Missing deadlines, delaying enrollment or choosing the wrong plan can cost you
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IN THIS ARTICLE
• Not fully comparing original Medicare with Medicare Advantage plans • Not signing up for Medicare at the right time • Being confused about your options if you work past age 65 • Delaying enrollment if your job’s insurance is second in line • Not knowing when to sign up for Part D • Choosing a Medicare Advantage plan that doesn’t include your health care providers • Not understanding your out-of-pocket costs • Waiting too long to buy Medigap coverage • Not checking the prescription list in a Part D policy • Assuming you can’t afford Medicare
A new term you’ll encounter in this article:
Creditable coverage. A prescription drug plan that the federal government considers as good or better than a basic Part D drug plan available under Medicare.
When you sign up for Medicare, you have to make several important decisions, and the rules and choices can be complicated. Here are 10 common mistakes that prospective Medicare enrollees make, and steps you can take to avoid these problems.
1. Not fully comparing original Medicare with Medicare Advantage plans
If you’re eligible for Medicare, you have two options: original Medicare or a Medicare Advantage plan. The type of coverage you choose depends on 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. This traditional Medicare program is offered directly through the federal government. It consists of Part A, which covers hospital costs, and Part B, which covers doctor visits and other outpatient services. Most doctors in the country accept this insurance.
To help pay for out-of-pocket costs, you can buy a Medigap policy, which has a separate monthly premium. Original Medicare doesn’t include Part D prescription drug coverage, so you’ll need to buy a stand-alone Part D plan from a private insurer if you don’t have other drug coverage. Original Medicare doesn’t limit your annual out-of-pocket costs.
Medicare Advantage. This is a private insurance alternative to original Medicare. These plans provide Part A, Part B and usually Part D benefits. They also may offer some benefits that original Medicare doesn’t, such as dental or vision care.
Medicare Advantage plans generally have a provider network, like the health maintenance organization (HMOs) and preferred provider organizations (PPOs) offered in many workplaces. They may charge more or may not cover care for out-of-network doctors and hospitals, except in emergencies.
Some Medicare Advantage plans require a referral from a primary care physician before they will cover specialist care. The plans are required to limit the amount of money you pay in copayments, deductibles and other out-of-pocket expenses, not counting premiums, each year. In 2024, the maximum out-of-pocket limit is $8,850 for care in your plan’s network, excluding prescription drug cost sharing, but some plans have lower caps.
You are not allowed to have a Medicare Advantage plan and a Medigap policy at the same time.
2. Not signing up for Medicare at the right time
You can sign up for Medicare only at certain times. Your initial enrollment period starts three months before the month you turn 65 and ends three months afterward.
If you don’t sign up during that seven-month window, you’ll have another chance to enroll during Medicare’s general enrollment period, which runs from Jan. 1 to March 31 each year. Your coverage will begin the month after you sign up during the general enrollment period, and you may have to pay higher Medicare premiums for the rest of your life.
The late enrollment penalty can add 10 percent to your monthly Part B premium for every 12 months you delay. But you may be able to postpone signing up for Medicare without a late enrollment penalty if you or your spouse are still working and you have health insurance based on that job.
3. Being confused about your options if you work past age 65
Even though you can sign up for Medicare at age 65, some people who plan to keep working and receive health insurance through their jobs decide to wait until later so they don’t have to pay premiums for both their employer’s coverage and Part B.
Signing up for Part A is a good idea for most 65-year-olds. The premiums are free if you or your spouse have worked long enough to be eligible for Social Security or Railroad Retirement Board benefits — even if you haven’t filed for them yet. For Part B, you won’t face a late enrollment penalty as long as you sign up before or within eight months of losing your job-based health care coverage. That is what Medicare considers a special enrollment period.
Many people don’t realize that this waiver of penalties applies only to job-based coverage from a current employer, not retiree health insurance or COBRA, which allows most people to stay on their company’s insurance plan for up to 18 months after they leave their job. Unless you or your spouse are still working and are covered through a current employer, it’s important to sign up for Medicare during your seven-month initial enrollment period, or you may face a late enrollment penalty and gaps in coverage later on.
4. Delaying enrollment when your job insurance is second in line
Having health insurance through an employer doesn’t always mean you should delay signing up for Medicare. You need to consider the size of the company. If it has 20 or more employees, your group health insurance is your primary coverage and Medicare is secondary coverage. Since your health insurance will pay out first, you can delay signing up for Medicare past age 65 while you or your spouse are still working.
However, if the company has fewer than 20 employees, Medicare generally becomes the primary insurance after you turn 65, and the employer’s coverage is secondary, even if you haven't signed up yet for Medicare.
Retiree coverage and COBRA also are considered secondary coverage. Those types of insurance will pay claims only after Medicare has paid its share. In that case, it’s important to sign up for Medicare when you become eligible so you don’t find yourself paying what would have been Medicare’s share before your secondary insurance kicks in. There are special rules if you have coverage through the Federal Employees Health Benefits Program.
Ask your benefits manager or human resources department if your job-based insurance is considered primary or secondary, or contact 800-MEDICARE.
5. Not knowing when to sign up for Part D
Original Medicare doesn’t cover prescription medications that you take on your own, but you can buy a Part D policy for drug coverage. The sign-up rules for Part D are different than those for parts A and B, and many Medicare Advantage plans include prescription coverage.
You can buy Part D coverage when you’re first eligible for Medicare, but you don’t have to sign up if you have other drug coverage that’s considered to be as good or better than Part D. This coverage could be from an employer plan, retiree benefits, Tricare military health care or another source.
Every September, you should receive a letter from your employer or insurance plan that lets you know whether your drug coverage is comparable to a Part D plan, what the government calls creditable coverage. If you lose your drug coverage, you’ll be eligible for a two-month special enrollment period during which you can sign up for a Part D plan without a penalty. Keep the letter as proof that you had prescription drug coverage comparable to Part D when the time comes to enroll.
If you lose your comparable drug coverage and go for 63 or more days without it, you may have to pay a late enrollment penalty. This penalty is calculated as 1 percent of the national base beneficiary Part D premium for every month you delayed, and it generally lasts for as long as you have Part D coverage. However, if you qualify for the Extra Help program, which helps low-income adults pay for Medicare out-of-pocket costs, then you won’t have to pay the penalty.
6. Choosing a Medicare Advantage plan that doesn’t include your health care providers
Each Medicare Advantage plan has different rules about provider networks. Most plans are either HMOs, which often require referrals to specialists and rely on primary care physicians to coordinate a patient’s care, or PPOs, which have networks of doctors, hospitals and medical facilities that contract with a plan to provide services. In both of these scenarios, your costs are typically lowest when you use in-network providers and facilities.
If you decide to enroll in a Medicare Advantage plan, find out if the doctors and hospitals you want to use are in your network. If you have questions, contact the plan for more information. If your providers are not in-network, check to see how much, if anything, the plan will pay for their services.
Make sure the plan continues to cover your doctors each year. You can switch to another Medicare Advantage plan during open enrollment, which runs Oct. 15 to Dec. 7, for coverage that begins Jan. 1, or during the Medicare Advantage open enrollment period, from Jan. 1 to March 31, each year. Coverage switched during Medicare Advantage open enrollment starts the first of the month after you change plans.
7. Not understanding your out-of-pocket costs
Although Medicare pays the lion’s share of the medical costs for its enrollees, prepare to pay some costs yourself. If you have original Medicare, you can get supplemental Medigap coverage and a separate Part D drug plan to help with many of these expenses. Here’s a rundown:
Premium. Each part of Medicare may have its own monthly fee. Most people pay no premium for Part A, which covers hospital services. Whether you choose original Medicare or get a Medicare Advantage plan, you’ll be responsible for the Part B premium, which is $174.70 a month for most people in 2024. If you enroll in a Medicare Advantage plan or a Part D plan, you also may owe a monthly premium, depending on the plan you select.
Deductible. You may have to pay a set amount before Medicare starts paying for your care. The Part A deductible in 2024 is $1,632 per benefit period — not annually — and the Part B deductible is $240 for the year. A benefit period for Part A begins the day you’re admitted as an inpatient to a hospital or skilled nursing facility and extends until you haven’t received inpatient care in either facility for 60 days. This means you can end up with multiple Part A benefit periods in a year, and each triggers another deductible. Many Part D plans also have deductibles.
Copayment. This is a fixed amount you must pay every time you receive a medical service. For example, if you have original Medicare without supplemental coverage, you may have to pay $408 a day if you’re in the hospital for 61 to 90 days during each benefit period in 2024. Part D plans have copays based on the type of drug you need.
Coinsurance. You may have to pay a percentage of the cost of a medical visit or service. If you have original Medicare, you generally have to pay 20 percent of the doctor and outpatient charges covered under Part B. Some of the most expensive drugs in Part D plans also may require you to pay a percentage of the cost.
8. Waiting too long to buy Medigap coverage
A Medigap policy can pay some of the out-of-pocket costs that Medicare doesn’t cover, such as your Part A hospital deductible and the 20 percent coinsurance in Part B. Private companies sell the policies, which are known by their letter, such as Plan G.
The federal government requires the benefits in each of the different types of Medigap plans to be the same, but premiums can vary. Several companies may offer policies with the same letter designation in your area.
If you buy a Medigap policy within six months of signing up for Part B when you’re 65 or older, insurance companies can’t deny you coverage or charge you more if you have health problems. But if you try to buy a plan outside of this window, companies in most states may refuse to sell you a policy or increase your premiums because of preexisting conditions.
Some states have their own rules governing Medigap policies, so if you didn’t sign up during your enrollment period, check with your State Health Insurance Assistance Program (SHIP) to ask about state-specific Medigap rules.
9. Not checking the prescription list in a Part D policy
Whether you’re planning to get your prescriptions through a stand-alone Part D plan or Medicare Advantage plan, take some time to learn about the rules, the drugs covered and your costs.
Make sure your plan covers your needed medicines. Each Part D plan has a list of covered drugs, called a formulary. If your drug is not on your plan’s formulary, you may have to request an exception, pay for it yourself or file an appeal. And filling some prescriptions may require prior authorization from your insurer to be covered.
In addition to comparing premiums, find out how much you would pay for your prescriptions with each policy. Part D plans have several levels of cost sharing.
You may have a $10 copay for some medications but a $35 copay for others. Or you may have to pay 20 percent of the price of the medication. You can compare the coverage for your drugs from each plan in your area by using the Medicare Plan Finder. Find out if a plan has preferred pharmacies where you can pay lower copayments.
Premiums and coverage can change from year to year. You can switch Part D plans during open enrollment each year, which runs from Oct. 15 to Dec. 7 for coverage starting Jan. 1.
10. Assuming you can’t afford Medicare
Several programs can help people with limited resources pay their Medicare premiums and cost-sharing expenses.
Medicare savings programshelp pay the monthly Part B premium and any Part A premium you might have. In some cases, the programs also can help cover the deductibles, coinsurance or copayments. Contact your State Health Insurance Assistance Program (SHIP) to learn if you’re eligible. These four Medicare savings programs aren’t available in Puerto Rico or the U.S. Virgin Islands, but Medicaid, a joint federal-state or federal-territory program that provides health insurance for people with low incomes, may be able to assist.
Extra Helpis a federal program that helps pay for some or most of the costs of Medicare Part D prescription drug coverage. Visit the Social Security Administration’s website, or call 800-772-1213 to learn if you’re eligible for Extra Help and apply. Alternatively, visit Medicare’s help with drug costs page for more information.
State pharmaceutical assistance programs are offered in some states to help eligible individuals pay for prescriptions. You can find them using Medicare's online tool or contact your State Health Insurance Assistance Program to learn whether your state has a program.