Missing Your Initial Enrollment Period
One of the most critical mistakes is failing to enroll in Medicare during your Initial Enrollment Period (IEP). This seven-month window includes the three months before your 65th birthday month, your birthday month, and the three months after. Unless you have qualifying coverage through current employment, missing this period can result in late enrollment penalties and coverage gaps.
For Medicare Part B, the penalty is a 10% increase in your monthly premium for each 12-month period you could have had Part B but didn't sign up. This penalty lasts as long as you have Part B coverage, which for most people is the rest of their lives.
Assuming COBRA Counts as Creditable Coverage
Many retirees make the mistake of thinking COBRA coverage qualifies as creditable coverage for Medicare purposes. Unfortunately, it doesn't. If you rely on COBRA and delay Medicare enrollment, you could face late enrollment penalties and a coverage gap when you finally do enroll.
You might end up paying higher premiums for Part B and potentially Part D for the rest of your time on Medicare, plus you could have months without any health coverage.
Failing to Enroll in a Medicare Part D Drug Plan
Even if you're not currently taking prescription medications, failing to enroll in a Part D drug plan when you're first eligible can lead to significant penalties if you need coverage later.
The Part D late enrollment penalty is calculated at 1% of the "national base beneficiary premium" ($34.70 in 2024) for each full, uncovered month. This penalty is added to your monthly premium for as long as you have Part D coverage.
Misunderstanding Creditable Work Coverage
Some people believe that any employer-provided health coverage allows them to delay Medicare enrollment without penalty. However, only coverage from current employment (your own or your spouse's) with a company of 20 or more employees is considered creditable.
If you delay enrollment based on non-creditable coverage, you could face late enrollment penalties for both Part B and Part D, as well as potential gaps in coverage.
Ignoring the Importance of Medigap Open Enrollment
When you first enroll in Medicare Part B, you have a six-month Medigap Open Enrollment Period. During this time, you can enroll in any Medigap (Medicare Supplement) plan without medical underwriting.
Missing this period means you might be denied coverage or charged higher premiums for Medigap policies in the future due to pre-existing conditions.
Falling for "Free" Medicare Advantage Plans Without Reading the Fine Print
While Medicare Advantage plans often advertise $0 premiums and extra benefits, it's crucial to understand the plan's network restrictions, out-of-pocket costs, and coverage limitations before enrolling.
You might end up with higher out-of-pocket costs or limited access to your preferred healthcare providers if you don't carefully review the plan details.
How to Avoid These Costly Mistakes
- Mark your calendar for your Initial Enrollment Period and don't miss it.
- Understand what qualifies as creditable coverage and how it affects your Medicare enrollment.
- Enroll in Part D coverage even if you don't currently need prescription drugs.
- Take advantage of your Medigap Open Enrollment Period if you want a Medicare Supplement plan.
- Carefully review all Medicare Advantage plans before enrolling, considering all costs and restrictions.
Navigating Medicare enrollment doesn't have to be a daunting task that leads to costly mistakes. Working with a trusted Medicare advisor can help you understand your options, avoid penalties, and choose the coverage that best fits your healthcare needs and budget. Remember, the decisions you make now can impact your healthcare costs for years to come, so it's essential to get it right from the start.