4 Medicare rules that surprise clients — and some advisers

During the ENGAGE session “Social Security and Medicare in 2026,” Kerri Buckley intently listened as Matthew Allen shared surprising rules related to Social Security before she took the stage.

“So, Matthew just told you all how to get your money from Social Security,” Buckley said. “Now I’m going to talk about how you’re going to spend a good portion of that on your healthcare.”

Buckley, co-owner of The Buckley Insurance Group, told ENGAGE attendees that she and her husband created the agency to address the complexity of Medicare. “It has a lot of different parts and a lot of timing issues and penalties that people don’t know,” Buckley said.

She stressed that while Medicare officially begins at age 65, the decision-making process must begin before 65 — especially given some surprising rules that can set things in motion even before you or your clients take action.

Receiving Social Security triggers automatic Medicare enrollment, even when covered by health insurance

If a client is receiving Social Security benefits before age 65, they will be automatically enrolled in Medicare at 65. The most common scenario that surprises people? Even a person receiving Social Security payments that has health insurance coverage through their spouse’s employer will receive their Medicare card and welcome packet in the mail about three months before they turn 65.

On the other hand, if a client isn’t drawing Social Security before age 65, they have to manually enroll in Medicare.

While either scenario can catch people off guard, it’s not necessarily a bad thing for a client who is prepared.

“With Medicare,” Buckley said, “timing is very important.”

Buckley said that while someone with existing health insurance might not want to start all parts of Medicare at 65, most do want to add at least Part A (hospital insurance) because it’s typically premium-free and can reduce the cost of hospital stays. Part B (medical insurance), on the other hand, typically has a monthly premium and likely isn’t necessary for clients with existing coverage; rather, it’s a matter of figuring out which coverage is the best fit.

If a client does receive a Medicare card and welcome packet prior to 65 but doesn’t want to enroll in both Parts A and B just yet, the packet includes instructions on how to decline (a decision that requires mailing your Medicare card and filled-out forms). If a client isn’t automatically enrolled but does want to start coverage at 65, they can apply online through the Social Security website up to three months before their birthday month.

Waiting on supplemental coverage can be costly

When a client does enroll in Part A or Part B (or both), a crucial clock starts on vital programs that supplement coverage for seniors — programs that can come with complications for the uninformed.

Part B medical insurance, in addition to its monthly premium (the standard is $202.90 in 2026), comes with other costs like a deductible and coinsurance. However, private insurance companies approved by Medicare offer a way to fill the coverage gaps via Medigap supplemental plans.

“When is the best time to enroll in a supplement?” Buckley asked. “Not doing it during your initial enrollment period can cause you issues down the road.”

If a client signing up for Part B for the first time passes on adding a Medigap plan during an initial period designated by the Medicare program, then trying to get a plan later may result in higher costs, fewer plan options, and medical underwriting in most states.

Buckley said most everyone adds Part A hospital coverage at age 65 because it’s “free,” but starting it does trigger the possibility of a lifetime penalty related to Part D prescription coverage. Passing on Part D when first signing up for Part A can start building a penalty that can quickly add up to hundreds of dollars a year — for life.

The good news is that most clients who opt only for Part A already have creditable drug coverage through other medical insurance that effectively stops the clock on any penalties for delaying Part D. In addition, clients who opt for Part B medical insurance typically opt for Part D as well and therefore avoid penalties, but there are exceptions.

“I do have clients that say, ‘Kerri, I’m not taking any medications. I don’t want to pay for a Medicare drug plan,’” Buckley said. “And that’s absolutely fine. You don’t have to take one.”

But, Buckley said, there are Part D plans that are affordable enough that it might make sense to add simply to avoid future penalties.

“And those penalties do follow you for life, unfortunately,” she said.

A $0 premium plan may not be the cheapest Medicare choice

A. B. D. What about C?

Part C is another name for Medicare Advantage, an alternative offered by private insurers approved by Medicare that can combine A, B, and D — with additional benefits but also with additional considerations.

While Part C plans typically require registrants to pay the Part B monthly premium and sometimes add additional monthly charges, some plans wipe out monthly premiums altogether. But at what cost?

“You have to be careful with these plans,” Buckley said. “Your financial risk can be much higher because there can be higher out-of-pocket costs associated with Medicare Advantage plans.”

Buckley acknowledged that Medicare Advantage plans have risen in popularity and are worthy of evaluation. Generally they’re more like healthcare plans that people are accustomed to from their working days, featuring a local network of doctors with deductibles and copays and coinsurance but also other benefits like dental.

“If you are healthy and want those additional grocery benefits or gym membership or things like that and you’re willing to take that risk for the financial exposure if you need services, you can be satisfied with those plans,” Buckley said.

Medicare isn’t free — but Medicare advice may be

Some may assume professional Medicare guidance carries a fee because of the complexity of the system.

While financial advisers can charge to analyze how different approaches to Medicare might affect a client’s retirement or tax plans, Buckley pointed out that licensed insurance agents are compensated by insurance carriers for sharing Medicare advice. Keep in mind that while licensed insurance agents possess the knowledge and tools to help, they may or may not be able to offer all available Medicare Advantage plans; it depends on whether they’re licensed to sell plans offered by all carriers in the area.

Editor’s note: If you didn’t attend ENGAGE, you still can access this session. Those who purchased an all-access pass to ENGAGE can view this and other archived sessions.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.