10 Common Medicare Mistakes to Avoid
Errors can prove costly to new enrollees
En español | Missing deadlines, delaying enrollment or choosing the wrong plan can cost you a bundle when it comes to Medicare. Here’s a list of 10 common mistakes new Medicare enrollees make and how to avoid them, according to the Medicare Rights Center, a nonpartisan, not-for-profit consumer service organization.
1. Not signing up for Medicare at the right time
Timing, as they say, is everything. It’s especially important when it comes to enrolling in Medicare. As you approach 65, you’ll want to enroll during what the government calls your initial enrollment period (IEP). This seven-month period goes from three months before the month in which you turn 65 until three months after.
If you don’t sign up during your IEP, you will get another chance to enroll during Medicare’s annual general enrollment period, from Jan. 1 through March 31 of each year. However, because you enrolled late, your monthly premiums for Medicare Part B — which covers your doctor visits and other outpatient services—will likely cost you more. If you enroll at any time during your initial enrollment period, a special enrollment period or during the general enrollment period, your coverage will take effect the following month. Remember, if you sign up for Part B during the general enrollment period, you’ll still be subject to that late enrollment penalty.
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2. Blowing the special enrollment period
If you are 65 or older, when you stop working and lose your health insurance coverage or when the insurance you have through your spouse ends, you’ll need to sign up for Medicare. Medicare has created a special enrollment period (SEP) that lets you do that without facing a late enrollment penalty.
Again, timing is everything. What many people don’t realize is that you can only use this SEP either while you are covered by job-based insurance or for eight months after you no longer have job-based insurance.
Note: Medicare does not count retiree health insurance or COBRA as job-based coverage. So, if that’s the insurance you have, you’ll need to reread mistake number one and sign up when you turn 65 or face that late enrollment penalty.
3. Delaying enrollment when your job insurance is second in line
Even when you have job-based insurance, some employers, depending on their size, can designate Medicare as your primary health coverage when you turn 65. And if you have retiree coverage or COBRA, those are considered secondary coverage.
If your job-based or other private insurance is considered secondary coverage, it will only pay for a medical claim after Medicare has paid its share. So, if your job-related insurance becomes your secondary coverage, it’s important to sign up for Medicare. If your job-based insurance is primary, then Medicare becomes your secondary coverage.
The way to find out if your job-based insurance is considered primary or secondary is to ask your benefits manager or human resources department, or seek help from 800-MEDICARE.
4. Not understanding Part B and Part D late enrollment penalties
For every 12 months you delay enrolling in Part B, your monthly Part B premium may be 10 percent higher. The penalty won’t apply if you have job-based insurance or are still under your special enrollment period.
For every month you delay signing up for a Part D plan, your monthly premium may be 1 percent higher. Part D plans cover prescription drug costs. You won’t have to pay the Part D penalty if you can show Medicare that you have drug coverage as good as that provided by a Medicare Part D plan.
You should receive a letter from your employer — or insurance plan — in September of each year letting you know if you have drug coverage comparable to a Part D plan. 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. But keep that letter so you can show Medicare you did have Part D-comparable prescription drug coverage when the time comes to enroll in Part D.
Note: Usually, these penalties last for as long as you have Medicare. But if you are paying this penalty and qualify for and enroll in a Medicare Savings Program or the Extra Help program — which helps low-income older adults pay for Medicare out-of-pocket costs — you will no longer have to pay the penalty.
5. Not fully comparing original Medicare with Medicare Advantage plans
If you are eligible for Medicare, you have a choice to receive your benefits through original Medicare or a Medicare Advantage plan. The type of Medicare 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 is the traditional program offered directly through the federal government. It comprises Part A, which covers hospital costs, and Part B, which covers doctor visits and other outpatient services. The vast majority of doctors in the country take 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 Part D (prescription drug coverage), so you must sign up for a stand-alone Part D plan if you do not have other drug coverage. Original Medicare does not have 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 certain benefits that original Medicare does not cover, such as dental or vision care. Some MA plans may also provide some nontraditional services, such as paying for wheelchair ramps, meals delivered to beneficiaries’ homes and transportation to medical appointments. These plans may also have different costs and rules than original Medicare. For example, an MA plan can require you to get a referral from a primary care physician before it will cover care from a specialist. And Medicare Advantage plans generally have a network of providers in your geographic area and may not cover care if you see an out-of-network provider (except in emergencies). MA plans have an annual out-of-pocket limit, and you cannot buy a Medigap policy when you are enrolled in Medicare Advantage.
6. Delaying buying a Medigap policy
Medigaps are supplemental health insurance policies that work with original Medicare. 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 coinsurance in Part B. Depending on where you live, you can choose from as many as 10 different Medigap plans. Each policy has a different letter name (for example, Plan A) and offers a different set of standardized benefits. Policies with the same letter name offer the same benefits, but premiums can vary from company to company.
The best time to buy a Medigap policy is during your Medigap 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. 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) at shiptacenter.org to ask about state-specific Medigap rights.
7. 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 sometimes 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 MA and Part D prescription drug plans also have deductibles. Medigap policies often cover original Medicare deductibles.
- Copayment: This is a fixed amount you pay for specific services. For example, under MA plans you may have a copay — usually around $25 — every time you see a doctor or get another medical service.
- Coinsurance: 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 the health provider you see accepts Medicare and takes what is called “assignment.” That means the provider is willing to accept the amount of payment on Medicare’s fee schedule for the service they perform. If you see nonparticipating 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.
Mistakes at a Glance
- Missing the enrollment window
- Botching the special enrollment window
- Misunderstanding your job’s insurance
- Ignoring late enrollment penalties
- Not fully weighing your options
- Delaying a Medigap buy
- Not understanding your out-of-pocket costs
- Picking a plan that doesn’t have your doctors
- Taking a drug plan that doesn’t meet your needs
- Assuming you can’t afford Medicare
8. Choosing a Medicare Advantage plan that doesn’t include your health care providers
Each type of Medicare Advantage plan has different network rules. Most plans are either health maintenance organizations (HMOs), which often require referrals to specialists and rely on primary care physicians to coordinate a patient’s care, or preferred provider organizations (PPOs), which have networks of doctors, hospitals and medical facilities that contract with a plan to provide services. Your costs are typically lowest when you use in-network providers and facilities, regardless of your plan.
If you decide to enroll in an MA plan, check with your providers to learn which plans they accept. If you have questions, contact your plan for more information. If your providers are not in the plan’s network, check to see how much, if anything, the plan will pay for their services.
9. Choosing drug coverage that doesn’t fully and affordably cover your prescriptions
Whether you’re planning to get your prescriptions covered through a stand-alone Part D plan or under a Medicare Advantage plan, take some time to learn about the rules, what drugs are covered and what your costs will be.
Make sure your plan covers your needed drugs. 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 out of pocket for the cost, or file an appeal. Remember, plans can change formularies so during the fall Medicare open enrollment period you should check your plan's formulary to make sure your prescriptiontions are covered and at a price you can afford.
Also find out whether your plan places any restrictions (sometimes called utilization management strategies) on coverage. Some plans may place a restriction on a certain drug, but others may not. One restriction might be requiring you to get prior approval from the plan before it will pay for a particular drug. Another example of a coverage restriction is step therapy, which means your plan requires you to try other, less expensive drugs before it will cover a more expensive medicine that you may need.
You should also take a look at whether the plan you’re considering will give you a good deal at the pharmacy of your choice — or through mail order. Each Part D plan has a network of pharmacies that include both preferred and non-preferred pharmacies. You typically pay less for your prescriptions at preferred pharmacies.
10. Assuming you can’t afford Medicare
If you have a limited income, you may be able to get assistance with your health costs through certain programs.
Medicare Savings Programs (MSPs) help pay the monthly Part B premium and may help with Medicare cost sharing, depending on the program (there are three types of MSPs). Contact your SHIP at shiptacenter.org to learn if you are eligible for an MSP.
Extra Help is a federal program that helps pay for some to most of the costs of Medicare Part D prescription drug coverage. Contact the Social Security Administration at 800-772-1213 or visit ssa.gov to learn if you are eligible for Extra Help and to start an application.
State Pharmaceutical Assistance Programs (SPAPs) are offered in some states to help eligible individuals pay for prescriptions. Contact your SHIP at shiptacenter.org to learn if there is an SPAP in your state.
Editor's note: This story has been updated to reflect new information.
Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the “Medicare Made Easy” column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for the Orange County Register and as a health policy and workplace writer for Newsday.