Medicare is the nation’s healthcare program for citizens age 65 years and up, and younger people who meet certain eligibility criteria. Medicare Part A, Part B, Part C, and Part D cover many major medical expenses for participants.
But choosing the right Medicare plan can be confusing, 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 you turn 65 and lasts for three months after that.
- Don't assume your spouse is covered just 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.
Not signing up at the right time can be one of the biggest mistakes you can make 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, and the premiums are deducted from your monthly benefits.
Medicare Initial Enrollment Period
But if you delay taking Social Security until a later age, you have to enroll for Medicare Part A and/or Part B on your own when you turn 65. The Medicare "Initial Enrollment Period":
- Starts three months before the month you turn 65
- Includes the month you turn 65
- Ends three months after the month you turn 65
So, if you turn 65 in September, you have between June and December to enroll.
Signing Up for Medicare Part A
In general, you should enroll in Medicare Part A during this Initial Enrollment Period—even if you have health insurance through an employer. That's because most people paid Medicare taxes throughout their working years and, therefore, won't have to pay for Medicare Part A. Of course, if you would have to pay a premium, you may opt to delay.
Signing Up for Medicare Part B
Most people need to enroll in Medicare Part B during the Initial Enrollment Period. The only way to delay Medicare Part B is if you have health insurance from your (or your spouse's) current employer. Everyone pays a premium for Medicare Part B that depends on your income and when you enroll.
If you have COBRA or retiree coverage—or if your employer gives you money to buy health insurance—you do not have health insurance based on "current employment."
If you don't enroll in Part A and Part B during your Initial Enrollment Period, you must wait to sign up, which can cause a gap in your coverage. Also, you may owe a lifetime late enrollment penalty that increases the longer you wait to sign up.
The penalty for Part A is 10% of the monthly premium, and you'll pay this higher premium for twice the number of years you delayed signing up. The late-enrollment penalty for Part B lasts for as long as you have Medicare. The penalty can go up 10% for every 12-month period you were eligible for Medicare Part B but didn't sign up.
Medicare for Spouses
Assuming that your spouse is covered just because you have Medicare is a big mistake. Medicare coverage doesn't work like employer-based coverage. This means it doesn't cover the entire family, and it only applies on an individual basis. Spouses must also 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 an employer, a COBRA plan, or a policy sold on the Health Insurance Marketplace. 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 (ESRD) or amyotrophic lateral sclerosis (ALS), also qualifies for Medicare.
Not having the right Medicare coverage is another potentially costly mistake. While Medicare Part A is usually free, Parts B, C, and D all require a monthly premium.
Medicare Part B
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 is 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.
Medicare Part C
Medicare Part C is also called a Medicare Advantage Plan. Private companies that contract with Medicare offer these plans to provide all your Part A and Part B benefits. Most Medicare Advantage Plans include Part D (prescription drug) coverage, as well as extra benefits for vision, hearing, and dental. The average premium for this type of coverage will run you about $23.00 in 2020.
Medicare Part D
Every plan that offers prescription drug coverage through Medicare Part D must provide a minimum standard level of coverage set by Medicare. Since plans can vary the list of prescription drugs they cover and how they place drugs into different "tiers," it's essential to find a plan that covers the medications you normally take.
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 to 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 CARES Act of 2020
On March 27, 2020, President Trump signed into law a $2 trillion coronavirus emergency stimulus package called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also:
- Increases flexibility for Medicare to cover telehealth services.
- Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.
- Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment.
For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option.
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.