This article is part of a series called “Avoiding Medicare Mistakes.” The Medicare mistake we’re talking about today is this: Thinking Medicare Part A and B is enough. In other words, some people choose to enroll in Medicare A and B only, thinking that Medicare A and B coverage is all they need. This can be a big mistake.
We’ll first look at a few of the reasons why some people choose Medicare A and B only, then dive into the financial risks and other consequences involved with choosing Medicare A and B only. Let’s get started.
Three Medicare Options
When you enroll in Medicare, you have three different coverage options to choose from. First, you can decide to stay on original Medicare A and B only (which is what we’re discussing today). Second, you can add a Supplemental plan and a prescription drug plan to original Medicare. Third, you can choose a replacement (or Advantage) plan. We’re not going to address all three options today, but if you’d like to learn more, check out our free resources on Supplemental plans and Advantage plans.
Why Would Someone Choose A & B Only?
There are two main reasons why people choose to enroll in Medicare A and B only. First, Medicare A and B only is by far the cheapest choice when it comes to monthly premiums. Why? As long as you’ve paid into Medicare for 40 quarters, Medicare Part A will be completely free.
While Part B is not free, it’s not going to break the bank, either. This year, the Part B monthly premium is $170.10. If you’re on Social Security, they take the Part B premium right out of your SS check. So for most people, Medicare Part A and B only costs them their Part B premium of $170.10/month. That’s it. This makes Part A and B only the cheapest option as far as monthly premiums go.
The second reason some people enroll in Medicare A and B only is simply that it’s the easiest choice. If you go the A and B only route, all you have to do is enroll in original Medicare A and B, then you’re done. You don’t have to make any other insurance decisions.
Why It’s a Mistake to Think Part A and B Is Enough
Despite being the “easiest” option and offering the cheapest monthly premiums, there are numerous drawbacks to enrolling in original Medicare A and B only. One of the biggest problems with A and B only coverage is the financial risks you place yourself in.
Financial Risks
There are several coverage gaps (things that Medicare won’t cover) with Part A and B. You are responsible to pay for these gaps out of your own pocket. For example, if you go to the hospital, you’ll have to pay a deductible. That deductible amount is the full out-of-pocket amount you’ll have to pay for a 60-day hospital stay.
However, if you end up staying longer than 60 days, you’ll be responsible to cover daily co-pays. These daily co-pays can add up to thousands of dollars very quickly. Again, if you have Medicare Part A and B only, you’ll be responsible to pay for these co-pays completely out of your own pocket.
Another financial risk that comes with choosing Part A and B only is the coinsurance system. Here’s how it works: Once you meet your yearly Part B deductible, Medicare is going to step in and pay 80 percent of your medical costs, and you’ll have to cover the remaining 20 percent. The problem with the 80/20 system is that your 20 percent is totally unlimited, meaning there’s no max amount. Your 20 percent could add up to thousands and thousands of dollars, and you’d be responsible to pay for all of it out of your own pocket.
As you can see, there are huge financial risks involved with enrolling in Medicare A and B only.
Medigap Eligibility
In addition to the financial risks of Medicare A and B only, there’s another reason why choosing A and B only is a mistake. It’s called the Medigap Eligibility. Here’s how the Medigap eligibility works: When you go on Medicare A and B, you’re given a six month period of time to buy any Medigap policy offered in your state, no underwriting required. In other words, you could have serious preexisting conditions, but during this six month period, the insurance company has to approve your policy and take you, no questions asked.
Let’s suppose I’m starting Medicare on January 1, 2022. For the next 6 months, I can purchase any Medigap policy I want without going through any medical underwriting. On July 1, 2022, this period is over. So anytime I want to enroll in a Medigap policy after July 1, 2022, I will now have to go through medical underwriting. This means the insurance company will ask me 25 health questions, check all my medications, and see what I’m being treated for. They might also require a general health statement from my doctor. If I don’t measure up to their qualifications, they can deny me coverage.
What does this have to do with Medicare A and B only coverage? If you go with Part A and B only coverage and don’t enroll in a Medigap policy during the first six months of being on Medicare, you may be forever disqualifying yourself from healthcare coverage you’ll need in the future. Why?
If your health isn’t great and you wait to enroll in a policy until after the six month period, you’ll have to go through the medical underwriting process, and you may have a hard time finding an insurance company that will cover you.
Part D & Advantage Enrollment Opportunity
Thirdly, if you initially enroll in Medicare A and B only, you will have a harder time enrolling in a Part D (drug plan) or Part C (Advantage plan) later on down the road. Unlike the Medigap eligibility period, you only have a three-month window to enroll in Part D and C plans. If you fail to enroll in a Part C or D plan during the three months following your Medicare enrollment, you will have to wait until the open enrollment period (OEP), which is October 15 through December 7th. And even if you enroll in a plan during the OEP, your coverage will not begin until January 1st of the next year, leaving you to cover all the financial costs out of your own pocket during this time.
Conclusion
As you can see, you certainly can make the choice to have Part A and B only coverage. But if you do, know that there are several consequences that could potentially cost you a lot of money down the road and limit your future Medicare coverage options.
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.
