You may not spend a lot of time thinking about Medicare until you’re actually looking to sign up. But there’s a lot to know about Medicare enrollment. And the last thing you want to do is fall victim to common Medicare mistakes. With that in mind, here are some potentially costly Medicare mistakes to steer clear of throughout the enrollment process.
1. Not enrolling on time
Your initial Medicare enrollment window is seven months long. It starts three months before your 65th birth month and ends three months after that month.
If you don’t sign up for Medicare on time, you could face costly penalties for being late. So it pays to complete your enrollment during that seven-month window.
Otherwise, for each one-year period you’re late signing up for Medicare Part B, you’ll face a 10% surcharge on your premiums. And worse yet, you’ll be stuck with that surcharge for life. You’ll also face a surcharge on your Part D drug plan premiums for late enrollment.
Penalties aside, being late with your Medicare enrollment could mean going without health coverage for a period of time. That puts you at risk of facing catastrophic costs in the event of an injury or illness.
2. Forgetting you might be eligible for a Special Enrollment Period
You might rush to sign up for Medicare at age 65 to avoid lifelong penalties. But in some cases, you may be exempt from those penalties if you delay your enrollment.
People who are covered by a qualified group health plan, which is generally defined as a plan with 20 or more employees, may be eligible for a special Medicare enrollment period. That window is eight months long and starts the month after your group health coverage ends.
If you have great coverage through a job, it may not make sense to enroll in Medicare right away. Why pay those Part B premiums when your employer might, for example, give you heavily subsidized insurance that costs less?
3. Forgetting you can get Part A only for free
If you have qualifying group health coverage, you may decide to wait on your Medicare enrollment at 65. But it could pay to sign up for Part A alone.
Medicare Part A is free for most enrollees. If you have group health coverage, Part A can serve as secondary insurance for hospital care. Costs your primary plan doesn’t pick up may be covered by Medicare, sparing you from having to pay more. So don’t assume you need to delay your Part A enrollment just because you’re waiting to sign up for Part B.
In 2021, an estimated 5.2 million Medicare enrollees had Part A coverage only, says the Kaiser Family Foundation. This primarily includes people who were still working and were using Part A as secondary insurance.
4. Continuing to contribute to an HSA after enrolling
It pays to contribute to an HSA (health savings account) during your working years because the money can be withdrawn at any time to cover qualified healthcare expenses. And it’s actually advantageous to carry an HSA balance into retirement since it’s a time when healthcare costs are likely to rise.
That said, HSA contributions are no longer allowed once you’re enrolled in Medicare. This holds true even if you’ve only signed up for Part A. Be sure to stop funding your account once you sign up for Medicare to avoid a tax headache.
To be clear, though, you can continue to use your HSA once you’re enrolled in Medicare. You just can’t contribute new funds.
5. Assuming Medicare Advantage is your best bet
It’s estimated that 49% of Medicare enrollees choose Medicare Advantage over Original Medicare (Parts A and B). These plans are offered by private insurers and typically offer more benefits than Original Medicare, making them attractive to many.
But there are a few pitfalls you might encounter with Medicare Advantage. First, you’re not guaranteed to have lower out-of-pocket costs. And though there are exceptions to this rule, the general convention with Medicare Advantage is that it can be a good deal for enrollees who are generally healthy. However, people with numerous health issues might end up spending more.
There’s also the fact that Medicare Advantage limits you to a narrow provider network. With Original Medicare, you can see any medical professional in the country who accepts Medicare. You may not be happy with your provider options if you choose a Medicare Advantage plan.
6. Waiting to buy Medigap coverage
Medigap, or supplemental insurance, is a good thing to have when you’re enrolling in Original Medicare. A Medigap plan can pick up the tab for the out-of-pocket costs you might incur as a Medicare enrollee.
For example, this year, under Medicare Part A, you’ll pay a deductible of $1,632 for every hospital admission. And if your stay extends beyond 60 days, you’ll face a daily $408 coinsurance. A Medigap plan might cover those costs, though the extent of your coverage will depend on the specific plan you choose.
It’s important to sign up for Medigap coverage during your initial Medigap enrollment period, which is six months long starting the first month you have Medicare Part B. During this time, you can’t be denied Medigap coverage for preexisting conditions, and you’re likely to lock in the most affordable price for your coverage.
In 2021, an estimated 12.5 million Original Medicare enrollees also had Medigap coverage, according to the Kaiser Family Foundation. Compare your plan choices carefully to make the most of your supplemental insurance.
7. Taking Social Security at the Time of Your Medicare Enrollment
Because Social Security and Medicare are interrelated, you might assume that once you sign up for Medicare, you must enroll in Social Security as well. Not only is that not necessary, but it could result in lower monthly benefits throughout your retirement.
As noted earlier, Medicare eligibility begins at age 65. But eligibility for full Social Security benefits doesn’t begin until age 66 for people born between 1943 and 1954. And for those born in 1960 or later, eligibility for non-reduced benefits begins at 67.
Put simply, if you sign up for both Medicare and Social Security at age 65, you’ll end up stuck with a lower monthly benefit for life. Given the costs you might incur as a Medicare enrollee, that’s a move that might sting financially.
Don’t fall victim to these common Medicare mistakes
Medicare is a complex program, so it’s important to know which Medicare mistakes to avoid during your enrollment. Wondering how to avoid these and other Medicare mistakes? Do your research! At Medicare School, we believe in giving you the information you need to make the right decision for your retirement.
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