Medicare decisions are some of the most important choices you’ll make around retirement, and the rules change every year. In this year’s edition of our annual series, Medicare: What You Need to Know, Tamme Nash, owner and insurance agent at The Sable Insurance Agency, walks through how Medicare works, when to enroll, what it costs and how to choose between your plan options for 2027.
Medicare 101 for 2027: key takeaways
- Your Initial Enrollment Period is a 7-month window around your 65th birthday: the 3 months before, the month of and the 3 months after.
- If you’re still working for an employer with 20 or more employees, you may be able to delay Part B without a penalty.
- If you contribute to an HSA, stop contributions 6 months before applying for Part A, because Part A coverage is made retroactive up to 6 months (but no earlier than the month you turn 65).
- Your Part B premium is based on your income from two years earlier. Higher earners pay an extra amount called IRMAA, which you can ask Social Security to reduce after a qualifying life-changing event.
- The Part D out-of-pocket maximum for prescription drugs rises to $2,400 in 2027.
- Annual Enrollment runs October 15 through December 7, with changes taking effect January 1.
When to enroll in Medicare
Medicare is federal health insurance for people 65 and older, people under 65 with certain disabilities, and people of any age with End-Stage Renal Disease or ALS. Even though it’s a federal health program, you apply through Social Security: online at ssa.gov, by phone, or at your local Social Security office.
Most people enroll during their Initial Enrollment Period. If you miss it, the General Enrollment Period runs January 1 through March 31 each year, and late enrollment penalties usually apply. If you or a working spouse are covered by a large employer group plan, a Special Enrollment Period lets you enroll later: you generally have 8 months, starting the month after your employment or your group coverage ends (whichever comes first), to sign up for Part B, but only about 2 months to sign up for Part D.
Still working? HSAs and delaying Part B
If you have a high-deductible health plan and contribute to a Health Savings Account, enrolling in Medicare Part A ends your ability to make HSA contributions. Tamme recommends stopping contributions 6 months before you apply, since Part A coverage is made retroactive (up to 6 months, but no earlier than the month you turn 65) and contributions during that window can create a tax problem. Keep in mind that starting your Social Security benefits automatically enrolls you in Part A.
The size of your employer matters too. With 20 or more employees, you generally don’t need Part B while you’re covered by the group plan. With fewer than 20, the group plan may only pay after Medicare, so you’ll usually want Parts A and B when you’re first eligible. If you’re on Medicare because of a disability, the rules are different, so call Medicare before waiving Part B.
What Medicare costs, and what IRMAA is
Part A is generally premium-free if you’ve paid into Medicare for at least 10 years. Part B has a monthly premium, and Social Security looks at your modified adjusted gross income from two years earlier to set it. If your income is above certain thresholds, you’ll pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of your Part B and Part D premiums. If your income has dropped because of a qualifying life-changing event, such as stopping or reducing work, marriage, divorce or the death of a spouse, you can ask Social Security to use your more recent income by filing Form SSA-44. This is a good conversation to have with your financial planner before you file.
Medigap vs. Medicare Advantage
Tamme calls this the most important choice in Medicare. With Original Medicare plus a Medicare Supplement (Medigap) policy, Medicare pays first and the supplement covers most of what’s left. These plans tend to cost more each month but offer predictable costs and broad access to doctors nationwide, and you add a separate Part D drug plan. In most states, Medigap plans are standardized, so the same plan letter has the same benefits at every company; only the premium differs.
Medicare Advantage (Part C) plans are run by private insurance companies, usually combine medical and drug coverage in one card, and often include extras like dental, vision and gym benefits. They tend to have lower premiums but more copays and network rules, and those rules can change each year. Because each plan has its own network and drug list, Tamme stresses checking that both your doctors and your medications are covered before you choose.
Part D prescription coverage in 2027
Every drug plan has its own formulary, or list of covered drugs, and the same drug can sit in a different cost tier from one plan to the next. Thanks to the Inflation Reduction Act, Part D now has an annual out-of-pocket maximum, which rises from $2,100 in 2026 to $2,400 in 2027. If you go 63 days or more without Part D or other creditable drug coverage, you may owe a late enrollment penalty that is added to your premium for as long as you have Part D. It equals 1% of the national base beneficiary premium for each month you went without coverage.
Start early
Tamme recommends starting the Medicare conversation about 4 to 6 months before you plan to enroll or retire, especially if you have a younger spouse who will need coverage. If you have questions about your own situation, text MEDICARE to 716-727-5047 and Tamme will reach out, or call our office at 716-634-6113.
This content is for informational purposes only and is not personalized investment, tax, legal or insurance advice. Tamme Nash and The Sable Insurance Agency are independent of Level Financial Advisors; Level Financial Advisors does not sell insurance products. Medicare rules, costs and plan availability change each year; confirm details with Medicare, Social Security or a licensed insurance professional before making decisions.
