Costly Medicare Mistakes To Avoid

As a follow-up to our latest Medicare webinar series, we thought it would be beneficial to share 11 of the costly mistakes that you can avoid making when enrolling and choosing your Medicare plan. If you have any questions about Medicare or the tips below, please contact our office and we will be happy to answer your questions.

After you turn 65, Medicare should cover a majority of your health care expenses. However, Medicare’s rules are confusing and failing to fill in gaps in coverage can be costly.

Avoid making these mistakes and ensure that YOU do not miss key deadlines for signing up, incur unnecessarily high premiums or out of pocket costs and avoid a lifetime penalty.

Mistake #1: Forgetting that you CAN Sign Up for Medicare at Age 65

If you’re already receiving your Social Security benefits, you will automatically be enrolled into Medicare Parts A and B on your 65th birthday (you can turn down Part B coverage and sign up later if you don’t need it).

BUT, if you are NOT receiving Social Security benefit by age 65, you will need to sign up for Medicare. People who are at least 64 years and 9 months old can sign up online. The window to sign up is seven months long, beginning 3 months before your 65th birthday and ending 3 months afterwards. This does not mean that you must sign up for Social Security, you may continue to defer it until age 70. Contact us to learn more about the optimal age for YOU to begin receiving your Social Security benefits.

Mistake #2: Failing to Sign Up for Medicare Part B if you have Retiree or COBRA Coverage

After you turn 65, Medicare is considered to be your primary insurance and all other coverage is considered secondary, unless you or your spouse has insurance through a current employer with 20 or more employees. Alternative employer-related coverage, like retiree or COBRA, or severance benefits will not be considered primary coverage after age 65. This means that if you do not sign up for Medicare, you could have gaps in coverage and be subject to a lifetime late-enrollment penalty of 10% of the current Part B premium for each year that you should have been enrolled in Part B but failed to do so.

Mistake #3: Losing Sight of the Medicare Part B Enrollment Deadline After Leaving Your Job

If you are covered through an employer with 20 or more employees, you do not have to sign up for Medicare at age 65. You may choose to keep coverage from your employer to avoid paying Part B premiums. However, you need to sign up within 8 months after leaving your job or you will have to wait until the next upcoming enrollment period. This means that you could go several months without coverage and potentially incur the 10% lifetime late-enrollment penalty.

Mistake #4: Accidentally Boosting your Premium Expenses following Financial Decisions

In 2020, most people paid $144.60 per month for Medicare Part B premiums. However, if you’re single and your AGI is more than $87,000 or over $174,000 for joint filers, you would have paid between $202.40 to $491.60 per month. There is also the potential for a high-income surcharge for Part D prescription-drug coverage too which ranged between $12.20 to $76.40 per month in 2020.

If you are approaching the income limit, be cautious when making financial decisions that could increase your AGI and make you subject to the surcharge. Contact CURO to learn more about these triggering events and how to avoid them.

Mistake #5: Failing to Contest the High-Income Surcharge for your Retirement Year

If you earned more than $87,000 (Single) or $174,000 (Married filing Jointly) in 2020, your Part B and Part D premiums are higher than average. To determine whether or not you are subject to the High-Income surcharge, the Social Security Administration uses your most recent tax return on file (generally 2019 for 2021 premiums). You may be able to have the surcharge reduced if your income has dropped since filing as a result of life-changing events. Events include marriage, divorce, death of a spouse, retirement, or reduced work hours.

Following one of these, you can provide evidence and ask Social Security to use your most recent and current income.

Mistake #6: Signing Up for Medicare Part A when you want to Contribute to an HSA 

After signing up for Medicare, you cannot contribute to a Health Savings Account or “HSA”, but that does not mean that at Age 65 you must stop making contributions. If you or your spouse has health insurance from your current employer, you are allowed to delay signing up for Parts A & B and continue contributing to an HSA. If you have already signed up for Social Security or if your employer has fewer than 20 employees, this is not an option because you cannot delay signing up for Part A.

in the year that you leave your job and enroll in Medicare, be careful about your contributions. You must prorate your HSA contributions based on the number of months before you were covered by Medicare.

Mistake #7: Leaving Medicare Part D Plan on Autopilot

Enrollment for Medicare Part D and Medicare Advantage plans opens up from October 15 to December 7 every year, and that is the best time to review all of your options and make the best plan for you. Costs and plans vary greatly from year to year, and some plans increase premium costs more than others. For example, if you’ve been prescribed new medications or one of your medications is now offered in a generic version, a different plan could prove to be more cost effective and suitable for your needs.

Easily compare all of the available plans in your area during open enrollment using the Medicare Plan Finder. Simply type in your prescriptions and dosages to check out how much you would pay for premiums and co-payments for the plans in your area.

Mistake #8: Enrolling in the Same Medicare Part D Plan as your Spouse

You and your spouse may have the same love of food or cars, but you probably don’t take the exact same prescriptions or have the same needs from your Medicare plan.

There are no spousal discounts for having the same Medicare Part D (prescription-drug) plans. When seeking out the ideal Medicare Part D plan for you, you need to vet plans for coverage of your specific prescription medications. Use the Medicare Plan Finder above to find the best plans for you and your spouse. Keep in mind that if you and your spouse register for plans with differing preferred pharmacies, you could be in for trips to multiple locations- but some plans reduce rates if you use certain pharmacies so the trip could be worth it.

Mistake #9: Beware of Going Out-of-Network within Your Medicare Advantage Plan

If your coverage is through a private Medicare Advantage plan, you generally need to use the plan’s specified network of doctors and hospitals in order to secure the lowest co-payments. Keep in mind that some plans will never cover out-of-network providers except in an emergency. It’s important to ensure that your doctors, hospitals, and other providers are covered in your plan from year to year.

You may switch Medicare Advantage plans during open enrollment, after you’ve narrowed down the list of plans that suit your needs, contact both the insurer and your personal doctor to ensure that they will be included in the network for the upcoming year.  

Mistake #10: Forgetting to Switch Plans Mid-Year if Needed

While open enrollment runs from October 15 to December 3, you also have from January 1 to March 31 to switch to a better Medicare Advantage plan.

Additionally, you have the option to switch plans outside of open enrollment following any qualifying life changes like moving to an address outside of your plan’s service area.

Mistake #11: Failing to Select the Ideal Medigap Plan for you

If you purchased a Medicare supplement plan within six months of enrolling in Medicare Part B, you can choose any plan in your area (even if you have a preexisting medical condition.) However, if you attempt to switch plans after that, insurers in most states are able to reject you OR charge more because of your health. With that said, choose your plan carefully.

Some states will allow you to switch into certain plans regardless of your health and some insurers will allow you to switch to another available plan option without a new medical exam.

To find out more about your state’s available plans and the rules, visit your state insurance department website. More information regarding medigap policies is also available at Medicare.gov

 **Presented by the editors of Kiplinger Retirement Report