Medicare Parts A, B, C, D

Part A — Hospital Insurance

What it covers: Inpatient hospital stays, skilled nursing facility care (limited), hospice, limited home health.

Premium: Free for most people (those with 40+ quarters of Medicare-covered employment or spouse's qualifying employment). Those without qualifying work history pay up to $518/month in 2025.

Deductibles and costs:

• Inpatient deductible per benefit period: $1,676 (2025).
• Days 1–60: $0 coinsurance after deductible.
• Days 61–90: $419/day coinsurance.
• Days 91–150: $838/day lifetime reserve days (once used, gone forever).
• Beyond: all costs.

Most hospital stays cost just the deductible. Long stays or readmissions within 60 days count as the same benefit period, so a single deductible covers them.

Part B — Medical Insurance

What it covers: Outpatient care, doctor visits, preventive services, lab work, durable medical equipment, some home health services.

Premium: $185/month base (2025), increasing annually with healthcare inflation. Higher-income enrollees pay IRMAA surcharges (see below).

Annual deductible: $257 (2025).

Coinsurance: 20% of the Medicare-approved amount after deductible. No out-of-pocket maximum — Part B alone can produce unlimited costs for high-use years.

This uncapped coinsurance is the main reason most enrollees also get Medigap or switch to Medicare Advantage.

Part C — Medicare Advantage

What it is: Private plans approved by Medicare that bundle Part A and B coverage, usually with Part D prescription coverage and often additional benefits (dental, vision, hearing aids, gym memberships, transportation).

Premium: Varies widely. Many plans have $0 monthly premium beyond Part B. Some have higher premiums in exchange for richer benefits.

Trade-offs:

• Network restrictions. HMOs require in-network care; PPOs allow out-of-network at higher cost.
• Regional coverage. Networks are typically built for specific counties or states.
• Pre-authorization required for many services.
• Out-of-pocket maximum. Unlike traditional Medicare, Advantage plans cap annual out-of-pocket (typically $7,550–$8,850 in-network for 2025; in excess of in-network for out-of-network).

Medicare Advantage has grown rapidly — over half of Medicare beneficiaries now choose it. Makes sense for healthy people who prioritize low current costs and the extra benefits; less attractive for people with complex health conditions needing specialized specialists, or frequent travelers.

Part D — Prescription Drug Coverage

What it covers: Prescription drugs.

Premium: Varies by plan, typically $35–60/month. Higher-income enrollees pay IRMAA surcharges.

Deductible: Up to $590 in 2025.

Coverage phases (2025):

1. Deductible phase: pay full drug costs until $590 deductible met.
2. Initial coverage: plan pays most, you pay copay.
3. Coverage gap ("donut hole"): closed as of 2024 — you pay 25% of drug costs through this phase.
4. Catastrophic coverage: after total out-of-pocket reaches $2,000 (2025, reduced under Inflation Reduction Act), you pay nothing for the rest of the year.

The $2,000 annual cap on Part D out-of-pocket is a major benefit that kicked in fully in 2025, improving outcomes for enrollees on expensive specialty drugs.

Medigap (Medicare Supplement Insurance)

Medigap plans pay the gaps in Traditional Medicare — the Part A and B deductibles and coinsurance. Different lettered plans offer different coverage levels:

• Plan G: Covers everything except the Part B deductible. Most popular.
• Plan N: Covers most gaps but requires some copays. Lower premium.
• Plan F: Covers everything including Part B deductible. Only available to those eligible for Medicare before 2020.

Medigap is private insurance; premiums vary widely by insurer and state. Typical Plan G premium: $150–$250/month, rising with age.

You need Medigap OR Medicare Advantage, not both. They're different strategies.

Enrollment windows

Initial Enrollment Period: 7 months, starting 3 months before the month you turn 65 and ending 3 months after.

General Enrollment Period: January 1 – March 31 each year, for those who missed IEP. Coverage starts July 1. Penalty: 10% of Part B premium for each full 12-month period you were eligible but not enrolled — paid for life.

Special Enrollment Periods: Triggered by specific events like losing employer coverage, moving out of plan area, etc.

Annual Enrollment Period: October 15 – December 7 each year, for switching between Traditional Medicare + Medigap + Part D and Medicare Advantage, or changing Advantage plans.

Missing initial enrollment for Part B and Part D triggers lifetime penalties. Set a calendar reminder as you approach 65.

If you're still working at 65

You can delay Medicare enrollment without penalty if:

• You (or spouse) are actively employed.
• You have qualifying employer group health coverage.
• You enroll within 8 months of losing that coverage.

Smaller employers (< 20 employees) often require you to enroll in Medicare at 65; check with HR before assuming you can delay.

IRMAA

Higher-income enrollees pay more for Parts B and D. Based on MAGI from 2 years prior. See "Healthcare in Retirement" for the current thresholds.

IRMAA is a major reason to plan Roth conversions and capital gains realization carefully in the years leading up to Medicare.

How Horizons uses this

Horizons can model Medicare costs as an expense category starting at age 65, with IRMAA surcharges triggered by your projected income in specific years. The Roth Conversion page shows projected IRMAA impact of conversion strategies, helping you avoid unintentionally tripping into higher premium tiers.