9 Common Medicare Mistakes to Avoid

You ever had the experience of reading or hearing about something and thinking to yourself that seems easy enough to understand, only to start to dig into it a little and realize it gets more complicated the deeper you look?

Medicare is definitely a good example of this. Sheesh…talk about confusing.

It’s supposed to be simple, right? It’s just insurance the government gives you, that’s easy enough.

Not so much.

And if you aren’t prepared and make mistakes, wow…those mistakes can cost you dearly.

Introduction

You’ve heard about this most of your life. Medicare. The health insurance for the elderly.

Sounds good, given what you probably pay if self-employed, or if you have an employer who offers health insurance but doesn’t actually pay much, leaving you to cover a major portion of the bill for you and your family.

Let’s face it, healthcare insurance isn’t a luxury you can choose to pass on and spend the money elsewhere. One serious injury of illness, especially something chronic, can put you and your family in the poorhouse for good.

No, health insurance is a necessity and it’s expensive.

KFF, a recognized leader in independent health related research and policy, estimates that the average spent on single coverage health insurance annually is $7,739, and  $22,221 for family coverage. And that will climb. They state that the average family premium has increased 20-percent since 2017 and 43-percent since 2012. Ouch!

If you’re lucky you have an employer who pays a large percentage of your insurance coverage. KFF estimates that employers in the U.S. pay an average of 82-percent of single employee premiums and 70-percent of family premiums. For small businesses (less than 200 employees), roughly 1/3rd of employees pay more than 50-percent of their family premium.

And if you’re one of the 16+ million self-employed in the U.S. (over 10-percent of the workforce), then you are likely covering the cost of insurance all by yourself.

With all those things in mind, it’s safe to say health insurance for ourselves and our families is a dang big issue.

So, getting to a point where the government will provide insurance is a major milestone for most of us. What a relief. And they do so when many of us are retired or ready to become so. All the better!

But… It’s always the “but” that gets you, isn’t it?

But, while most automatically become eligible when turning 65, there are a slew of things you must consider and do or you can end up being penalized, in many cases for the rest of the period you receive Medicare. For most that translates to life.

There a special periods with set numbers of days or months in which to do things and some hoops to jump through or you can pay dearly. You’ll have to learn about primary versus secondary, supplemental insurance, as well as original (traditional) versus Medicare Advantage, the various Medicare Parts, and more.

In this article we are going to cover some of the major components of Medicare, along with mistakes you definitely want to avoid when it comes time to register.

Medicare & mistakes that can cost you big time.

Be sure to learn the differences between original Medicare and Medicare Advantage

When it comes to Medicare coverage that you become eligible for when turning 65, you need to know there are options – original Medicare and Medicare Advantage or MA. And you need to recognize there are differences between the two that can have a big effect on your healthcare and finances in retirement.

Original Medicare is the program that has been offered for decades through the federal government. It includes Part A, which is hospital insurance covering things like inpatient, nursing facility, hospice and home care.

Part B is medical insurance covering things like doctor visits and services from other health care providers, certain types of home health care, outpatient treatments and care, preventative services and programs (e.g., shots, wellness visits, screenings), and medical equipment, such as hospital beds, walkers, wheelchairs, etc.

It doesn’t include a drug plan, so you must purchase a Part D plan separately to have prescription drug coverage (both generic and brand-name prescriptions) or buy your own prescription plan through a private company or network.

Keep in mind that there are still costs associated with Part A, B and D coverage, including co-pays, coinsurance, your premiums, deductibles, and more.

You can purchase Medigap (a form of privately administered insurance from a carrier approved by Medicare) to supplement your original Medicare coverage. It will help pay for costs not covered by Medicare and that you would have to pay out-of-pocket.

An important point to consider is the fact original Medicare has no cap on out-of-pocket expenses, so if you see the doctor often and/or have chronic issues, your coverage can get very expensive. If instead you’re pretty healthy and rarely go to the doctor, then original Medicare might suit you best.

On the flipside, most doctors throughout the U.S. accept Medicare coverage, so chances are you can use your existing doctor. And if traveling and need to see a doctor they will probably accept your Medicare coverage.

Medicare Advantage plans are a type of plan approved by Medicare that are provided by private insurers that offer Part A and Part B coverage, much like original Medicare, and often Part D prescription coverage, all wrapped into one plan.

Keep in mind that most MAs come with other benefits, such as vision and dental coverage, as well as perks like gym memberships and other goodies.

Importantly, they do have capped out-of-pocket maximums, so an MA plan can be more ideal if you see the doctor often or have chronic illnesses.

While they often have lower out-of-pocket expenses than original Medicare, you usually are limited to utilizing doctors and facilities that are in their network, or you’ll pay extra and might even be denied coverage on some claims. And if you travel you may not have access to your network providers, which could be costly.

Before making a decision about Medicare, you have to determine whether original Medicare or an MA plan fits better in your budget, as well as your lifestyle, medical needs, and more.

The big one – not signing up on time

A lot of times we view deadlines more as guidelines and any consequences that might be attached as thin threats that are never enforced.

That’s definitely not the case when it comes to Medicare. You have windows in which to enroll and make decisions. Failure to do so can cost you more to be ensured for the remainder of your lifetime.

When it comes to Medicare, you can enroll starting three months prior to the month of your 65th birthday and up to three months after your birth month.

Fail to enroll during that initial enrollment period (IEP) and it will cost you. You’ll still be able to enroll during the annual general enrollment period, which runs from January 1st through March 31st. But when you do so, you’re penalized (late enrollment penalty) on your Part B coverage, which is 10-percent.

Another thing to keep in mind is the fact that for every 12 months you delay signing up for Part B coverage your monthly premium may be 10-percent higher. That can get quite expensive and will remain that way for the entire period you remain enrolled in Part B coverage.

The same holds true for Part D coverage. For each 12-month period you delay signing up for Part D coverage with Medicare, your premiums will increase by 1-percent and remain elevated for the entire period you remain enrolled in Part D.

(Note, you don’t have to enroll in Part D prescription coverage with Medicare as long as you can demonstrate you have “creditable” drug coverage as good or better than that offered in Medicare Part D)

Missing a special enrollment period

The special enrollment period (SEP) is a provision that allows you to elect Medicare if you’re 65 or older and still have job-based insurance (or your spouse does), or if you lose that insurance.

If you do lose your job-based insurance you have up to eight month to enroll in Medicare and avoid the aforementioned late enrollment penalty.

Not coordinating your current work coverage with Medicare

If you do have job-based insurance when you turn age 65, your employer may be able to designate Medicare as your primary insurance, depending on their size (small employers) and certain conditions.

For most larger employers your work-based insurance will be your primary coverage and Medicare will be considered secondary coverage.

This is an important distinction to be sure of when you do turn 65. If your employer insurance is considered primary you may still want to purchase Medicare to make payments covering costs not paid by your work-based insurer. In other words, Medicare will pay second on claims.

If instead your employer is able to designate Medicare as your primary insurance and the insurance they offer as secondary, they won’t pay for claims until after Medicare pays. If you don’t have Medicare insurance in that scenario, the worked-based insurance will never pay and you could be left holding the bag.

Failing to check prescriptions for coverage

With all health insurance plans, they offer a list of generic and brand-name prescriptions that they cover, which is referred to as their formulary.

Original Medicare and Medicare Advantage plans are no different. In order to have coverage applied (either partly or fully), any prescription drug you have been prescribed must be listed in their formulary. If not, you can ask for an exception, file an appeal, pay out-of-pocket or forgo using the drug, which may not be an option.

Keep in mind that even if the drug is covered, you may still owe a copay that is set by the plan.

Not buying Medigap

Medigap is a form of  Medicare supplement if you elect original Medicare coverage. It is issued by private insurers and is meant to bridge the gap in coverage between your Part A and Part B plans. Simply stated, Medigap helps cover some part (sometimes all) of your portion of the costs not covered by Medicare Parts A and B, such as coinsurance, copays and deductibles.

Keep in mind that there is a Medigap open enrollment period that starts once you turn 65 and have enrolled in Medicare Part B. This period lasts for six months, during which time you can’t be denied for preexisting conditions. They also have to sell you a plan at their best available rate.

After the open enrollment period they can deny coverage for preexisting medical conditions and don’t have to sell a plan at the best available rate.

Check for changes to plan

Medicare Advantage plans often change. This can include things like premiums, deductibles, coinsurance, copayments, and more. A common issue that people run into is a change in drugs that are covered (formularies) and even the doctors or facilities you must use to remain in network.

Given that Medicare Part D or Medicare Advantage plans auto-renew each year (January 1st), you need to check for changes in your coverage before the renewal occurs. And if there are issues or things you are not happy about, contact your Medicare Advantage provider to address the issues before the annual renewal.

Pay attention to the perks

Many plans are offered with perks that you’ll see listed in their advertisements, but those “goodies” often come with conditions or strings attached.

Gym memberships, shopping clubs, dental or vision coverage, safety devises and over-the-counter products, and more, are the types of perks offered. But they are often not free, so you might have to pay for a portion of the cost of the perk out of pocket.

And they can change from year to year. So good dental coverage this year, but not so great coverage the next. Same for memberships and other benefits. It is a matter of buyer beware, so you need to check the fine print in order to understand how the perks work, restrictions, and more.

Be aware when it comes to the ads

No doubt you’ve seen the TV commercials that play repetitively during certain parts of the year that promote Medicare Advantage plans. You probably get inundated by the direct mail ads as well.

They often claim to work with or be contracted by Medicare, but they are not. They are simply approved by Medicare.

Quite often they claim they can get you more money, along with other perks. Ultimately many of these ads are geared simply toward getting you to change your plan, which could be a terrible mistake.

Definitely contact Medicare before ever changing your plan. You can do so at 1-800-Medicare (800-633-4227).

Conclusion

Medicare….hmmm, not so simple after all.

It’s definitely one of those things in life where you know you want and need it, but the actual thought of taking it on seems a bit daunting, so you hold off and delay. Sorta like starting that gym package or new routine. The first step is the biggest.

In this case though, you may not end up spending and wasting a few dollars, relatively speaking, when you never actually go to the gym or take the course or read the book that’s supposed to change your life.

No. Mistakes or delays in registering or making choices regarding Medicare can cost you dearly. And not just on a one-time basis. Actually for the rest of your life, potentially.

Talk about buyer’s remorse – you miss a deadline and even while in the act of purchasing something good and necessary you’ll know that you are overpaying due to a simple mistake. Like a pebble in your shoe, you’ll be reminded for the rest of your life that the  gov’t was dang serious when it came to their Medicare deadlines.

And this is just scratching the surface…there’s definitely more.

Obviously that’s a lot to take in and process. For most they’d be better served utilizing some help and guidance when it comes to making their Medicare decisions.

We haven’t even talked about the projected premium increases to Medicare Parts B and D going forward, as well as Income Related Monthly Adjusted Amount (IRMAA) surcharges that are based on your income level in retirement. IRMAA can potentially cost you tens of thousands in taxes alone once you start taking required minimum distributions at age 73.

And then you consider the bigger picture. Medicare is just one part of retirement and living out your golden years. There’s a ton more key considerations when it comes to your retirement – both prior to doing so and certainly for the duration thereafter.

We can work with you to address your ever-increasing healthcare needs and costs in retirement, creating a holistic, comprehensive retirement plan that includes tax, income and spending strategies customized to maximize and preserve your portfolio and reduce taxes, completely customized to you and your spouse’s situation. A plan created with the goal of ensuring you have the best opportunity of living out the retirement you envision.

If you are ready to take the next step and talk to a team of retirement planners who can advise on Medicare, Social Security and myriad other retirement issues, and who will put your interests first, Schedule a call today!