Navigating into Medicare Beyond 65: Common Pitfalls to Avoid and Crucial Decisions to Make

The choice to continue working beyond the age of 65 raises a crucial question: what about Medicare? It’s a complex issue, filled with potential pitfalls and misleading information that could result in costly errors. If you or your spouse have plans to work past 65 and are covered by an employer-provided plan, pay close attention to the following common mistakes, how to avoid them, and an additional bonus tip to make well-informed decisions regarding your Medicare coverage.

The following are three widespread mistakes often made by people approaching 65.

1. Mistake #1: Failure to enroll in Medicare at 65 when covered by a small group plan

If you or your spouse are working for a company with 19 employees or fewer—regardless of how many are covered by the group health plan—you fall under the category of a small group plan according to Medicare. Hence, you must sign up for Medicare at 65.

Why is this significant? Prior to turning 65, your small group plan was the primary payer for most of your healthcare expenses, while you covered out-of-pocket expenses such as copays, deductibles, and coinsurance. However, upon reaching 65, Medicare shifts to the primary payer position and the small group insurance plan becomes the secondary payer. This order applies irrespective of whether or not you have enrolled in Medicare.

The drastic consequence of not enrolling in Medicare at 65 is that you will be held responsible as the first payer. So, if you run into a huge claim, the insurance company acting as the second payer will put the financial responsibility on you. To avoid this, enroll in Medicare Part A and B when you turn 65.

You may also want to consider dropping the small group plan after going on Medicare, as they often entail out-of-pocket costs and higher premiums. Opt instead for a supplemental plan, an advantage plan, or a prescription drug plan, which may offer lower out-of-pocket costs.

Insight: Sometimes, employers even offer a raise to cover the expenses of Medicare premiums, although they are not obliged to pay these premiums directly.

2. Mistake #2: Staying on a group plan without comparing Medicare options

The second common mistake involves those who can but don’t necessarily have to enroll in Medicare at 65. If you or your spouse are with a company consisting of 20 or more employees, you’re not obligated to enroll in Medicare at 65.

People often overlook the critical step of comparing the group plan to their Medicare options. Many simply continue with their existing group plans out of convenience, even if they’re not quite satisfied.

To avoid making this mistake, it is crucial to conduct a thorough comparison between your group plan and the various Medicare options available. Take into account factors such as premiums, deductibles, coinsurance, copays, and the maximum out-of-pocket expenses.

For example, if your group premium amounts to approximately $200 or more per month, considering Medicare as an option could be a wise decision, especially if you also have a substantial deductible. In such cases, Medicare can potentially save you a significant amount of money.

Make sure to carefully evaluate and compare the costs and benefits of both your group plan and Medicare to determine which option is more cost-effective for you. This way, you can make an informed decision that best suits your healthcare needs and financial situation.

For instance, let’s consider a practical scenario. By opting for Medicare along with a supplemental plan, which has a monthly cost of approximately $314.90 inclusive of prescription drugs, you will enjoy the benefit of minimal out-of-pocket expenses. These expenses would only include a small yearly deductible and a few copays for medications.

To determine if it is financially beneficial to stick with your group insurance, you can evaluate the potential expenses of Medicare compared to your current plan. If you discover that Medicare provides a more cost-effective option, it is recommended to enroll within the initial seven-month enrollment period. This allows you to secure your coverage in advance and make the most informed decision for your healthcare needs.

Dedicate the necessary time to thoroughly assess your options and explore every possibility to ensure that you make the optimal choice for your specific needs.

Tip: Do not make the mistake of waiting to enroll during the company’s open enrollment season. If you are 65, you can use your initial enrollment period to get Medicare regardless of your employer’s open enrollment season.

3. Mistake #3: Enrolling in Medicare at 65 when you should absolutely not

The third common pitfall to avoid occurs when it is not advisable to enroll in Medicare at 65. This situation arises when you have a spouse who is significantly younger and has no other employment options, or you have children covered by your group plan until they reach the age of 26.

If you currently have excellent group coverage that offers attractive cost and care, it is best to remain on your group plan. Enrolling in Medicare at 65 in this scenario would result in your spouse or child losing their insurance coverage.

Remember, it is crucial to carefully assess your specific circumstances and weigh the advantages and disadvantages before making any decisions about Medicare enrollment.

4. Bonus Mistake: Automatic Enrollment in Medicare While Receiving Social Security

Many people are unaware that once they start receiving Social Security benefits, whether it be their own retirement, spousal benefits, or survivor benefits, they will be enrolled in Medicare automatically once they turn 65.

The error lies in continuing to be enrolled in both Parts A and B of Medicare when you have a high-quality group plan. It can be a waste of money to maintain both Parts, especially since Medicare only serves as a secondary payer.

If you are satisfied with your group plan because it offers excellent coverage at an affordable price, it is advisable to refrain from remaining enrolled in Medicare Part B. You have the option to delay enrolling in Part B by returning the card you receive approximately 100 days before your date of eligibility or by completing a form known as the CMS 1763.

Remember: You can pick up Part B at a later date using the Special Enrollment Period (SEP) as long as you can prove that you’ve had continuous, credible coverage through a group plan back to your 65th birthday.

Conclusion

Deciding on Medicare when you choose to continue working beyond 65 can be a minefield. By avoiding these common pitfalls — and keeping this bonus tip in mind — you can successfully navigate through your choices for Medicare coverage. You wouldn’t want to leave any stone unturned; explore all possibilities to come up on top with the best decisions regarding your health coverage.