November 29, 2020

Edited 12/29/20

8 Costly Medicare Mistakes to Avoid

Medicare in retirement is tricky and can get very expensive, so make sure you’re protecting your savings and avoiding these costly mistakes.

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Medicare can be complex, so it’s easy to make mistakes as you enter and navigate the system. Making these Medicare mistakes can cause you a lot of extra hassle and expense. In order to save more of your hard earned retirement funds, avoid making these eight costly Medicare mistakes:

1. Not knowing the difference between the Original Medicare and Medicare Advantage.

There are two options to choose from when it comes to healthcare: Original Medicare or Medicare Advantage.

  1. Original Medicare, also known as Medicare Part A and Part B, is federally funded insurance. Part A and B covers hospital insurance and medical coverage, respectively. You may need to add Part D (a Prescription Drug Plan) and you may need additional supplemental insurance plans like Medigap.
  2. Medicare Advantage, also known as Medicare Part C, is coverage offered by private insurers. It generally bundles  Parts A, B, and D. However, each policy is different and often changes.

Thus, you need to see which option is best for your current and future healthcare needs. However, both options may require patients to pay premiums, deductibles, and copays.

2. Not signing up for Medicare Part B and Medicare Part D (prescription drug coverage) when you turn 65.

Your Medicare Part B premium will increase 10% for each 12-month period you could have been enrolled but weren’t. For Medicare Part D premiums, you will have to pay a 1% late penalty for each month that you did not have prescription drug coverage through Medicare Part D, Medicare Advantage, or an employer-sponsored plan. 

Not everyone retires at age 65. If you’re working, you may want to keep your employer-sponsored health insurance and delay enrolling in Medicare Part B and Medicare Part D. Don’t forget to enroll in Medicare Part B and Medicare Part D if you leave your job or your COBRA coverage ends. It’s important to never go without health insurance.

3. Not paying attention to the Fall Open Enrollment period for Medicare Supplement Insurance (Medigap) plans.

If you don’t enroll at the right time, insurers can refuse to sell you a Medigap plan or deny coverage for your pre-existing conditions. If you buy a Medigap plan within six months of initially signing up for Medicare, you are guaranteed enrollment in a policy, regardless of any pre-existing health conditions.

4. Keeping your existing plan without reviewing your alternatives.

You should compare your Medicare Advantage plan options each year because the plan rules change and your medical needs change. You might find a less expensive plan that better fits your current needs. Use free online tools like eHealth Medicare, a non-government website, to compare plans and get access to live agents to answer your questions.

5. Picking the same plan as your spouse.

Every person is different in their medical history and current conditions, so a plan that works well for your spouse is not necessarily the right plan for you. Compare the plans with your specific health care needs in mind. You and your spouse each have to sign up for Medicare individually. You do not automatically get enrolled if your spouse already has Medicare.

6. Not Planning Ahead for Your Future Health Needs. 

Some people underestimate their health risks because it’s daunting to envision yourself getting sick. But, picking a plan now based on your current health might not make sense for your future health. You should really try to anticipate where your future medical expenses will be, if possible.

7. Thinking Medicare Covers Everything.

Remember that Original Medicare does not cover hearing aids, eyeglasses, dentures, dental care, long-term care, and routine foot care. Some of those are very large expenses that you could have to pay out of pocket at some point in the future. There’s a way to prevent that. Most Medicare Advantage plans cover vision, hearing and dental care.

8. Overlooking Changes in Your Income Affects Your Premiums.

Most people pay the standard amount for Medicare Part B and Medicare Part D premiums, but if your adjusted gross income is above a certain level, you’ll have to pay an extra charge in your monthly premiums.

Be aware if your annual income is close to this threshold so you can adjust working hours or other income sources to avoid exceeding the threshold. For example, for Medicare Part B premiums in 2021, the extra charge begins if your income in 2019 was more than $88,000 for an individual or $176,000 for a couple. 

You can file an appeal if you think you’ve been incorrectly charged a higher premium. For example, you can request a review of your income if you recently married, divorced, or became widowed. The same is true if you or your spouse recently stopped working, reduced your work hours, or experienced a termination of an employer’s pension plan. 

Medicare can be an excellent protection for patients whose medical needs grow as they get older, but it’s not free. You can save plenty of money if you understand what Medicare mistakes you need to avoid in your timing, enrollment and income decisions.