4 Pro Tips for Successfully Scaling the Medicare Mountain

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If you're in or nearing retirement, you're probably familiar with Medicare, the U.S. government's health care program for those age 65 and older.

More than 66 million Americans get their health coverage from Medicare.

It's one of the most important pieces of retirement planning, yet also one of the most confusing. For many retirees, selecting Medicare coverage is a decision that can significantly impact their income, taxes and overall financial security.

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Why is Medicare such a hot-button topic?

Starting January 1, 2026, a new six-year pilot program from the Centers for Medicare and Medicaid Services (CMS) aims to improve efficiency, reduce fraud and help patients receive the right care more quickly.

However, some worry that it could create more confusion and red tape for patients in the six experimental states, including Texas, as they try to understand how their care will be handled.

In the past, there has been limited pre-approval for beneficiaries seeking services for original Medicare. Now, through the Wasteful and Inappropriate Service Reduction (WISeR) model, beneficiaries will undergo a review process that uses artificial intelligence in conjunction with human review before certain medical services, procedures and devices are covered.

According to the National Library of Medicine, waste in health care represents 25% of all health care spending in the United States. So, while patients may have to wait longer when it comes to getting procedures approved and completed, it could help them and providers avoid unnecessary or inappropriate care and keep costs down.

These and other changes have made Medicare a hot-button topic. Many people are surprised by how complex the system really is. That's why it's so important to understand all of your options, both for your health and your wallet.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Know the cost of Medicare

When people think about Medicare, they often focus on health care — what's covered and what isn't. But what they fail to consider is the financial side.

Medicare premiums are directly tied to your income, so one of the challenges is determining the best time to enroll. Your timing and financial setup can have lasting effects on your premium costs.

For example, if you're still working and plan to retire soon, your Medicare premiums may initially be based on your highest earning years.

If you won't be making what you have made over the past couple of years, there's a form you can file to have your premiums adjusted once your income drops, but many people don't know that and end up overpaying.

Take a look at your Social Security benefits, 401(k) and other retirement account withdrawals, and any other income sources to understand how each will affect your premiums and tax situation.

Know when to enroll

It's a really complex system, but the bottom line is to make sure you coordinate your Medicare enrollment with your retirement income plan.

People frequently get confused about when to enroll in Medicare, and failing to do so on time can have serious consequences on your health care and finances for years to come.

If you are about to turn 65, you can enroll anywhere from three months before to three months after your birth month. But don't miss the deadline. If you miss the initial enrollment period, you could end up paying more expensive premiums for the rest of your life.

Don't assume Medicare covers everything

One of the biggest misconceptions about Medicare is that it will cover all your health care needs. Traditional Medicare (Parts A and B) can come with high out-of-pocket costs, including deductibles and coinsurance. It also doesn't cover dental care, vision, hearing aids and other long-term care needs.

If people are seeking more coverage, a Medicare Advantage plan can help cover some of those out-of-pocket expenses.

A health savings account (HSA) can also be used to help supplement the costs. However, this is also an area where retirees can get into trouble. Once you enroll in Medicare, you are no longer allowed to contribute to your HSA, and you must stop contributing up to six months before applying for Medicare. Missing this deadline can result in penalties or having to pay back any excess contributions.

Medicare also doesn't cover long-term care, such as assisted living or nursing homes. If you require an extended stay at one of these facilities, you will need to come up with the funds to help fill the coverage gap.

It's important to have a long-term care strategy, whether that's through an annuity or traditional insurance. A typical long-term care insurance policy can help cover the costs of adult day care, respite care, stays in Alzheimer's special care facilities, assisted living facilities, nursing homes and hospices.

Understanding and planning for coverage gaps early can help retirees protect their hard-earned savings and ensure they're prepared for any future health challenges.

Reevaluate prescription coverage every year

Medicare is not a set-and-forget plan. Just as your health needs change, so do plan costs, provider networks, drug coverage and benefits.

Once you're enrolled, you should be reviewing your plan every year and use the open enrollment period to make adjustments.

Prescription drug coverage can be one of the most expensive parts of healthcare in retirement. If you choose original Medicare, you need to enroll separately in Part D, which helps pay for brand-name and generic drugs.

Even if you don't need prescription drugs now, it's recommended to get coverage upfront to avoid paying a late enrollment penalty if you join later.

Reviewing your plan options every year can help you find better benefits, lower premiums or a more comprehensive coverage for your medical needs. This is also a good time to meet with your financial professional, who can help you enroll in the right plan for you.

Your health is valuable: Consult a professional

Medicare decisions should never be made on a whim — these are lifelong decisions that could affect your entire financial plan, and changing them can be costly or next to impossible. That's why working with a financial professional who understands your individual situation is so valuable.

The late stages of your career and into retirement are not the time to take chances with the money you've worked your whole life to earn.

Get informed, review your plan and make sure you're set up for success in the years to come. Because when it comes to your health care and financial future, informed decisions are the best medicine.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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With more than 20 years of experience guiding clients through the complexities of retirement planning, Cathy DeWitt Dunn is a trusted financial expert and founder of her own successful firm. As a Certified Divorce Financial Analyst (CDFA®) and Federal Retirement Consultant (FRC®), Cathy brings specialized expertise to help women and federal employees navigate their financial futures with confidence.