Personal Finance

Baby Boomers: The Right Medicare Plan Makes the Most Sense Depends On a Few Things

Chris MacDonald

Published: January 20, 2025 4:11 pm

The baby boomer generation is undoubtedly the most important demographic for most investors to consider, from a sheer size and wealth standpoint. Holding more than half the nation’s wealth, this group is becoming the largest group from a social security perspective as well (with as many as 10,000 new baby boomers coming of retirement age daily).

Born between 1946 and 1964, baby boomers will increasingly need to choose which Medicare plan they wish to enroll in. Accordingly, millions of baby boomers will be looking for advice on which Medicare plans may make the most sense for their unique situations (given the multiple parts and plans that are available).

As is always the case, discussing these matters with a qualified financial advisor is the recommended course of action for those exploring these questions right now. However, for those looking for at least some broad strokes on what to consider when it comes to these plans, here are a few of the more pertinent tips I’ve come across that may be worth taking a look at.

Key Points About This Article:

• Navigating the maze of Medicare options upon retiring can be one of the most time-consuming parts of turning the page to full retirement age.
• Here are a few of the key considerations baby boomers looking to choose between Medicare plans may want to consider.
• 4 million Americans are set to retire this year. If you want to join them, click here now to see if you’re behind, or ahead. It only takes a minute. ^(Sponsor)

Understanding Medicare Options

Medicare provides a foundational structure of health coverage, divided into four main parts, each designed to cater to different aspects of a beneficiary’s healthcare needs. The four main parts are Part A: Hospital Insurance; Part B: Medical Insurance; Part C: Medicare Advantage; and Part D: Prescription Drug Coverage. Each of these unique options are built on Part A, which is most commonly referred to as the core of Medicare coverage.

Above Part A, Part B covers expenses for outpatient care and is more focused on preventive services. This includes coverage for doctor’s visits, outpatient hospital care, and preventive services such as screenings for diabetes and cancer, which can help detect health issues early when they are most treatable. Part B also covers medically necessary services like tests, lab work, and surgeries, plus supplies such as wheelchairs and walkers that are considered medically necessary to treat a disease or condition. 

Unlike Part A, Part B requires a monthly premium based on income, and it generally covers 80% of the Medicare-approved amount for covered services, while the beneficiary is responsible for the remaining 20%.

Medicare Advantage, or Part C, offers an alternative to Original Medicare (Parts A and B), with plans provided by private insurance companies approved by Medicare. These plans must cover all the services that Original Medicare covers but can offer additional benefits, which may include coverage for prescription drugs, dental care, vision care, and health and wellness programs. 

Some plans also offer extra benefits like transportation to doctor visits and over-the-counter drugs. Medicare Advantage Plans often require you to use network providers and may have a lower out-of-pocket cost than Original Medicare. Premiums vary by plan, location, and services offered.

Finally, Part D is Medicare’s prescription drug coverage, which helps cover the cost of prescription drugs, including many recommended shots or vaccines. Part D plans are run by Medicare-approved private insurance companies. Beneficiaries choose a plan based on a formulary, which is a list of covered drugs, which can vary from plan to plan. 

Each plan can vary in cost and specific drugs covered but must give at least a standard level of coverage set by Medicare. Plans may have a deductible and typically include cost-sharing measures like co-payments or co-insurance.

Factors Influencing Plan Selection

Choosing the right Medicare plan involves a thoughtful balance of personal health needs and financial considerations. Indeed, every retiree will be different, and may want to consider a range of factors before picking a bare-bones or “all the way” option.

One’s individual health needs should provide the baseline for how much care one expects to receive in retirement. Those with chronic conditions such as diabetes or health disease may benefit from a more comprehensive Medicare Advantage plan which may provide lower out-of-pocket expenses for frequent services.

Of course, factoring in which providers may be in network and how costly the deductibles, copayments, and coinsurance may be is the other piece of the puzzle. Medicare Advantage Plans can save those with significant future healthcare outlays money over time, but can be more costly up-front. Thus, those who may be healthier often pay the tabs for those requiring more extensive healthcare over time (as is the case with how most products are set up).

Knowing how to enroll (and when) is the other key factor baby boomers will want to consider before making their decision. Indeed, timing is critical when enrolling in Medicare to avoid penalties and ensure coverage when you need it. You have an Initial Enrollment Period around your 65th birthday, during which you can sign up for Medicare. If you miss this period, you might face late enrollment penalties and have to wait for the General Enrollment Period to apply, potentially leaving you without health coverage for several months. Understanding these timelines and planning your enrollment strategically can prevent costly mistakes.