Healthcare Insurance in Retirement: A Path Forward

Written by: Douglas P. Bajor, CFA^® , CPA, CFP^® 
Retired Senior Wealth Management Advisor

“There must be some way out of here” said the Joker to the Thief.
“There’s too much confusion, I can’t get no relief.”

All Along the Watchtower (Jimi Hendrix version)

Healthcare is a key concern for many people planning for or undertaking retirement. The costs can be significant and the path forward at times can be confusing. This article will summarize the approach that my wife and I employed to make sure that we were making good decisions and will also share with you some key considerations in making your own choices.

Have Discussions with Friends, Family, and Greenleaf Trust

Over a year before my planned retirement date, my wife and I had discussions with many different people about how they had approached their healthcare decisions. Different people have different needs, but their approaches and experiences with obtaining healthcare coverage were very useful. I also spoke with the Human Resources team at Greenleaf Trust as my plan was to retire about eight months before age 65. They informed me that we could continue our participation in the group health insurance plans at Greenleaf Trust under the provisions of COBRA as specified by the Federal government. The monthly premiums were lower under the group plan than we would pay for similar coverage through the Health Insurance Marketplace under the Affordable Care Act (ACA). I participated in the group plan for eight months after retiring until I qualified for Medicare at age 65 while my wife remained in the group plan longer as she is eighteen months younger than me. The Human Resources team at Greenleaf Trust also introduced my wife and me to a healthcare consultant that worked with Greenleaf Trust on their group plans. She helped me to select a Medicare Advantage plan and my wife to select a private insurance plan after COBRA ended. We wanted our healthcare insurance in retirement to closely resemble what we had experienced during our working years including dental, vision, and drug coverage.

The Different Parts of Medicare

Medicare has different parts or coverages. Part A covers hospital stays. Part B covers physician services and outpatient procedures. Part C is for those utilizing a Medicare Advantage plan, which is similar to original Medicare but is administered by a private insurance company and may include additional coverage for dental, vision, and hearing exams. Part D provides drug coverage. Part G is for Medigap coverage that pays for things that Medicare does not such as deductibles, co-pays, and coinsurance, but is not available to participants in a Medicare Advantage plan.

Medicare Premiums: IRMAA Is Not the Name of a Long Lost Aunt

For most people, there is no premium for Part A coverage.

The Part B coverage monthly premium for 2026 begins at $202.90 for couples with Modified Adjusted Gross Incomes (MAGI) below $218,000. The premiums increase as your MAGI rises into different brackets eventually reaching a maximum of $689.90. This increase is technically referred to as IRMAA (Income -Related Monthly Adjustment Amount). MAGI for Medicare purposes is Adjusted Gross Income (AGI) from your 1040 personal tax return from two years prior + tax-exempt interest (i.e. your 2026 Medicare premiums are derived using your 2024 tax return).

The Part D drug coverage monthly IRMAA premium begins at $0 and rises in a similar manner to Part B insurance eventually reaching a maximum of $91. Please note that IRMAA amount is in addition to the premium for the drug plan that you choose.

You will pay the Medicare premiums monthly or they will be deducted from your Social Security benefits if you have begun to receive them.

The good news is that for most people, these Medicare premiums are usually lower than the cost of private health insurance. But during your working years, you and your employer both paid a Medicare tax on your earnings of 1.45%. For wages above $200,000, the employee also paid an additional tax of 0.9%.

Please note that health insurance / Medicare premiums can be deducted as a medical expense on your personal tax return if total expenses exceed 7.5% of your AGI. Also, you can pay such premiums from your Health Savings Account (HSA).

Long-Term Care Costs Are Significant

A study by Genworth Financial found that the median annual cost for long-term care for a private room in 2024 was $127,750. However, Medicare does not pay for long-term care. It will cover a stay at a skilled nursing facility after a person has been in the hospital. Medicare covers 100% of the cost for days 1-20. For days 21-100, the patient pays $217 per day while Medicare pays the balance. Beyond 100 days, the full cost must be covered by the patient unless they qualify for Medicaid, which has strict income and financial resources to qualify.

Long-term care insurance can be an option for some individuals, but it is best to acquire such insurance when a person is in their 50s or 60s so that they can obtain a more favorable premium. Hybrid life insurance/long-term care policies may also be an option. My wife and I began our long-term care coverage when we were in our early 50s as both of my parents and my wife’s mother needed nursing home care near the end of their lives. These policies have a 3% annual inflation adjustment and currently will pay approximately a monthly maximum of $6,200 with a lifetime maximum of $375,000.

The premiums for long-term care policies may be deductible if you itemize deductions and medical expenses exceed 7.5% of your AGI.

A patient can use their HSA to pay nursing home costs.

A Path Forward

As we age, the value of our health and access to good medical care increases significantly each year. It is important to approach healthcare decisions in a thoughtful manner. Whether you proceed with traditional Medicare with or without a Medigap supplement plan or a Medicare Advantage Plan, you should carefully evaluate whether you will have access to your preferred doctors and any prescription drugs that you need. Your client centric team at Greenleaf Trust can help to introduce you to healthcare insurance professionals that can assist you in evaluating the options. With a bit of effort, you can find a path forward.