For your clients who are 64 going on 65, it’s time to have “the Medicare talk.”

The decisions your clients make about Medicare when they turn 65 can have a lasting impact on their health-care costs in retirement. And your clients must make these decisions when they are only beginning to become familiar with a very complex program, so there’s a lot of room for error.

For instance, if your clients don’t time their Medicare enrollment correctly, they could find themselves paying a late-enrollment penalty every month of every year that they have Medicare for the rest of their lives. If they miss their Medigap open enrollment period, they may never be able to purchase a Medigap policy without undergoing medical underwriting.

That’s why it’s crucial to make Medicare planning an integral part of the service you provide to your clients. Schedule a discussion about Medicare with your clients who are approaching age 65. The goal would be to help your clients make a successful transition to Medicare, so that a lower proportion of their retirement income ends up going toward health-care costs. These often become issues for those who think if they work past 65 with employers’ benefits, they don’t have to worry about Medicare.

Advisors’ Medicare Checklist For Clients Turning 65
Here’s a checklist of dos and don’ts to review with your client during your discussion.

1. Avoid late-enrollment penalties by coordinating Medicare correctly with other insurance.

Medicare adds steep penalties to Part B and Part D premiums if someone enrolls late without following the rules for deferral. A common way that people trip up, and end up with penalties, is by failing to coordinate Medicare correctly with other health insurance they may have.

Your clients who are already retired at age 65 will need to sign up for Medicare at age 65 -- even if they have other insurance coverage. Retiree plans typically require members to sign up for Medicare as soon as they are eligible. Likewise, if your clients have COBRA coverage or a private plan or coverage through the health insurance marketplaces, they cannot delay their enrollment in Medicare without facing penalties.

Your clients who are still working at age 65, or who have a spouse who works, may be able to delay enrollment in Part B without penalty if they are covered by a group health plan based on current employment, as long as they work for an employer with 20 or more employees. If your clients have this option (and they should check with their benefits administrator), they will need to assess whether the employer plan or Medicare provides the most cost-effective coverage.

2. Protect the Medigap open enrollment period.

In most cases, it’s not a good idea for your clients to sign up for Part B as secondary insurance if they plan to stay on an employer’s health plan after age 65. Here’s why: The day they sign up for Part B, the clock starts ticking on their open enrollment period for Medigap supplement insurance.

This period lasts for six months and begins on the first day of the month in which your client is both 65 or older and enrolled in Medicare Part B.

If your client times out on his Medigap open enrollment period, he may be charged a higher rate or denied coverage if he decides he wants a Medigap policy later.

3. Don’t pay more in high-income premiums than is necessary.

Higher-income beneficiaries pay higher premiums for Part B and Part D. It’s important to make sure your clients don’t overpay.

Social Security uses the most recent federal tax return provided by the IRS to determine who must pay higher Medicare premiums, typically the return from two years ago. But if your client retires this year, his income may be lower than it was when he was working. Social Security will bill him for a higher premium based on his prior income, unless he requests a new decision by filing form SSA-44.

You also may be able to use income and asset planning to keep client income below the graduated thresholds that trigger higher premiums.

4. Don’t make Medicare “couples mistakes.”

Couples mistake No. 1: Making poor choices about how to cover a spouse or dependent. Your clients who cover their families through an employer plan need to arrange for how their family will be covered if they drop that plan to enroll in Medicare. It’s important to study all the available options. For example, a plan through a state health insurance marketplace may be significantly less expensive than COBRA coverage.

Couples mistake No. 2: Spouses signing up for the same Medicare plan. After decades of sharing the same employer health plan, couples may do better to “split up” when it comes to Medicare. Because each spouse has individual health-care needs, the most cost-effective coverage for one spouse is not likely to be the most cost-effective option for the other. Medigap plans can be an exception: Couples may be able to get a household discount if one of the standardized plans works well for both of them.

5. Choose Medicare plans carefully.

Choosing one coverage option over another can mean a difference of hundreds, or even thousands, of dollars in out-of-pocket costs over the course of the year. The sheer number of options available can frustrate those who are trying to make a wise choice. People often experience “choice overload” as they try to choose among, on average, 35 Part D prescription drug plans and 18 Medicare Advantage plans. In addition, in most states, there are 10 standardized Medigap plans, each offered with varying premiums by numerous insurance companies.

The result is predictable: Research shows that the vast majority of retirees fail to find and enroll in the Part D plan that meets their medication needs at the lowest cost.  Inertia also comes into play, as few beneficiaries switch plans during the annual enrollment period even though it may save them money to do so.

The Medicare talk you have with your clients as they turn 65 may be the most important Medicare discussion you’ll ever have, but don’t let it be the only one.

Financial advisors can add value to their service by making Medicare planning part of their clients’ annual financial review. This involves finding ways to assess their Medicare plan choices as part of their comprehensive evaluation of the client’s finances.

Financial advisors also can set themselves apart by working with a Medicare plan selection service. Experienced Medicare specialists provide a depth of Medicare expertise to an advisor’s clients and a higher level of assistance with making coverage choices that protect both the client’s health and retirement income.

Mary Dale Walters is senior vice president of the Allsup Medicare Advisor, a nationwide Medicare plan selection service offered by Allsup Inc. Allsup Medicare Advisor is a flat fee-based Medicare plan selection service that provides a comparative analysis of plans and serves as a trusted resource for financial advisors and seniors. Allsup Medicare specialists can work with your clients one-on-one to assess their needs and research their Medicare options, so they can choose cost-effective coverage that protects their health and retirement savings. Financial advisors may contact (888) 220-9678 or go to FinancialAdvisor.Allsup.com for more information.