Medicare provides most of the health coverage for over 58 million Americans in retirement. Because of such a large and diverse population of members, Medicare and approved insurance companies provide many customization options for Medicare benefits and costs.
Unfortunately, with so many options to consider, the process of picking the best Medicare plan can be overwhelming. In addition, making mistakes such as signing up too late, going out of network, or choosing a plan that simply doesn’t fit your needs are inevitable if you are unprepared. So, when deciding how Medicare fits into your retirement plan, avoid these 7 common mistakes which can lead to penalties, higher out of pocket costs, or insufficient coverage.
7 Common Medicare Mistakes:
Mistake #1: Late Enrollment
Enrolling in Medicare after you become eligible can lead to penalties. If you are receiving Social Security four months prior to turning 65, you will be automatically enrolled in Medicare Parts A and B. If not, you will need to sign up for both Part A and Part B during the 7-month period around your 65th birthday. The 7-month period, known as the initial enrollment period, includes the month of your 65th birthday, the three months prior, and the three months after.
There are some cases in which you can delay signing up for Part B, such as having health insurance through a current employer. However, if you don’t get Part B when you’re first eligible, your monthly premium could go up 10% for each 12-month period you could have had Part B. In most cases, you’ll have to pay this penalty for as long as you have Part B.
Mistake #2: Going to an Out-of-Network Doctor with a Medicare Advantage Plan
Medicare Advantage Plans, sometimes called “Part C”, are offered by private insurance companies that have been approved by Medicare. These plans are bundles and usually include Medicare Part A (Hospital Insurance), Part B (Medical Insurance), and Part D (Drug Coverage).
Much like PPO insurance plans, Medicare Advantage plans consist of networks of doctors, specialists, and providers. Each Medicare Advantage Plan can have a different network and can charge different out-of-pocket costs. Some Medicare Advantage plans don’t cover any of the costs associated with going to an out-of-network doctor for a non-emergency.
Therefore, it’s important to know what your plan covers and to make sure your doctors, hospitals and other providers are covered in your plan from year to year. Keep in mind that if you move out of your plan’s geographic area, you may be able to change plans without having to wait for the annual enrollment period. In any event, it’s important to always know which doctors and hospitals are in your network, wherever you are, so you can avoid massive, unexpected bills.
Mistake #3: Not Choosing the Right Medigap Plan the First Time
If you enroll in a Medicare supplement plan, also known as a Medigap plan, within 6 moths of signing up for Medicare Part B, you can get any plan in your area. This also includes those who have a preexisting condition. If you try to switch plans after that, insurers in most states can require you to go through medical underwriting. You want to avoid medical underwriting, because if you are required to go through this process, you run the risk of being rejected or charged more because of your health conditions.
Mistake #4: Allowing your Plan to Renew without Reviewing
If you have a Medigap or Medicare Advantage plan, it automatically renews every year – unless you decide to change it. In addition, Medicare Advantage and Part D plans can change the services and prescription drugs they cover from year to year. They can also change deductibles, premiums, and copay or coinsurance amounts.
Therefore, you should review your plan each year to make sure that your medications, doctors, and other providers are still covered. Those who don’t could be surprised with larger bills from their doctor, hospital or pharmacy – and these surprises can be devastating to your retirement plan.
Mistake #5: Choosing a Plan that Doesn’t Meet your Needs
A plan that works for a friend or spouse, no matter how much they love it, may not work for you. That’s why it’s important to know the details of the coverages, copayments and premiums in the plan and choose based on which fits your needs and budget. Keep in mind which healthcare services you currently use and how often you use them. Also, consider how your needs may change in the future.
In addition, be careful to understand special discounts or offers from providers before you take them. Some companies offer discounts if you and a member of your household get your plans from the same company. These discounts can be a great benefit if they have plans that work for your situation as well, but it doesn’t mean they are always the best choice. In many cases, they can pin you into a plan that isn’t ideal for your situation.
Mistake #6: Expecting Medicare to Cover Long-term Care
This often comes as a shock to people, but long-term care, such as nursing homes or assisted living, is not covered by Medicare. In most cases, if you require long term care, you would be responsible for paying 100% of the cost.
The lack of planning for long-term care can be a disastrous mistake. If you want to be sure you are comfortable should a debilitating illness arise, make sure you are saving to cover long-term care expenses in retirement. For more valuable information on this topic, attend our live Meld University Webinar: Planning for Long-Term Care Expenses in Retirement.
Mistake #7: Contributing to an HSA while Enrolled in Medicare
Another point that is often overlooked by those nearing retirement is you should stop contributing to your HSA at least 6 months before you apply for Medicare. Those who continue to contribute to their HSA after enrolling can be hit with a tax penalty.
For those who want to continue to save money for out of pocket healthcare costs while on Medicare, there are specific plans for savings while on Medicare, called MSAs. These plans are similar to HSA accounts, but they are designed for those receiving Medicare.
Secure Your Retirement™ with Financial Fingerprint™
If you are planning for retirement or need help understanding your Medicare options, reach out to the team at Meld Financial. At Meld, our team of financial, legal and tax professionals will develop your Financial Fingerprint™, a comprehensive wealth management plan that is quick to assemble, easy to understand and simple to modify as your circumstances change.
With your Financial Fingerprint™, you can have confidence that you are prepared to transition to Medicare when the time is right. Contact Meld Financial today to speak to a member of our team.
