Medicare 101 for Arizona Retirees: Parts A, B, C, D and IRMAA

A couple I recently sat down with in Gilbert were both turning 65 within a few months of each other, and they came in genuinely overwhelmed. They’d gotten a stack of glossy mailers, a few unsolicited phone calls, and well-meaning advice from neighbors who all swore by completely different plans. “We just want to make the right choice,” the husband told me, “but we don’t even understand what the choices are.” If that sounds familiar, you’re in good company. Medicare is one of the most important and most confusing decisions you’ll make in retirement, and the rules don’t exactly explain themselves.

Let’s walk through the basics in plain English, the way I’d explain it to a friend over coffee. My goal here isn’t to sell you anything (I don’t sell insurance, and as a flat-fee fiduciary I never will), it’s to help you understand how the pieces fit together so you can make a confident decision.

The Four Parts of Medicare

Medicare comes in four “parts,” and the alphabet soup trips a lot of people up. Here’s the simple version:

• Part A (Hospital Insurance) covers inpatient hospital stays, skilled nursing care, hospice, and some home health care. For most people, Part A is premium-free because you (or your spouse) paid into it through payroll taxes over your working years.
• Part B (Medical Insurance) covers doctor visits, outpatient care, preventive services, and durable medical equipment. Part B has a monthly premium, and this is the part where higher-income retirees can get hit with surcharges (more on that below).
• Part C (Medicare Advantage) is a private alternative that bundles Parts A and B (and usually D) into one plan, often with extras like dental or vision.
• Part D (Prescription Drug Coverage) covers medications and is offered through private plans.

Enrollment Timing: Don’t Miss Your Window

This is where I see the most expensive mistakes. Your Initial Enrollment Period is a seven-month window: the three months before the month you turn 65, your birthday month, and the three months after. Enroll during this window and you avoid penalties and coverage gaps.

There’s an important exception. If you (or your spouse) are still working at 65 and covered by a qualifying employer group health plan, you may be able to delay Part B without penalty and enroll later through a Special Enrollment Period. But the rules around what counts as “qualifying” coverage are strict, and getting this wrong is costly. If you’re a business owner in Scottsdale or still working part-time in Prescott, this is worth confirming carefully before you assume you can wait.

If you miss your window without a valid exception, you’re looking at late-enrollment penalties. The Part B penalty adds roughly 10% to your premium for each full 12-month period you could have had it but didn’t, and that surcharge generally lasts for as long as you have Part B. The Part D penalty works similarly and is tied to how long you went without creditable drug coverage. These penalties are permanent, which is exactly why timing matters so much.

Original Medicare vs. Medicare Advantage

This is the big fork in the road, and there’s no universally “right” answer; it depends on your health, your budget, and how much flexibility you want.

Original Medicare (Parts A & B) Plus Medigap and Part D

With Original Medicare, you can see virtually any doctor or hospital in the country that accepts Medicare, with no networks and no referrals. Because Original Medicare alone leaves you exposed to deductibles and coinsurance with no annual out-of-pocket cap, most people pair it with a Medigap (Medicare Supplement) policy to cover those gaps, plus a standalone Part D plan for drugs.

The tradeoff: you’ll pay monthly premiums for the Medigap and Part D plans, but your costs become far more predictable. For Arizona retirees who split time between Phoenix in the winter and somewhere cooler in the summer, or who travel often, the nationwide access is a meaningful advantage.

One timing note that catches people off guard: when you first enroll in Medigap, you typically have a one-time guaranteed-issue window where insurers can’t deny you or charge more for health conditions. Miss it, and switching Medigap plans later may require medical underwriting.

Medicare Advantage (Part C)

Medicare Advantage plans often have low or even $0 monthly premiums and bundle in extras. The catch is that they use provider networks (so your favorite Tucson specialist may or may not be in-network), often require referrals, and put more of the cost-sharing on you when you actually use care, up to an annual out-of-pocket maximum. They can be a great fit for healthy, budget-conscious retirees who don’t travel much, but the “free” premium can be misleading if you have ongoing health needs.

Healthcare is one of the biggest and most uncertain costs in retirement. If you want to pressure-test how these choices fit your broader plan, our retirement healthcare decision tool is a helpful starting point.

IRMAA: The Surcharge for Higher-Income Retirees

Here’s the part that surprises a lot of my higher-net-worth clients. Your Part B and Part D premiums aren’t the same for everyone. If your income is above certain thresholds, you pay an Income-Related Monthly Adjustment Amount, or IRMAA, on top of the standard premiums.

IRMAA is calculated using your Modified Adjusted Gross Income (MAGI) from two years prior, so your 2026 premiums are based on your 2024 tax return. The surcharge climbs in tiers, and the thresholds adjust annually for inflation. For retirees with $1M–$3M+ saved, a single large IRA distribution, a Roth conversion, or a big capital gain can quietly bump you into a higher IRMAA bracket two years down the road.

Because these are cliffs, going even one dollar over a threshold can trigger the full surcharge for that tier, proactive income planning genuinely pays off. This is exactly the kind of coordination a fee-only fiduciary handles when managing your withdrawals and Roth conversion strategy.

A Few Common Pitfalls

• Assuming Medicare covers long-term care. It doesn’t cover extended custodial care, which is a separate planning challenge entirely.
• Letting a commissioned agent steer the decision. Insurance agents are often paid differently depending on which plan you choose. That’s not a reason to distrust them, but it is a reason to get independent, conflict-free advice too.
• Ignoring the two-year IRMAA lookback. The income decisions you make today can raise your premiums later.

The Bottom Line

Medicare doesn’t have to be overwhelming once you understand how the parts fit together: A and B form the foundation, C bundles things through a private plan, D handles drugs, Medigap fills the gaps, and IRMAA is the income-driven wrinkle higher earners need to watch. The right choice is deeply personal, and it should be coordinated with your tax and withdrawal strategy, not made in a vacuum. If you’d like guidance from someone whose only loyalty is to you, with no insurance commissions in the picture, connect with a fee-only fiduciary advisor in Arizona. You can also explore how to work with a truly fee-only advisor to keep every part of your retirement plan aligned.

Important Disclosures

This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. Consult your own qualified advisor before acting on anything discussed here.

Investing involves risk, including possible loss of principal. Tax rules change and outcomes vary by individual circumstances. Arizona Fee Only is a directory and does not provide investment, tax, or legal advice.