Common errors can be costly, but here’s how to avoid them, by Patricia Barry, AARP
Medicare is uncharted territory for most of the 10,000 people a day who currently come into the program. It’s not a minefield exactly, but lurking in the undergrowth are pitfalls and traps that can be costly unless you take care to avoid them. Here are the top 10 Medicare mistakes to beware of:
Mistake No. 1:
Assuming you don’t “qualify” if you haven’t worked long enough
Earning 40 credits through paying payroll taxes at work — about 10 years’ work — ensures that you won’t have to pay premiums for Part A services (mainly hospital insurance) when you join Medicare. But you don’t need any work credits to qualify for Part B (doctors’ services, outpatient care, medical equipment) and Part D (prescription drugs), provided that you’re 65 or older, and a U.S. citizen or a legal resident who’s lived in the United States for at least five years. You may also qualify for Part A benefits on your spouse’s work record, or you can pay premiums for them. But if you wait to sign up until you’ve earned 40 credits (pdf), you may end up paying permanent late penalties.
Mistake No. 2:
Failing to enroll in Part B when you should
Enrolling at the time that’s right for you is critical. If you don’t, you risk late penalties, in the form of surcharges added to your premiums for all future years, and delays of several months before coverage kicks in. If you have health coverage, beyond age 65, from an employer for whom you (or your spouse) actively work, and the employer has 20 or more workers, you can delay Part B enrollment without penalty until the employment ends. Otherwise, you need to sign up during your seven-month initial enrollment period, of which the fourth month is the one in which you turn 65.
Mistake No. 3:
Assuming you don’t need Medicare Part B if you have retiree health coverage
Part B is optional, but you should carefully check with your retiree plan to see how it fits in with Medicare. In many such plans, Medicare automatically becomes primary coverage and the plan pays only for a few services that Medicare doesn’t cover. So if you fail to sign up for Part B when you’re required to, you’ll essentially have no coverage.
Mistake No. 4:
Thinking you must reach full retirement age before signing up
Full retirement age for most people is now 66. But to avoid late penalties you need to sign up for Medicare at age 65, unless you have health coverage from your own or your spouse’s current employment. You don’t need to be collecting government retirement benefits to enroll in Medicare.
Mistake No. 5:
Not signing up for Part D because you don’t take any prescription drugs
Why pay Part D premiums if you need no medicines? Because you don’t have a crystal ball and can’t be sure that you won’t get some unforeseen illness or injury that takes expensive drugs to treat. (Some cancer drugs cost thousands of dollars a month.) Part D, like all insurance, provides coverage when you need it, but doesn’t allow you to wait to sign up until the need becomes urgent. One solution (if you don’t have drug coverage from elsewhere): Pick the plan with the lowest premium, so you get coverage at the least cost.
Mistake No. 6:
Picking a Part D drug plan on the basis of its premium or its name or because your best friend chose it
The best way to pick a plan is according to the specific drugs you take, because Part D plans do not cover all drugs and they charge widely differing copays, even for the same drug. You can compare coverage and costs for your own drugs among different plans by using the plan finder program on Medicare’s website or by calling Medicare at 800-633-4227.
Mistake No. 7:
Misunderstanding enrollment periods
You may have read about “open enrollment” and gotten the idea that this is the only time you can sign up for Medicare. Not true! In Medicare, open enrollment (Oct. 15 to Dec. 7 each year) is only for people who are already in the program and want to change their coverage for the following year. If you’re coming into Medicare for the first time, you get your own enrollment period — either around the time you turn 65, or throughout the time you have health coverage from your own or your spouse’s employment and for up to eight months after it ends. So if you miss your personal deadlines because you’re waiting for open enrollment, you risk delayed coverage and permanent late penalties. (Note: Different enrollment periods apply in some other situations, including when people qualify for Medicare due to disability.)
Mistake No. 8:
Being too late to buy Medigap with full protections
Medigap supplemental insurance is extra coverage you can choose to buy privately to cover some or most of your out-of-pocket expenses in traditional Medicare, such as deductibles and copays. But to get the full federal protections, you need to buy it at the right time and be 65 or older. (See Choosing a Medigap Policy.)
If you buy a Medigap policy within six months of enrolling in Part B or in a few other specific circumstances, Medigap insurers can’t deny you coverage or charge higher premiums based on your current health or preexisting medical conditions. Outside of those time frames, they can do both. (Note that people under 65 don’t get this federal umbrella, though some states provide similar protections.)
Mistake No. 9:
Failing to read your Annual Notice of Change
This important document comes in the mail each September if you’re enrolled in a Medicare Advantage plan (HMO or PPO) or a Part D prescription drug plan. It specifies what changes the plan will make in its costs and coverage for the following year. You can then compare it with other plans during open enrollment (Oct. 15 to Dec. 7) and switch if you want. Failing to read the notice can result in nasty shocks on Jan. 1 if you stay with a plan that hikes its charges.
Mistake No. 10:
Not realizing that you may qualify for help to lower your costs
Medicare comes with many expenses — premiums, deductibles, copays — that many people find hard to pay. So if your income is limited, be sure to check out two programs that can reduce those costs if you qualify. Under a Medicare Savings Program, your state pays the Part B premiums and maybe other expenses. Under the federal Extra Help program, you get low-cost Part D prescription drug coverage.