Medicare is the nation’s health care program for citizens age 65 years and up, and younger people who meet certain eligibility criteria. It covers many major medical expenses for participants. But choosing the right Medicare plan can be confusing in many cases, and it may be difficult to decipher all of the language written into these plans and options. Here are some potential mistakes to avoid when you choose your plan so you end up with the coverage you need.
- Your enrollment window begins three months before the month in which you turn 65 and lasts for three months after that.
- Don't assume your spouse is covered because you are.
- Make sure you have enough coverage for all your medical expenses.
- If your income is low enough, you may qualify for a Medicare Savings program.
Enrolling Outside Your Enrollment Window
This can be one of the biggest mistakes made with Medicare. If you receive Social Security when you turn 65, you don't have to do anything—you're automatically enrolled in the program. This means the premiums are deducted from your monthly benefits. But if you delay taking Social Security until a later age, you will have to enroll on your own when you turn 65.
The enrollment period begins three months before the month in which you turn 65 and lasts for three months after that. So if you turn 65 in September, you have between June and December to enroll. You don't have to sign up if you're still covered under a health insurance policy from your job. Keep in mind, COBRA coverage and coverage from a former employer where you still pay the premiums don’t count. Once you quit working, you have eight months in which to sign up. But if you work for a company with fewer than 20 employees, you may be required to sign up even if you have current coverage with the company.
You can also delay signing up if you have coverage through a younger spouse’s plan. But failure to sign up within the prescribed window can result in surcharges on your future premiums and potential gaps in your coverage.
Assume Your Spouse Is Covered
Medicare coverage doesn't work like employer-based coverage. This means it doesn't cover the entire family and only applies on an individual basis. Just because you have coverage doesn't mean your spouse is covered. They also had to have paid their dues in the workforce for at least 10 years in order to qualify for Part A. If your spouse is not 65, then they will have to find coverage elsewhere—perhaps through their employer, a COBRA plan, or a policy sold on the exchange. It doesn't matter whether your spouse receives spousal Social Security benefits.
If your spouse hasn't turned 65, they may qualify under certain conditions. Anyone who receives disability benefits from Social Security for 24 months, or has end-stage renal disease or amyotrophic lateral sclerosis (ALS), also qualifies for Medicare.
Not Purchase Enough Coverage
While Medicare Part A is free, Parts B, C, and D all require a monthly premium. Most people should probably get at least Part B so that they have coverage for doctor visits and outpatient care. The standard premium for Part B coverage is $144.60 for 2020, which can be deducted from your monthly Social Security benefit. There's also an annual deductible of $198 for Part B coverage.
The annual Medicare premium changes annually and is deducted from your Social Security benefits.
Parts C and D can also provide important coverage for things like dental, vision, and prescription drugs. You can also opt for a Medicare Advantage policy which helps defray these costs. The average premium for this type of coverage will run you about $23.00 in 2020. And a Medigap insurance policy can help you to pay for things that are not covered elsewhere, like coinsurance, copays, and deductibles. It helps in comparing these options to see how they may fit your needs.
Can't Afford Your Premiums?
Many people don't have enough money in their retirement nest eggs, meaning they'll rely heavily on their Social Security checks to pay for their monthly expenses. Keep in mind that your monthly premiums are deducted from your benefits, which lowers the amount you receive each month. According to the Social Security Administration, the maximum benefit people receive at full retirement age is $3,011.
If your income is low enough that you will have trouble affording the premiums, your state or local department of social services may have programs available for those who financially qualify. If you are eligible for any of the four different Medicare Savings programs available, you may receive help paying for your premiums.
The Bottom Line
Medicare is a complex program that has many parts and options to choose from. Don’t hesitate to seek professional guidance from a qualified financial advisor who has been trained in this area for help.