By Al Kushner  

CPAs are often entrusted with a client’s financial health. One crucial aspect that significantly impacts both financial health and overall well-being is health care planning, particularly Medicare issues. Even seasoned professionals can stumble when navigating this complex territory. In this blog, I aim to equip CPAs with several strategies to avoid some common pitfalls.

Understand the ABCs

The first step toward helping clients avoid Medicare mistakes is understanding what Medicare entails. Medicare parts A, B, C, and D each cover different aspects of federally assisted health care, from hospital insurance to prescription drug coverage. It's essential to know the costs of each part and how they will impact an individual's financial situation.

Original Medicare (parts A and B) covers approximately 80% of health care costs. Without additional coverage, such as a Medigap or Medicare Advantage plan, beneficiaries are left with a potentially significant financial burden. Advising clients about these options can help them avoid unforeseen expenses.

Enrollment Timing

One of the most common missteps clients make revolves around enrollment periods. Missing the initial enrollment period (IEP) or special enrollment period (SEP) can lead to a lifetime of late penalties, significantly increasing the cost of your client’s health care. CPAs can work these dates into other deadlines, ensuring that clients will be made aware of their upcoming responsibilities.

Preventing Penalties

Certain decisions can result in substantial penalties. For instance, contributing to a health savings account after enrolling in Medicare can lead to tax penalties. Awareness of such potential consequences allows us to guide clients toward better choices.

Navigating IRMAA

Another crucial aspect of Medicare that CPAs should be aware of is the income-related monthly adjustment amount (IRMAA). IRMAA is an extra charge added to Medicare Part B and Part D premiums for individuals whose income exceeds a certain threshold. It is essential to inform clients about this potential additional cost because it can significantly impact their financial planning.

The income brackets for IRMAA are updated annually, and the extra charges can range from a few dollars to several hundred dollars per month. Therefore, keeping up to date with these changes and considering them when advising clients on tax strategies and retirement planning is vital. By doing so, CPAs can help clients avoid unexpected Medicare costs and effectively manage their health care expenses in retirement.

Prescription Drug Plans

Finally, Medicare Part D, which provides prescription drug coverage, is a common area of confusion. Formularies (the list of covered drugs) can change annually, making it vital for clients to review their plans each year.

While complex, Medicare is a field that CPAs cannot afford to overlook. By equipping ourselves with knowledge and staying vigilant about common mistakes, we can provide invaluable advice to our clients and help them navigate the complicated terrain of Medicare with confidence and security.

Al Kushner is an insurance consultant specializing in Medicare since 1986 and the author of 10 Medicare Mistakes Financial Planners Make & How to Avoid Them. He can be reached at AKushner@VirtualMedi.care.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.