Medicare Mistake #1: Underestimating the out-of-pocket costs of Original Medicare and other Medicare plans.
While it’s likely you’ve been paying into Medicare throughout a lifetime of payroll taxes, unfortunately, Medicare is not free. Unless you have a Medicare Supplement (Medigap) plan, or you enroll in a Medicare Advantage Plan, Original Medicare does not have an annual limit on what you pay out-of-pocket. Recognize that Original Medicare comes with the following out-of-pocket costs: Monthly Medicare Premiums, Medicare Deductibles, and Medicare Coinsurance.
Medicare Premiums: There is typically no premium for Part A which covers hospital costs. The Part B premium that covers medical costs is currently $170.10 per month. Rates can be adjusted higher based on income. If you’re uncertain where your income places you, visit Medicare.gov’s Income Related Monthly Adjustment Amount (IRMAA). This rate can also be adjusted higher with late enrollment penalties if you didn’t sign up when you were first eligible (typically at age 65). This premium can change annually. Medicare beneficiaries will pay this premium every month regardless of whether you go to the doctor or not. There are also premiums typically associated for Medicare Advantage or Part D Prescription Drug plans as well.
Medicare Deductibles: There is an out-of-pocket flat threshold cost that must be reached by the enrollee before Original Medicare starts covering the costs. This is cost competent is often the case for Medicare Advantage and/or Medicare Part D enrollees too. Individuals trying to mitigate these costs should investigate Medicare Supplement plans (Medigap) which will often pay for the Original Medicare Deductibles.
Medicare Coinsurance: Medicare Part B enrollees are often required to will pay for 20% of Medicare-approved costs relating to: durable medical equipment, doctor services (including most relating to hospital inpatient), outpatient therapy after the deductible has been paid.
For Medicare Part A the coinsurance amounts fixed to set dollar amounts depending on the length of your hospital stay. For more information visit Medicare Parts A & B Costs
Medicare Mistake #2: Not understanding the coverage limitations of Original Medicare.
Original Medicare (Part A and B) also has limitations on coverage (for more information visit The 8 Things Medicare Does Not Cover). The major items not covered under Original Medicare in most instances are prescription drugs, dental, hearing and vison related services. Therefore, it’s wise to investigate Medicare Part D prescription drug coverage options and/or Medicare plans offered through private insurance companies (Medicare Part C).
Medicare Mistake #3: Missing your Medicare enrollment periods.
The important 7-month long annual enrollment period if you are aging into Medicare when you turn 65 is the IEP (initial enrollment). This 7-month period timeframe starts 3 months before the month in which you turn 65 until three months after. Beneficiaries can enroll in Original Medicare, Medicare Part D, and a Medicare Advantage plan during this period. Missing IEP enrollment can translate to having penalty costs added to the enrollee’s monthly premiums. If you’re late enrolling in Part A there will likely be a 10% added cost to the monthly premium for twice the number of years there was a delay in your enrollment. The late penalty for Part B will last as long as you have Medicare. There is a 10% penalty cost levied for every 12-month period that the person was qualified but was not enrolled. Another common mistake for some individuals is not signing up for any sort of prescription drug coverage (Medicare Part D) during IEP since they may deem it unnecessary at the time of enrollment, but everyone’s health needs to change over time. Late enrollment into the Part D prescription drug plan will cost the enrollee a 1% penalty of the average nation premium added to their monthly premium for every month the person was eligible and did not enroll (Medicare Part D Premium and Costs for 2022)
If you miss IEP the next chance to enroll would be during the annual general enrollment period (GEP) from January 1 through March 31. However, the drawbacks of missing IEP won’t be entirely erased considering IEP late enrollment penalties will still likely be ascribed to your Medicare Part B premiums.
There are some scenarios where individuals can avoid late enrollment penalties through the Special Enrollment Period (SEP). The SEP generally lasts for 60 days after the qualifying event. Those who don’t enroll in Part B because they have job-based health insurance also get an SEP after losing this coverage, which lasts eight months (The Guide to Medicare Enrollment Periods)
Medicare Mistake #4: Overlooking Medicare Advantage plans an affordable Medicare option.
Original Medicare is not a one size fits all type of coverage. Every individual’s healthcare needs and expenses are unique. Typically, potential enrollees that seek a more customized type of coverage will find it through Medicare Part C plan which also known as Medicare Advantage. The Medicare Part C plan is run by private insurance companies to which you pay a premium. Advantage plans will typically offer coverage options for prescription, dental, hearing and vison related services (for more information visit What is Medicare Part C?).
Medicare Mistake #5: Not enrolling in a Medicare Advantage plan that supports your healthcare needs (e.g. primary doctor, specialists, hospitals).
Medicare Advantage enrollees should have a good understanding of how their PPO or their HMO networks recognize out-of-pocket costs and coverage.
- HMO: Health Maintenance Organizations require members to get most medical services from an in-network provider. They typically make exceptions for emergencies. They also typically require members to choose a primary care doctor and consult with that physician for referrals to specialists.
- PPOs: Preferred Provider Organizations charge the least for in-network services but will allow out-of-network visits for a higher cost. They generally don’t require members to choose a primary care doctor or ask for referrals.
Make sure you have a good understanding of your policy and read the terms and conditions. Policyholders can get stuck with surprise bills if they carelessly go out of their PPO (preferred provider organization) network, or don’t have a firm grasp on what is considered fully covered (free) for preventative care vs intervention care. Typically preventative care like an annual check-up has no out-of-pocket costs. If you are on any medications it’s recommended you also check the health plan’s list of drug coverage (known as a formulary) to see if your particular drug is covered or a similar one is on the list. How to Compare Medicare Advantage Plans.
Medicare Mistake #6: Overlooking the benefits of using a licensed health insurance agent to review and compare different Medicare plans.
Part of fully understanding the terms and coverage of your policy is knowing what questions to ask. Listed below are questions you can ask an agent as you compare different health plans which should enable you to make a more informed decision regarding your coverage options. When making the call be sure to ask for the agent’s full name, their company, and the best number to call them back at directly in case you get disconnected.
- How much do I have to pay out-of-pocket for the plan including: monthly premiums, deductibles, copays and coinsurance?
- Is there a copay for doctor visits? If so, what is it? Is there a separate copay for specialists?
- Can I see a specialist without a referral?
- Is there an annual out-of-pocket cost cap for the plan? If so, how much?
- Does this plan include dental, vision care, and other special services?
- Will my specific doctors, hospitals and prescription drugs be covered? If not are you willing to switch to doctors, hospitals, and drugs that are covered on the plan being considered?
- How will Medicare effect my current healthcare coverage?
- What is the plan’s star rating it received from Medicare?