Medicare Isn't Just Expensive -- It's Unpredictable. Here's How to Plan for That.

Many older Americans look at Medicare as a safety net, like Social Security. But while both programs can change from year to year, Social Security benefits usually change for the better.

With Social Security, your monthly checks are eligible for an annual cost-of-living adjustment. There are actually provisions to prevent those benefits from decreasing from one year to the next.

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Medicare, on the other hand, tends to change for the worse yearly. Specifically, the cost of Medicare tends to increase, and that can be tricky to plan for. But it's important to anticipate those higher costs and do what you can to minimize the financial pain.

Why Medicare costs are so uncertain

At first, Medicare might seem straightforward. Most enrollees don't pay a premium for Part A, which covers hospital care. But there's a monthly premium associated with Part B, which covers outpatient care.

Medicare Part D drug plans set their own premiums. There are even some $0 premium plans. The same holds true for Medicare Advantage plans.

The problem is that a lot of your costs under Medicare could change over time. With Part A, your inpatient deductible and daily coinsurance rate could change from year to year.

With Part B, your premiums could rise, too. This year, for example, the standard monthly Medicare Part B premium increased from $185 to $202.90.

The costs you face under Part D and Medicare Advantage could increase as well. Your plan's premiums could go up, and you might lose certain types of coverage that result in higher out-of-pocket costs.

Then there are IRMAAs to think about. IRMAAs, or income-related monthly adjustment amounts, apply to higher earners. And what they effectively do is tack a surcharge onto the costs of Part B and Part D.

IRMAAs are based on your income from two years prior. But IRMAA tiers also change annually, so it's not always such an easy thing to avoid those extra costs.

How to build a more resilient plan

Healthcare might end up being one of your biggest costs in retirement. And Medicare will likely play a huge role in that. Since Medicare costs may not be as predictable as you'd like them to be, it's important to build some flexibility into your plan.

First, don't budget for your premiums exactly. Expect those premiums to increase and allow for some wiggle room in your budget to reflect that. You should also include some spending room for higher-than-average costs, such as if you undergo a procedure that leaves you with a big bill.

Next, if you're eligible to participate in a health savings account during your working years, fund one and reserve the money for retirement. That way, you'll have a dedicated pool of funds to tap for healthcare spending.

Also, look at Medigap insurance if you'll be sticking with original Medicare, as opposed to enrolling in a Medicare Advantage plan. A Medigap plan can help cover costs like deductibles and coinsurance.

Additionally, review your Medicare plan choices every year during the program's open enrollment period. Comparing plans could help you uncover opportunities to reduce your costs or find coverage that's a better match for your specific healthcare needs.

Finally, be savvy with income planning. Withdrawing from your retirement savings mindfully could help keep your income below IRMAA territory. At the same time, read up on IRMAA rules so you can plan strategically.

And also, if you have a large amount of money in a traditional IRA or 401(k) plan, consider a Roth conversion before required minimum distributions start. Otherwise, those mandatory withdrawals could result in IRMAAs.

Medicare may be something you rely on heavily in retirement. But the costs associated with it aren't cheap, and they also aren't fixed. By planning for ever-changing costs, you can set yourself up to more easily pay your healthcare expenses and limit your financial stress over time.

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