Once you turn 65, having the ability to get Medicare can provide significant relief. By getting Medicare coverage, you can get the essential insurance coverage you need for medical and hospital services. Unfortunately, Medicare can be surprisingly complicated.
According to the Centers for Medicare and Medicaid Services, there are 62.4 million Medicare beneficiaries in the U.S. If you already have Medicare or you’ll soon be joining that number, it’s important to understand how Medicare and the open enrollment period work so you can avoid making one of these common (and sometimes very costly) mistakes.
Ignoring the open enrollment period
After your initial enrollment when you turn 65, you need to know when each Medicare open enrollment period occurs. Every year, the Medicare open enrollment period runs from October 15 through December 7.
During open enrollment, you can make changes to your insurance coverage and/or enroll in a new Medicare plan. It’s a good idea to use this time to review your plan and other available options. Coverages and pricing can change from year to year, so it pays to compare different plans to see whether there’s a better option for you.
Compare top-rated medicare plans (It's simple to do - just fill out the form to be connected with a licensed agent who can walk you through custom Medicare Advantage options.)
Not understanding your out-of-pocket costs
One of the most costly retirement mistakes people make with Medicare is that they assume it’s completely free. But although Medicare will likely cover a substantial portion of your health care costs, you’ll still be responsible for some charges.
Many people make the mistake of shopping for insurance only by comparing premiums. But that could cost you a lot in out-of-pocket expenses. Sometimes a more expensive premium can actually result in net savings over the course of the year.
Each plan will have different costs based on the following factors:
- Premium: Your premium is how much you pay each month for your coverage. You have to pay your premium even if you don’t use any health services that month.
- Deductible: Your deductible is what you have to pay for health services before your insurance starts paying. Generally, the lower the deductible, the higher your premium will be.
- Copayment: After you reach your deductible, the copayment is a fixed amount you pay every time you visit a doctor or have a procedure done, such as $20 per visit.
- Coinsurance: Rather than a copayment, some plans use coinsurance. After you reach your deductible, you’ll pay a percentage every time you visit a doctor or have a procedure done, such as 20% of the office visit cost.
You can use the Medicare Out-of-Pocket Estimator to see how your coverage choices affect your costs.
Not buying additional coverage
Although Medicare provides some coverage, it doesn’t cover all your health care expenses. Original Medicare is made up of Part A (hospital insurance) and Part B (medical insurance). It doesn’t include prescription drug coverage, and it doesn’t cover services like eye exams, hearing aids, or dental care.
If you’re not aware of that, you could be in for a costly surprise when you fill a prescription or go to the dentist. This kind of surprise can be expensive and leave you with the stress of unpaid medical bills. However, there are some additional options to get the coverage you need.
- Medicare Part D: Also known as Medicare Part D, this coverage is an optional way to get coverage for prescription medications. Plans will vary in what they cover and their cost.
- Medicare Advantage plans: Sometimes referred to as Medicare Part C, these plans are offered by private insurance companies. They combine your Medicare Part A and Part B benefits and usually include prescription drug coverage. They may also cover other services that original Medicare doesn’t, such as eye exams, hearing aids, dental care, and wellness programs.
Assuming you and your spouse need the same coverage
Many people assume it’s best to pick the same coverage for themselves and their spouses. However, you may have very different health care needs, and the most cost-effective plan for you may not be the right plan for them.
Depending on what health issues you have or what prescription medications you take, you may be better off with another plan. Or you may need to add Medicare Part D to your coverage or even enroll in a Medicare Advantage plan.
Not checking to see which providers are available
When considering your options, pay attention to what providers are covered and the network type. With original Medicare, you can go to any doctor, hospital, or health care provider that is enrolled in Medicare and accepting Medicare patients. You usually don’t need a referral to see a specialist, and you don’t need to choose a primary care physician.
If you opt for a Medicare Advantage plan, it could get more complicated. When you enroll, you’ll choose a network type:
- Health Maintenance Organization: HMOs tend to be more affordable than other plans, but you typically can see only doctors and health care providers within the plan network unless you need emergency care. You will also typically need referrals to see specialists and you’ll have to select a primary care physician.
- Preferred Provider Organization: PPOs are more expensive than HMOs, but offer more flexibility. They are typically less expensive when it comes to in-network doctors and health care providers, and you will probably have some coverage if you see out-of-network doctors. You usually don’t need referrals to see specialists, and you don’t need to choose a primary care physician.
- Private Fee-For-Service: PFFS plans determine how much they’ll pay doctors and hospitals for services. You can get care from any doctor, as long as they agree to the fees and terms of the PFFS plan. However, not all health care providers accept PFFS plans, so your options may be limited, or you may have to pay the full cost on your own.
Before you pick a Medicare plan, make sure the health care providers you want to see will be covered by your plan. If you have a condition that requires specialized care, make sure you won’t end up having to pack out of pocket. Get a free medicare consultation with no obligation to enroll.
Not understanding late enrollment penalties
If you’re eligible for Medicare, make sure you enroll on time. Not enrolling at the appropriate time can end up being a mistake that costs you for years to come. To give you an idea, here are how some of the late enrollment penalties work:
- Part A: If you didn’t get Part A coverage when you were first eligible for it, your monthly premium may go up by 10%. The penalty will apply for twice the number of years you didn’t sign up for Medicare. For example, if you didn’t sign up for two years, you would have to pay the 10% penalty for four years.
- Part B: If you didn’t sign up for Medicare Part B when you were first eligible your monthly premium may go 10% for each 12-month period you could have had Part B coverage. You’ll typically have to pay this penalty every time you pay your premium for as long as you have Part B coverage.
- Part D: Once 63 days pass after the initial enrollment period, you may owe a late enrollment penalty if you don’t have a Medicare Part D plan, a Medicare Advantage plan, or creditable prescription drug coverage, such as coverage from an employer or union. The penalty will be based on a percentage of what Medicare has declared as the “national base beneficiary premium” as well as how long you went without coverage.
Not considering your travel plans
With original Medicare, you have coverage throughout the U.S. and its territories. However, original Medicare does not typically cover medical care you receive outside of the country.
If you have a Medicare Advantage plan, terms can vary. Some plans will include out-of-network and out-of-state-coverage, whereas others do not. On the plus side, some Medicare Advantage plans will cover you if you require health care while you’re overseas.
If you enjoy traveling, keep that in mind when shopping for a plan. If you plan to travel outside the U.S., or even to a different state within the U.S., having a plan that doesn’t cover you could turn into a costly mistake.
Thinking you’ve already got the best plan
Although you may have chosen a great plan last year, it still makes sense to check out what plans are available and compare coverages and costs. New plans come into the marketplace every year, and you may be able to find a plan that offers the coverage you need at a better price or get more services and items covered than you had before.
Thinking your health won’t change
You may be in excellent health right now, but that may not always be the case. Although a very basic plan may have worked for you last year, your medical situation can change over time, and you may have more complex medical needs going forward. Each year, it pays to reevaluate your health and health care needs to ensure you have the right plan so you can get the best care possible.
How to choose the right Medicare plan for you
To choose the best Medicare plan for you, and avoid costly open enrollment mistakes, there are a few key steps you'll need to take:
- Evaluate your care needs. Those who require more medical services may find it's more cost-effective to pay higher premiums for a comprehensive Medicare Advantage plan.
- Review your current coverage. If you're happy with your plan, you may want to keep it, but make sure you understand any changes to coverage or your premiums that may have occurred.
- Comparison shop for Medicare Advantage plans. Look carefully at premiums and what each plan covers to determine whether it is a good fit. Pay attention to the plan's network, out-of-pocket expenses, and coverage during domestic and foreign travel or in regard to any special care of medication you know you’ll need. You can easily compare top Medicare plans now — Just click this link then fill out the form to be connected with a licensed agent who can walk you through custom Medicare Advantage options.
The Medicare open enrollment period is quickly approaching so make sure you’re prepared. By being aware of some of the common enrollment mistakes people make, you can avoid these issues and choose the best health care plan for the upcoming year.