Turning 65? Time to Enroll in Medicare. But Don’t Delay or It Could Cost You!
For most Americans, Medicare covers a healthy portion of health care expenses after they turn 65. The enrollment window begins three months before the month you turn 65 and lasts for three months after that. The real issue is how much and what you should sign up for as there are several choices to make.
Find out and learn as much as you can now, because if you make any mistakes during the enrollment process, you could wind up paying high premiums and hefty out-of-pocket costs. That’s our best advice. But sometimes, people don’t heed good advice and they make mistakes, among them: they underestimate costs, miss deadlines, and fail to get full coverage.
So, go into this with your eyes wide open. Medicare has strict enrollment rules which can lead to a few surprises, especially if you don’t take the time to understand when you should enroll. We’ve prepared a quick summary of the kinds of mistakes people typically make and provided some advice on how to avoid them.
Above all, be an informed consumer. Begin your journey by visiting the following websites which will have answers to many of your questions. Additionally, there are private consultants who can help you.
The Ten Common Mistakes People Make
(The following information is courtesy of AARP, The Wall Street Journal, and Kiplinger’s.)
1. Missing the deadline to sign up for Medicare
Sign up for Medicare on time. As you approach 65, enroll during what the government calls your initial enrollment period. If you don’t sign up during this period, you can get another chance to enroll during Medicare’s annual general enrollment period, from Jan. 1 through March 31 of each year. But, because you enrolled late or delayed, your monthly premiums for Medicare Part B — which covers your doctor visits and other outpatient services—can cost you more.
2. Not realizing there’s special enrollment period for special situations
If you are over 65, or lose your health insurance coverage or that of your spouse, there is a special enrollment period that gives you the chance to sign up for Medicare without facing a late enrollment penalty. But you can only use this option either while you are still covered by your job-based insurance or for eight months after it expires. (COBRA does not qualify as “job-based coverage;” it is considered secondary coverage.) Ask your benefits manager or human resources department if you’re not sure or seek help from 1-800-MEDICARE.
3. Underestimating the costs of traditional Medicare
Traditional (“original”) Medicare has three parts: A, B, and D. Part A covers care for inpatient hospital services; Part B covers physician services; Part D covers prescription drugs. If you claim Social Security before age 65, the Social Security Administration automatically enrolls you in traditional Medicare when you turn 65. But traditional Medicare alone might not be the best fit for your needs. There are deductibles, co-payments, and many other costs. So, Medicare Advantage, an alternative to traditional Medicare, should be considered. Often referred to as “Part C”, it is delivered by private companies that are approved by Medicare. However, prescription drug coverage is not always included.
4. Underestimating the Costs of Medicare Advantage plans
If you are eligible for Medicare, you have a choice to receive your benefits through traditional (original) Medicare or a Medicare Advantage plan. The type of Medicare coverage you choose depends on various factors such as your health care needs, the insurance your doctors accept, where you live, whether you travel often, and your financial situation.
Original Medicare is the traditional program offered directly through the federal government. Most doctors in the U.S. takes this insurance. To help pay for your out-of-pocket costs, you can buy a Medigap policy, which has its own separate monthly premium. Original Medicare does not include prescription drug coverage, so you must sign up for a separate Part D plan if you do not have other drug coverage. Original Medicare does not put a limit on your annual out-of-pocket costs.
Medicare Advantage (MA) is a private insurance alternative to original Medicare. These plans provide Part A, Part B and usually Part D benefits. They may also offer other benefits that original Medicare does not cover. Some MA plans may also provide some nontraditional services, such as paying for wheelchair ramps or transportation to medical appointments. These plans may also have different costs and rules than original Medicare.
5. Choosing traditional Medicare without Medigap
Medigap is supplemental health insurance that works with traditional (original) Medicare. Medigap—supplemental insurance sold by private companies—helps traditional Medicare beneficiaries pay for the cost-sharing in Parts A and B. Yet, almost as many people who choose traditional Medicare, don’t have any supplemental coverage. You can get Medigap insurance by purchasing a Medigap policy through an insurance company licensed to sell one, or Medicaid (which depends on income), or through an employer who offers one.
If you have a Medigap policy, it pays part or some of the out-of-pocket costs that Medicare doesn’t cover, such as your Part A hospital deductible or the 20 percent co-insurance in Part B. Depending on where you live, you can choose from several Medigap plans. Each policy offers a different set of benefits, and premiums can vary from company to company.
The best time to buy a Medigap policy is during Medicap open enrollment period. That six-month window starts when you turn 65 years old and have enrolled in Medicare Part B. It’s important to enroll then because during that time, the insurance companies that sell Medigap policies cannot deny you coverage if you have a preexisting condition, and they have to sell you a plan at the best available rate. Important! If you try to buy a plan outside of this window, companies may refuse to sell you a policy or may deny you coverage for your existing health problems.
Some states have their own rules governing Medigap policies, so if you made this mistake and didn’t sign up during your enrollment period, check with your State Health Insurance Assistance Program (SHIP) to ask about state-specific Medigap rights.
6. Forgetting to get prescription coverage
As with Medigap, many people don’t realize that they are not automatically enrolled for prescription coverage when when they sign up for Parts A and B. You must actively select this plan. If you don’t, you may wind up paying for your prescriptions out-of-pocket. Also, if you miss the window for enrollment, your Part D premiums will rise.
7. Buying the same Medicare Part D Plan as Your Spouse
Most spouses do not take the same medications, which is why there are no spousal discounts for Medicare Part D prescription drug plans. So, check the Medicare Plan Finder which will estimate your out-of-pocket costs for each of you. Also check carefully to be sure which plans have preferred pharmacies where you can get the best rates. One other tip: don’t assume your spouse is covered because you are.
8. Going out of network in your Medicare Advantage Plan
If you are covered through a private Medicare Advantage Plan, you probably need to use the doctors and hospitals in that plan’s network to get the lowest co-payments. Make sure your doctors, hospitals, and other providers are covered in your plan from year to year. If not, you can switch your Medicare Advantage Plan during the open enrollment period from October 15 to December 7. Compare out-of-pocket costs for your medications etc. by using the Medicare Plan Finder.
9. Not understanding your out-of-pocket costs
Although Medicare pays the lion’s share of the medical costs for its enrollees, you need to be prepared for any substantial out-of-pocket costs. Here’s a rundown:
- Premium: Each part of Medicare may have its own monthly premium. Most people have no premium for Part A, which covers hospital services. You will be responsible for the Part B premium, which will be deducted from your monthly benefit if you are collecting Social Security. If you enroll in a Medicare Advantage (MA) plan or a Part D plan, you may also owe a monthly premium, depending on the plan you select.
- Deductible: Before Medicare starts paying for the cost of your care, you may have to pay a flat amount, called a deductible. Parts A and B in original Medicare have annual deductibles, and some Medicare Advantage (MA) and Part D prescription drug plans also have deductibles. Medigap policies often cover original Medicare deductibles.
- Co-payment: This is a fixed amount you pay for specific services. For example, under MA plans you may have a co-pay — usually around $25 — every time you see a doctor or get another medical service.
- Co-insurance: This is where your plan will charge you a percentage of the cost of a medical visit or service. If you have original Medicare, you will owe 20 percent of the cost of the service. So, if you get a blood test that costs $100, Medicare will pay $80 and you’ll be responsible for $20. Medigap policies also usually cover your 20 percent share.
Note: If you have original Medicare, you should make sure your health provider accepts Medicare and takes what is called “assignment”, meaning your provider is willing to accept the amount of payment on Medicare’s fee schedule for the service they perform. If you see non-participating providers, they can charge you up to 15 percent more than Medicare’s approved rate. If you have an MA plan, you should try to go to a network provider because some MA plans won’t cover out-of-network care at all, and others will pay less if you go out of network.
10. Automatically renewing your Medicare plan without reviewing it first.
Your Medicare Part D or Medicare Advantage plan renews every year on January 1, unless you change it. Automatic renewal may not always be your best Medicare solution: health benefits and prescriptions drugs can change, and what you pay in deductibles, premiums or co-pays can also change. Usually, you receive an Annual Notice of Change that identifies any plan changes. Check it out! And if you are baffled, seek assistance from licensed consultants or go to any of the government websites we’ve listed in this blog post.