Medicare Coverage Gaps: What Treasure Coast Retirees Must Know

What if the biggest threat to your retirement savings isn't the stock market — it's a hospital bill? For Treasure Coast retirees in Stuart, Port St. Lucie, and surrounding Florida communities, Medicare coverage gaps represent a financial risk most people never see coming. Traditional Medicare covers roughly 80% of approved medical costs, but that remaining 20% carries no annual cap — leaving your hard-earned wealth dangerously exposed. In this episode, we break down exactly where those gaps exist, what they could cost you, and how smart retirement and tax planning strategies can protect your nest egg before a health crisis strikes. Whether you're newly enrolled or approaching Medicare eligibility, this conversation belongs on your must-hear list. Our fiduciary, fee-based financial planning approach means we're always working in your best interest — not ours. Ready to talk? Schedule a complimentary discovery call at TDWealth.net. For educational purposes only. Not investment advice. 📖 Full show notes: https://tdwealth.net/medicare-coverage-gaps-what-treasure-coast-retirees-must-know/

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Davies Wealth Management

684 SE Monterey Road

Stuart, FL 34994

772-210-4031

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Davies Wealth Management makes content available as a service to its clients and other visitors, to be used for informational purposes only. Davies Wealth Management provides accurate and timely information, however you should always consult with a retirement, tax, or legal professionals prior to taking any action.

Transcript

SPEAKER_00 0:00

You know, you could spend um thirty years diligently building a five million dollar portfolio.

SPEAKER_01 0:06

Oh, easily, doing everything right.

SPEAKER_00 0:08

Right. Surviving bear markets, inflation, just doing everything perfectly.

SPEAKER_01 0:12

Uh-huh.

SPEAKER_00 0:13

Only to have a hidden leak quietly drain it all the moment you retire.

SPEAKER_01 0:17

Yeah, and I think the craziest part is that it is completely legal. I mean, people spend decades hyper focused on building wealth, right?

SPEAKER_00 0:24

Yeah, the accumulation phase.

SPEAKER_01 0:25

Exactly. But then they entirely ignore the biggest systemic threat to keeping that wealth.

SPEAKER_00 0:31

So welcome to the deep dive. Our mission today is to, well, pull back the curtain on Medicare's four biggest coverage gaps.

SPEAKER_01 0:38

And how people actually plan around them.

SPEAKER_00 0:41

Exactly. We want to look at how high net worth retirees build a structural fortress around those gaps. We're getting our insights today from a really comprehensive guide put together by Davies Wealth Management.

SPEAKER_01 0:51

They're a fee-based fiduciary advisory firm out of Stewart, Florida, right?

SPEAKER_00 0:55

Yep, Stuart, Florida. And this research was designed specifically for their 1715 Treasure Coast Financial Wellness Podcast.

SPEAKER_01 1:02

So the critical shift we have to make right away is just redefining what Medicare actually is for the listener.

SPEAKER_00 1:09

Right, because for most people it's just a given.

SPEAKER_01 1:11

Exactly. If you're a mass market retiree living mostly on Social Security, maybe a modest pension Medicare is basically just a healthcare checkbox. You turn 65, you sign up, and you're good.

SPEAKER_00 1:22

But the Davies Guide is focusing on a different group.

SPEAKER_01 1:26

Right. They focus on folks with, say, $1.5 to $8 million in investable assets, which is a huge demographic along Florida's treasure coast. Definitely. For that demographic, Medicare is not simply a healthcare issue. It is a highly complex wealth management problem.

SPEAKER_00 1:43

Aaron Powell Okay, let's unpack this because the first major blind spot comes from uh just a fundamental misunderstanding of Medicare's math.

SPEAKER_01 1:50

Aaron Powell The 80-20 split.

SPEAKER_00 1:52

Yes. We grew up hearing standard Medicare Part B covers roughly 80% of approved costs. Which sounds fantastic, right? An 80% discount feels really reassuring.

SPEAKER_01 2:01

Aaron Ross Powell It sounds like great coverage until you get a chronic, highly expensive diagnosis.

SPEAKER_00 2:06

Right. It's the 80-20 illusion. Because the trap here is that the remaining 20% has absolutely zero out-of-pocket maximum.

SPEAKER_01 2:12

None at all.

SPEAKER_00 2:13

It's like buying a premium insurance policy for a sports car, only to find out the engine isn't covered if you crash it.

SPEAKER_01 2:19

That's a perfect way to put it.

SPEAKER_00 2:20

Wait, so just to be clear, if a retiree needs a long cancer treatment or like a major cardiac surgery, they are on the hook for 20% of the total cost forever.

SPEAKER_01 2:31

Yes. There is no cap. If the treatment is half a million dollars, you owe $100,000 in cash. Wow. And that uncapped liability doesn't even stop at Part B. Part A, which handles your hospital stays, has a mechanism that is, well, frankly, it's designed to catch people off guard.

SPEAKER_00 2:48

How so?

SPEAKER_01 2:49

In 2026, the standard Part A deductible is $1,632.

SPEAKER_00 2:54

I mean, for a retiree with a $3 million net worth, a $1,632 bill is annoying, but it's hardly going to bankrupt them.

SPEAKER_01 3:01

Uh, but that's because of how Medicare redefines the word deductible. In normal corporate insurance, you pay your deductible once a calendar year. Right. Medicare Part A applies that $1,632 deductible per benefit period.

SPEAKER_00 3:13

Aaron Powell Wait, per benefit period? What does that mean?

SPEAKER_01 3:15

It means a benefit period begins the day you enter the hospital as an inpatient. And it only ends when you have been completely out of inpatient care for 60 consecutive days.

SPEAKER_00 3:25

Hold on. So if I'm hospitalized in January for a heart issue, pay this $1,632, recover, go home.

SPEAKER_01 3:32

Yeah.

SPEAKER_00 3:33

But then I have a completely unrelated emergency, like I break my hip in June, I legally have to pay that full deductible again.

SPEAKER_01 3:40

You do. You could easily pay it three or four times in a single bad year. It really compounds your out-of-pocket exposure alongside that uncapped 20%.

SPEAKER_00 3:49

That completely changes the math. So how do affluent Treasure Coast retirees actually plug this hole?

SPEAKER_01 3:54

They use a Medigap policy, which is a Medicare supplement. Specifically, they use Medigap Plan G.

SPEAKER_00 4:00

Okay. And mechanically, how does plan G work?

SPEAKER_01 4:02

Mechanically, it absorbs that uncapped 20% liability from Part B, and it covers all those recurring hospital deductibles from Part A.

SPEAKER_00 4:10

So it's left to pay.

SPEAKER_01 4:11

After you pay your monthly premium to the insurance company, your only out-of-pocket medical expense is the Part B annual deductible, which is just $257 in 2026.

SPEAKER_00 4:21

Aaron Powell That's a huge relief. But the Davies Guide emphasizes you can't just wait until you get sick to buy this, right?

SPEAKER_01 4:28

Oh, definitely not. There is a very strict six-month guaranteed issue window.

SPEAKER_00 4:33

When does that start?

SPEAKER_01 4:34

It strictly begins the month you turn 65 and enroll in part B. During those exact six months, insurance companies cannot use medical underwriting.

SPEAKER_00 4:43

Meaning they can't deny you.

SPEAKER_01 4:44

Right. They have to sell you the policy at the best possible rate, even if you are actively going through chemotherapy.

SPEAKER_00 4:51

And if someone misses that window, or they just didn't realize it was important.

SPEAKER_01 4:55

Then the leverage totally flips to the insurance company. They can dig through your records, charge astronomical premiums, or just flat out refuse to cover you.

SPEAKER_00 5:03

Wow.

SPEAKER_01 5:04

Plus, there's a pricing quirk specific to Florida called the attained age pricing model.

SPEAKER_00 5:09

Yeah, I saw that in the source material. Explain how that works because it sounds incredibly punitive.

SPEAKER_01 5:14

It really can be. With attained age, your monthly premium is tied strictly to your current age. So every single year you get older, your premium automatically goes up.

SPEAKER_00 5:23

Regardless of health.

SPEAKER_01 5:24

Completely regardless of health or general inflation. A policy that looks cheap at 65 can become prohibitively expensive by 85.

SPEAKER_00 5:33

So it's not just about finding the cheapest rate at 65.

SPEAKER_01 5:36

Exactly. The fiduciary strategy is selecting a carrier with massive financial reserves and a history of very low rate increases.

SPEAKER_00 5:44

Okay. So Medigap Plan G basically saves you while you're in the hospital or seeing doctors. But what happens when the hospital discharges you?

SPEAKER_01 5:52

Right. You're stable enough to leave, but you still can't physically dress or feed yourself at home.

SPEAKER_00 5:56

Aaron Ross Powell Which moves us right into the second major gap. And honestly, this seems like the biggest wealth killer.

SPEAKER_01 6:03

It is where the most catastrophic wealth destruction actually happens.

SPEAKER_00 6:06

The numbers are staggering.

SPEAKER_01 6:07

Yeah.

SPEAKER_00 6:08

Medicare pays basically nothing for long-term custodial care.

SPEAKER_01 6:11

Right. They cover up to a hundred days of skilled nursing, but only after a qualifying hospital stay.

SPEAKER_00 6:16

And skilled nursing is very different from custodial care.

SPEAKER_01 6:19

Vastly different. Skilled nursing is medical intervention like Ivy antibiotics after a stroke. Custodial care is just assistance with daily living, bathing, using the bathroom, getting out of bed.

SPEAKER_00 6:30

And Medicare covers zero of that. Meanwhile, private nursing facilities in Florida are over $100,000 annually.

SPEAKER_01 6:37

And memory care runs $120,000 to $150,000 a year minimum.

SPEAKER_00 6:43

Which is terrifying.

SPEAKER_01 6:44

What's fascinating here is that for a married couple, if both eventually need care for just a few years, costs can easily exceed half a million to a million dollars.

SPEAKER_00 6:53

A million dollars in cash.

SPEAKER_01 6:57

Absolutely.

SPEAKER_00 6:58

But looking at the solutions the guide offers, I do want to push back on one thing. They recommend a hybrid life and long-term care policy for high net worth folks.

SPEAKER_01 7:06

Yep. It's highly utilized on the Treasure Coast.

SPEAKER_00 7:09

Right. You take a lump sum, say $500,000, and reposition it from a CD into this hybrid policy. Trevor Burrus, Jr.

SPEAKER_01 7:15

Which creates a leverage benefit pool for long-term care. And if you never need pair, it pays a tax-free death benefit to your heirs.

SPEAKER_00 7:22

Okay, but let's be realistic. If a retiree has $5 million, why lock up $500,000 in a complex uh insurance product?

SPEAKER_01 7:30

You're thinking they should just self-fund.

SPEAKER_00 7:32

Yeah. Wouldn't a savvy investor just keep that money in the S P 500, earn a historical 8 to 10%, and just write a check to the nursing home from their market gains.

SPEAKER_01 7:42

We hear that objection all the time. On a spreadsheet, it makes perfect sense. But it completely ignores sequence of returns risk.

SPEAKER_00 7:50

Meaning bad market timing.

SPEAKER_01 7:52

Exactly. Imagine you decide to self-fund. You leave your money aggressively in the market. Then the exact year you need to enter a memory care facility at $150,000 a year, the stock market drops 30%.

SPEAKER_00 8:06

Oh, right. So I'm being forced to sell assets at a massive loss just to cover the facility bill.

SPEAKER_01 8:11

Precisely. You permanently lock in those losses. It drains your portfolio way faster than your optimistic projections accounted for.

SPEAKER_00 8:19

It makes a lot of sense.

SPEAKER_01 8:20

The hybrid policy is basically a non-correlated asset. The leverage is contractually guaranteed. You put in $500,000, they might guarantee a million-dollar care pool immediately. Trevor Burrus, Jr.

SPEAKER_00 8:29

You don't have to wait 15 years for the market to double your money. Trevor Burrus, Jr.

SPEAKER_01 8:32

Right. And the benefits are tax-free, whereas liquidating market assets triggers capital gains taxes. Trevor Burrus, Jr.

SPEAKER_00 8:37

It's defensive architecture.

SPEAKER_01 8:39

Trevor Burrus, Exactly. Now the guide does note that for the ultra-high net worth, say five to ten million in assets dedicated self-insurance is an option.

SPEAKER_00 8:48

Trevor Burrus Just setting a million dollars aside.

SPEAKER_01 8:49

Trevor Burrus Yes. But it requires immense discipline. They literally segregate those funds into conservative, liquid instruments so it's not subject to market volatility.

SPEAKER_00 8:58

Aaron Powell But either way, the timeline matters. You have to plan this in your late 50s or early 60s, well before Medicare eligibility.

SPEAKER_01 9:05

Trevor Burrus If you wait until you're 65, your health might already disqualify you. Aaron Powell Okay.

SPEAKER_00 9:09

So GAF two is about protecting the assets you have. GAP three is completely different. This is where the income you generate in retirement is actually weaponized against you. Trevor Burrus, Jr.

SPEAKER_01 9:18

You're talking about IRMAA, the income-related monthly adjustment amount.

SPEAKER_00 9:22

Here's where it gets really interesting. It's like a financial boomerang. Standard Medicare premiums are just a baseline, right?

SPEAKER_01 9:28

Right.

SPEAKER_00 9:28

If you're a married couple in 2026 and your modified adjusted gross income, your MGI crosses $212,000. Medicare slaps you with heavy surcharges.

SPEAKER_01 9:39

On both parts, B and D.

SPEAKER_00 9:41

And if you hit the top tier, meaning a Mad GI over $750,000, you're paying over $10,000 extra per year for the exact same medical coverage.

SPEAKER_01 9:52

And the way MadGI is calculated catches so many successful people off guard.

SPEAKER_00 9:56

Because it's not just social security, right?

SPEAKER_01 9:58

Yeah. It includes required minimum distributions from traditional IRAs, capital gains from selling property, even the supposedly tax-free interest from municipal bonds.

SPEAKER_00 10:08

But the boomerang part, the tricky part is the two-year look back rule.

SPEAKER_01 10:11

That's the kicker.

SPEAKER_00 10:12

If I'm paying my Medicare premiums in 2026, Medicare isn't looking at my 2026 income. They are looking at the tax return I filed for 2024.

SPEAKER_01 10:21

Because of IRS processing delays, two years ago is the most complete data they have.

SPEAKER_00 10:26

So a big Roth conversion or business sale I make today dictates my healthcare bills two years from now.

SPEAKER_01 10:31

If we connect this to the bigger picture, this is exactly how fiduciaries manage that exposure.

SPEAKER_00 10:36

How do they do that? Because wouldn't a Roth conversion trigger the IRMAA penalty anyway?

SPEAKER_01 10:41

It can if you do it blindly. That's why they use Roth conversion laddering. They don't convert a million dollars all at once.

SPEAKER_00 10:46

They stretch it out?

SPEAKER_01 10:47

Yes. They calculate exactly how much room you have in your current IRMAA bracket. Say they determine you can convert exactly $42,500 this year without tipping into the next surcharge tier.

SPEAKER_00 11:00

Oh wow.

SPEAKER_01 11:00

They do that exact amount, slowly draining the traditional IRA over a multi-year ladder. This shrinks the future RMDs that would force them into maximum penalties in their 80s.

SPEAKER_00 11:11

That's incredibly precise. The guide also mentions QCD's qualified charitable distributions, up to $105,000 at age 70 and a half.

SPEAKER_01 11:20

Aaron Ross Powell Right, because that money goes straight from your IRA to a charity. It satisfies your RMD, but never touches your bank account.

SPEAKER_00 11:26

Aaron Powell So it lowers your MGI.

SPEAKER_01 11:28

Completely invisible to the IRMA calculation.

SPEAKER_00 11:31

Aaron Ross Powell Let me ask you this though. What if the income spite wasn't a strategic move? What if I retired late, so I had a massive executive salary in 2024, but now in 2026 I'm on a fixed income.

SPEAKER_01 11:41

And Medicare is still hitting you with surcharges based on your old salary.

SPEAKER_00 11:45

Exactly. Am I just stuck paying that penalty?

SPEAKER_01 11:47

Aaron Powell Not at all. There's a little known IRS form called SSA 44. It allows you to formally appeal an IRMAA surcharge if you've had a life-changing event.

SPEAKER_00 11:54

Aaron Powell And retiring counts as a life-changing event.

SPEAKER_01 11:57

Trevor Burrus Retiring, getting divorced, the death of a spouse, they all qualify. You file the form, prove your new lower income, and they waive the two-year look back.

SPEAKER_00 12:06

That is fantastic. Okay, so we've covered hospital bills, nursing homes, and tax surcharges. Let's shift to gap four, the invisible gaps.

SPEAKER_01 12:15

The daily annoyances, routine care.

SPEAKER_00 12:17

Right. Standard Medicare covers almost no dental vision or hearing. The guide says retirees spend $1,500 to $3,000 annually out of pocket for this. Hearing aids alone can be $7,000 a pair.

SPEAKER_01 12:30

It's a huge out-of-pocket shock for new retirees.

SPEAKER_00 12:33

But I have to ask, why wouldn't these affluent retirees just use a Medicare Advantage plan? We see the commercials all the time, throwing in dental envision for free.

SPEAKER_01 12:40

It comes down to a critical trade-off network restrictions.

SPEAKER_00 12:44

Ah, HMOs and PPOs.

SPEAKER_01 12:45

Exactly. High net worth retirees on the Treasure Coast want access to the absolute top specialists in Stewart or Jupiter Island or Mayo Clinic.

SPEAKER_00 12:54

And Medicare Advantage often restricts that.

SPEAKER_01 12:56

Heavily. You have prior authorizations, gatekeepers, out-of-network denials. If you have $3 million, you do not want an insurance company dictating your cancer treatment.

SPEAKER_00 13:05

So they opt for traditional Medicare for the freedom.

SPEAKER_01 13:07

Yes, unfettered access. And to cover the routine stuff, they just buy standalone dental and vision plans. It's maybe $30 to $80 a month, but it preserves their freedom of choice.

SPEAKER_00 13:18

Aaron Powell Okay, so what does this all mean for you, the listener? How does it all snap together? Walk me through the Davies Wealth Management Case Study, the $3.2 million retired executive couple in Stuart.

SPEAKER_01 13:30

Sure. It's a fully coordinated plan. First, at 65, they take parts A and B for nationwide provider control. Then during that six-month window, they get Medigap Plan G to close Gap One, the hospital deductibles, and 20% liability, plus a standalone part D for drugs.

SPEAKER_00 13:46

And for long-term care. Gap two?

SPEAKER_01 13:48

They reposition an old $600,000 CD into a hybrid LTC policy that walls off the core portfolio from nursing home costs.

SPEAKER_00 13:56

What about IRMA?

SPEAKER_01 13:57

They do Roth conversions from 65 to 72 to manage future IRMAA. Once they hit 70 and a half, they start doing QCDs to keep their MGI down.

SPEAKER_00 14:06

And finally, standalone dental and hearing plans for gap four.

SPEAKER_01 14:10

Exactly. It's a cohesive strategy.

SPEAKER_00 14:13

The main lesson here is that Medicare planning isn't just an insurance decision, it is the intersection of tax strategy, cash flow management, and estate planning.

SPEAKER_01 14:22

And handling these gaps incorrectly can easily erode decades of discipline saving. That's why coordinating with a fee-based fiduciary is just so vital.

SPEAKER_00 14:31

Completely agree. And we'll leave you, the listener, with a final lingering thought to ponder on your own.

SPEAKER_01 14:37

It's a big one.

SPEAKER_00 14:38

Because of Medicare's two year IRMAA look back, the financial decisions you made in 2024 are already writing your 2026 healthcare bills. If you look at the wealth building moves you are making today, what future healthcare reality are you accidentally writing for yourself?

SPEAKER_01 14:52

Really makes you stop and think.

SPEAKER_00 14:54

It does. Thanks for joining us, and we'll catch you next time on the deep dive.