Costly Medicare Mistakes You Shouldn’t Make

According to the latest Consumer Expenditure Survey, healthcare is one of the three biggest expenses encountered by retirees—with these costs growing over time!

Providing coverage for over 62 million Americans, Medicare is the most common insurance option for retirees. Therefore, it’s hard to argue against this as an essential component of retirement planning.

That said, one might assume a large proportion of people have at least a broad overview of Medicare and how it works. Yet, a recent Harris Poll survey claims more than 7 out of every 10 participants over age 50 wish they had a better understanding of Medicare coverage!

In fairness, there’s no disputing that Medicare particulars are sometimes very complicated and—quite frankly—overwhelming. However, let’s discuss some common (and costly) mistakes you can easily avoid without exerting too much effort in the process.

Not enrolling on time during the initial enrollment period

If you’ve received Social Security or Railroad Retirement Board benefits for at least four months prior to turning 65, the government will often automatically enroll you in Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) at age 65—with your Medicare card/instructions typically arriving in the mail three months prior to your 65th birthday.

All other eligible seniors have a seven-month enrollment window to sign-up for Medicare, beginning three months before you turn 65 and ending three months thereafter. You can apply for benefits online or over the phone.

If you miss your initial enrollment period, you can sign up during the Medicare General Enrollment Period (January 1-March 31, annually) and your coverage will start on July 1st.

If you don’t qualify for free Part A premiums and don’t buy in when you’re first eligible for Medicare, your monthly premium could go up 10%. You’d also need to pay this late enrollment penalty for twice the number of years you didn’t sign up but could have. For example, if you were eligible for Part A for two years but didn’t sign up, you’ll need to pay the higher premium for four years.

Not enrolling for Medicare Part B on time

Medicare Part B covers medical services and supplies that are necessary to treat your health condition: including visits to doctors and other healthcare providers, medical equipment, and ambulance services. You are required to enroll in Part B if you don’t have “creditable coverage” from another source, such as an employer. A failure to do so may result in a 10% monthly premium fee for each 12-month period you could have had Part B but didn’t. In most cases, this penalty is assessed for as long as you possess it.

You can enroll for Part B during your initial enrollment period or the Medicare General Enrollment Period.

Not enrolling for Medicare Part D on time

Medicare Part D helps cover the cost of both brand-name and generic drugs. To qualify for this optional plan, you must have Medicare Part A and/or Part B. You can obtain Part D through stand-alone coverage or a Medicare Advantage Plan. No matter which option you choose, you must go through a private insurance company regulated by Medicare and enroll during a designated enrollment period: such as your Initial Enrollment Period, Annual Enrollment Period (October 15-December 7 each year) or a Special Enrollment Period.

While Medicare Part D is optional, if you go without credible prescription drug coverage for more than 62 consecutive days after you’re first eligible, you’ll need to pay a late enrollment penalty once you do in fact enroll. This penalty is permanent and depends on how long you lacked Part D or credible prescription coverage.

Waiting to buy a Medigap policy

Offered through various insurance companies, Medicare Supplement plans cover many out-of-pocket costs Original Medicare does not: such as copayments and deductibles. Some policies also cover medical expenses when you travel beyond U.S. borders—another service Original Medicare doesn’t offer.

If a Medicare Supplement plan (also known as a Medigap policy) is right for you, keep in mind that insurers who offer such policies cannot deny you coverage or charge you more for any preexisting condition when you first enroll in Medicare. However, adding a Medigap policy outside of your initial seven-month enrollment period may cost you more overall; even worse, insurers can deny you coverage based on your health status. Specifics vary from state to state, so be sure to do your homework accordingly.

Not knowing that income increases may boost your Medicare premiums

Medicare Part B premiums are based on your income levels. If you earn $91,000 or less ($182,000 or less if you file a joint tax return) in 2022, you’ll pay a monthly premium of $170.10. If you earn just $1 more than these thresholds, your monthly premium will jump to $238.10 (and higher if you earn even more)!

You’ll also need to consider Medicare surcharges that trigger for any income above the same thresholds—starting at $12.40 in additional monthly charges and rising to $77.90 per month. Surcharges can be mitigated through proper tax planning or contested by filing an appeal—typically in light of a life-changing event.

Assuming your Medicare coverage also covers your spouse

Unlike most employer-based programs, Medicare applies only to the enrolled individual. This means your spouse must also enroll in Medicare (or, if not yet eligible, seek out coverage elsewhere).

Not getting the most out of Medicare Part D

Rising prescription drug costs has created a myriad of challenges for retirees. Specifically, drastic increases have prompted many seniors to reduce their intake of prescription drugs, purchase less expensive prescription drugs from other countries such as Canada, or—in extreme cases—skip their medications entirely.

That said, some plans boost their premiums more so than others and/or add new hurdles before agreeing to cover your medications. It’s therefore important to review available plans in your area during the Medicare Open Enrollment Period as a sensible way to save money (as well as potential headaches).

If your spouse is also enrolling in Medicare Part D but requires different medications, it may make sense to participate in different plans that each cater to your own individual needs.

Assuming Medicare covers long-term care

Many people incorrectly assume Medicare covers long-term care. The truth is that it doesn’t, except in very limited circumstances. With recent studies reporting the annual median cost of nursing home care rings it at almost $90,000, expenses can quickly alter retirement dreams.

Long-term care insurance policies typically cover out-of-pocket expenses that accompany home care, assisted living, and nursing homes—benefits not covered by Medicare and other public programs.

In sum: avoiding common Medicare mistakes

With healthcare costs constantly increasing over time, it’s important to understand your Medicare options to help combat these expenses—especially during retirement. While navigating the Medicare maze isn’t always easy, you can now see that it’s easy to sidestep some of these common (and costly) mistakes without exerting too much effort overall.

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Vision Retirement is an independent registered advisor (RIA) firm headquartered in Ridgewood, New Jersey. Launched in 2006 to better help people prepare for retirement and feel more confident in their decision-making, our firm’s mission is to provide clients with clarity and guidance so they can enjoy a comfortable and stress-free retirement. To schedule a no-obligation consultation with one of our financial advisors, please click here.

Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.