July 28, 2015 — There is at least one good thing about getting to the ripe old age of 65 – you are eligible for Medicare! It pretty much removes the worry of finding health and drug insurance coverage, and you get this benefit at a very low cost. But if you make some of these common mistakes, you might not be eligible for it when you want it, or it might cost you more money than it should.
We think this article will be useful for people who have not yet signed up for Medicare as well as those who are already in the program. It is part of our series on Medicare and health care insurance. See the bottom of this page for links to the rest of the series.
But before we launch into the worst Medicare mistakes, here is a tiny background about Medicare:
What is Medicare, and who is eligible?
Medicare is health insurance for people 65 years or older, under age 65 with certain disabilities, and any age with end-stage renal disease (ESRD) or Lou Gehrig’s disease. Medicare has four parts — Part A, which is hospital insurance, Part B, which is medical insurance, Part C, which is Medicare Advantage Plans, and Part D, which is Prescription Drug Coverage. You are eligible for premium-free Part A if you are age 65 or older and you or your spouse worked and paid Medicare taxes for at least 10 years.
What is the difference between Medicare and Medicaid?
Medicare is a health insurance program that is available to eligible people over 65 and a few other individuals suffering from special illnesses. Most people qualified for the program by paying Social Security and Medicare payroll taxes. Medicaid is a joint Federal and State program that helps pay medical costs for some people, irrespective of age, with limited incomes and resources. Most of your health care costs are covered if you have Medicare and Medicaid. Medicaid programs vary from state to state.
Biggest Medicare Mistakes
1. Not signing up for Medicare at age 65 if you are not already enrolled in Social Security or still actively working.
If you are receiving Social Security benefits you will automatically be enrolled in Medicare. But if you decide not to apply for SS by age 65, you have 7 months to enroll in Medicare (3 months prior to your 65th birthday, your birthday month, and 3 months later). The only valid excuse for not signing up at age 65 is when you are actively working and have coverage in a group plan. If your spouse is covered in the group plan, he or she can also delay signing up for Part B.
The penalties for not signing up on time for Part B are severe. For one, there is a 10% lifetime penalty for every 12 months you delay Part B enrollment (e.g.; a 3 year delay equals 30% penalty). Another major penalty is that if you don’t sign up and then need major medical care, you might not be able to get coverage for a long time. First you must wait for the Jan-March signup period, and even after that the coverage will not start until the following July. In the case of a catastrophic illness, the consequences of not having coverage could be very serious.
2. Not understanding the various kinds of plans, or choosing the wrong kind of plan.
First you have to understand the various Medicare plans (Parts A, B, C, and D), and then choose the right one among them. Part A (hospitals) enrollment is automatic and free for most people. But making the choice between Part B (medical care from doctors, etc.) or C (Medical Advantage) is more complex. Part B generally gives you more hospitals and doctors to choose from, but at a higher cost. Part C offers lower costs and deductibles but more limited choices. For a retired snowbird the choice might be easy – the Part C network choices are probably not available in both your winter and summer locations, so you have to go with Part B. For others it is a decision that will require some thought.
If you are choosing a Medigap policy, which will help you reduce your out of pocket costs, you need to pick the right one. For example some plans might make you pay extra for certain pre-existing conditions, while others do not. It is important to compare different plans against your situation.
3. Missing the deadline signup for Medicare after leaving your job.
As we mentioned you do not have to sign up for Medicare if you are actively working at age 65. But when you leave that job, you have 8 months to do so. Penalties will apply if you do not.
4. Not reviewing your plan choice every year during the open enrollment periods.
Every year you need to review your situation against your coverage. And the time to do that is during the open enrollment period, which starts on October 15 and runs through December 7. For example, is Part C still a good choice for your situation, or is Part B better? Maybe you have moved and the doctor network that covers you is not nearby. Perhaps the cost factor between B and C plans has narrowed. Maybe you can get a lot better deal on your Medigap insurance, or you need to step up coverage because of your changed medical situation. Failure to review your situation could mean that you don’t have the access or the coverage that you need. See our article on “Open Enrollment“.
5. Not reviewing Part D every year.
Part D plans (prescription drug coverage), also offered by private insurance companies, can be be very volatile. Prices and availabilities are largely driven by what drugs you take, or what you might need in the future. The experts caution against putting your Part D plan on autopilot, because if you do you might find yourself paying a lot for drugs you don’t take any longer, or not covered for some you do need.
Medicare videos – a great resource:
We recommend you invest 5 minutes to watch this informative video with Medicare trainer Andy Tartella “The ABCD’s of Medicare.” It is part of a series produced by the Centers for Medicare and Medicaid Services (CMS), an agency of the U.S. Department of Health and Human Services. Another good video is one produced by Kiplingers, “5 Common Medicare Mistakes“. Lastly, this article from the Squaredaway blog has even more Medicare videos worth watching. Spend a few minutes, you’ll be an expert!
Medicare is a great plan and a comfort to millions of Americans over 65. But if you don’t insure you get enrolled on time, or take it for granted down the road, you could jeopardize that piece of mind.
For further reading
FAQ feature at Medicare.gov
So You’re Turning 65: Your Medicare 101 Guide
Topretirements Survey Report: We Like Medicare, Please Keep it Working!“, reports on the results of our recent member survey on Medicare.
What to Do About Health Insurance If You Retire Before Age 65“.