July 1 and ends January 31.

If you’re already receiving Social Security benefits by age 65, Medicare will notify you regarding your enrollment two months before your Medicare coverage starts. In this case, you should automatically be enrolled for Part A and B, but always verify that is the case.

If you don’t sign up by the deadline, you’ll face a stiff penalty. Your Part B premium will increase by 10 percent for each 12-month period you were eligible but didn’t enroll. This penalty will apply for as long as you have Medicare coverage.

There’s Always an Exception

You avoid the late sign-up penalty if you or your spouse is actively employed and you’re covered under the employer’s group health plan. In this case, you have a special enrollment period to sign up for Medicare. Once you or your spouse is no longer employed or the group health coverage ends, whichever occurs first, you have eight months to apply for Medicare Part A and B. As long as you sign up within that eight-month window of time, you won’t be charged a penalty.

Medicare Part B Premiums

Medicare premiums aren’t the same for everyone. Part B premiums are based on your modified adjusted gross income (MAGI) two years prior to enrollment. If you file an individual tax return with MAGI above $85,000 or file a joint tax return with $170,000 or more MAGI, your premium will be higher than the base amount of $135.50 in 2019.

If your current income is lower than it was two years ago, you can file for an adjustment to your Medicare premiums via Form SSA-44. This is referred to as an “income-related monthly adjustment amount” (IRMAA). For example, if you retired in 2020 and are living off Social Security and investments, your income might be much lower than it was when you were working in 2018. As a result, you can complete the form and submit it to Social Security to get your Medicare Part B premiums reduced.

As a Medicare recipient, you should pay attention to your income and how it may affect your Medicare premiums. Also, note that when you are required to take minimum distributions from your retirement accounts, you might be required to pay higher Part B premiums as well.


It’s completely reasonable to be concerned about health care costs in retirement. To ensure that you receive the best possible pricing for both Medicare Part B and Medicare supplement insurance, you need to be aware of your health needs, the enrollment period, and your income.

For more information regarding eligibility, covered medical expenses, and premium costs, go to www.medicare.gov

Meredith Carbrey is a Senior Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website or email Meredith.

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