The deadline for Medicare enrollment is right around the corner - December 7th. Before you enroll, it’s important to make sure you’re avoiding these costly Medicare mistakes!
Mistake #1: Not Reviewing Your Part D Plan Annually
Open enrollment for Medicare Part D and Medicare Advantage plans runs from October 15th - December 7th each year. Given that we’re officially in the enrollment window, it’s a good time to review all of your options to make sure you have the coverage you need that’s also cost effective. You may be surprised at how much your cost and coverage can change from year to year!
The changes in your Medicare costs and coverage usually revolve around Prescription drug (Part D) plans. Part D plans are constantly changing, and the list of drugs that are covered (and how much of their cost is covered) is always shifting.
If you don’t review your Part D plan annually, you run the risk of overpaying. Some common changes that you should look out for are:
- Additional paperwork or “hoops to jump through” in order to get your prescription drugs covered.
- A requirement to use specific pharmacies in order to get the best rates.
- Changes in your prescription drugs (ex: it’s gone generic) that alters the coverage you receive.
It’s also important to keep in mind that all plans are individualized meaning you don't have to enroll into the same Medicare Part D prescription drug plan as your spouse. Most spouses don’t take the same medications - so different plans may have better coverage for each spouse.
Before you start to worry - you should know that it’s easier than you think to compare all of the plans available in your area during open enrollment. Go to the Medicare Plan Finder to search your drugs and dosages in order to see how much you’d pay for premiums and co-pays. Make sure you’re searching both your prescription drugs as well as your spouse’s so that you can get the coverage you need!
Mistake #2: Failing to Enroll When You Should
Some retirees aren’t currently receiving Social Security benefits (usually because they’re delaying to get a bigger benefit until their full retirement age or later). A common misconception among retirees who aren’t receiving Social Security benefits is that they don’t need to sign up for Medicare. This is incorrect.
In reality, retirees only have a seven-month window to sign up for Medicare - from three months (64 years and 9 months old) before your 65th birthday month to three months after your 65th birthday.
If you’re already receiving Social Security benefits, you likely don’t have the same concerns. You’re automatically enrolled in Medicare Part A and Part B when you turn 65 - though you have the option to turn down Part B coverage in favor of shopping around or signing up later.
So why is this a costly mistake? Because if you fail to sign up for Part B on time, you can get hit with a 10% LIFETIME PENALTY in the form of surcharges added to your premiums, or delays when your new coverage kicks in. Ouch!
If you’re delaying Social Security benefits and assumed you needed to delay Medicare enrollment, as well, you need to know that the penalty amount could increase by 10% for every 12-month period you were eligible for Part B but failed to enroll. So, if you wait three years to sign up, you could be stuck with a penalty as high as 30% of the premium forever.
Mistake #3: Forgetting to Enroll After Leaving Your Job
If you currently have medical coverage through your employer (and your employer has 20+ employees), you’re exempt from having to enroll in Medicare at age 65. However, once you leave that employer, you only have 8 months to sign up for Medicare. If you fail to do so, you’ll be subject to the same 10% lifetime late-enrollment penalty.
Mistake #4: Missing the 6-Month Window to Enroll in a Medigap Policy
If you are going to purchase a Medicare supplement plan (or a Medigap policy) you should do so within six months of the day your Part B Medicare starts. This date is shown on your Medicare card, so it should be easy to remember!
You need to enroll within this six month period because insurance companies are required to provide coverage - regardless of your current health status or pre-existing conditions. Whether or not you feel you need the coverage now, it’s important to enroll. If you wait until after the six-month window, insurers are allowed to use medical underwriting to determine whether or not they accept you into the plan. If they do choose to accept you, they get to determine how much you’ll be rated. Enrolling within your 6-month window helps you to save money and get the coverage you need!
Mistake #5: Assuming Medicare Covers Everything
It’s critical to understand that Medicare - while helpful - doesn’t cover everything. In fact, there are some significant gaps in coverage that will likely impact you at some point during your retirement years. Some notable things that are not covered by Medicare are:
- Dental (cleanings, fillings, dentures)
- Hearing (hearing aids or exams)
- Long-term care (including assisted living or nursing homes)
- Vision (eye exams, glasses, contact lenses)
You will likely need some form of supplemental insurance to cover these things - and it’s important to do the research on what supplemental insurance is best for you during this enrollment period. Even if you don’t feel you need these forms of care now, you might require them later - and you definitely don’t want to get hit with a hefty out-of-pocket bill because you don’t have any insurance to cover all or part of it.
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Desmond Henry is a fee-only CERTIFIED FINANCIAL PLANNER™ professional and founder of Afflora Financial Life Planning in Topeka, Kansas. He helps the retiring/retired plan their finances and invest their money. CLICK HERE to learn more.