Four Pitfalls for First-Time Medicare Enrollees
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Retirement is a time of transition and a new beginning. That’s a nice way to say that this is the first time most people get involved with the federal government about healthcare.
Age 65 is usually when you are eligible for Medicare, the state health insurance program. But the rules, options, and implications for when and how you sign up for the program are complex.
Below are some of the pitfalls you might encounter if you don’t log in properly at the beginning. Read on to avoid big problems and serious fees.
Pitfall # 1: You are missing your first registration period
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In general, you are eligible for Medicare when you turn 65. However, if you fail to register in time, this could result in permanent fines – we’ll get to that shortly – or delay benefits.
Medicare gives you a seven-month initial admission period, which includes the month you turn 65, the three months before that, and the three months after.
If you miss this time slot, you will typically have to wait to apply during the annual general enrollment period from January 1st to March 31st. Therefore, it says in the official Medicare manual:
“Your coverage will not start until July 1 of this year and you may have to pay a higher Part A and / or Part B premium for late enrollment.”
If you have Social Security benefits when you are 65, you will automatically receive Medicare so you do not need to enroll.
If you are employed after the age of 65 and have health insurance through your employer, you may be able to keep your employer’s health insurance. The Medicare program recommends these workers contact their employer to find out how their Medicare coverage works.
Be careful in any case. Don’t let employer protection fall until you understand the pros and cons.
Do you need help? Contact your State Health Insurance Assistance Program (SHIP) for a free one-to-one Medicare consultation.
Pitfall # 2: You’ll have to pay more if you sign up late
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If you miss your initial admission period and do not have any other qualifying health insurance, such as employer insurance, you will face fines.
How much? It depends on how long you’ve waited and what part of Medicare we’re talking about:
- Part A (which primarily covers inpatient hospitalization): Most people get Medicare Part A free of charge. However, if you are not eligible for Premium-Free Part A and do not purchase this coverage when you are first eligible, your premiums can be 10% higher for twice the number of years you have not signed up. For example, a two-year delay means higher premiums for four years.
- Part B (which covers medical services and other outpatient treatments): Failure to enroll in Medicare Part B when first eligible will usually incur a permanent penalty. Your rewards could increase 10% for every 12 month period you have waited to sign up – with that reward increase as long as you have Part B.
- Part D (Optional Coverage for Prescription Drugs): You may want Medicare Part D if you choose Original Medicare instead of a Medicare Advantage plan (more on this below). However, if your initial registration period has expired and you are then absent from Part D, Medicare Advantage, or other drug insurance for 63 consecutive days or more, you may owe a Part D late registration penalty. The size of this penalty depends on how long you have been without drug insurance, but you will most likely have to pay it for as long as you have a Part D plan.
Pitfall # 3: You are mistaking Medicare for Medicare Advantage
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There are two main types of Medicare: Original Medicare and Medicare Advantage.
Original Medicare: This is traditional Medicare offered direct by the federal government. It generally comprises parts A and B. There are also two types of optional supplementary insurance for people with Original Medicare:
With Original Medicare, you don’t need to choose a family doctor, and you usually don’t need a referral to see a specialist. One disadvantage is that there are no annual limits for paying out of pocket.
Medicare benefit: This is all-in-one coverage offered by private health insurers that are approved by the federal program. Medicare Advantage plans include Parts A and B and usually drug insurance.
Medicare Advantage plans must adhere to the rules of the Medicare federal program and must cover all services that Original Medicare covers. However, these rules can change annually and Medicare Advantage plans may cover additional services.
As a result, coverage and costs can vary widely from one Medicare Advantage plan to the next.
You can switch from original Medicare to a Medicare Advantage plan or vice versa, but only during certain enrollment periods.
There are also potential downsides to switching – such as losing access to a preferred doctor or losing a Medigap policy you had with Original Medicare (as we detail on the next page). So be careful and do your research before switching.
Pitfall # 4: You Lose Your Medigap Policy
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There is an important risk to keep in mind while using Original Medicare with a Medigap supplement policy.
If you are switching from Original Medicare to a Medicare Advantage plan – here are Medicare.gov steps for switching – you can cancel your supplementary insurance. But there are risks involved in doing that.
You are only guaranteed coverage by Medigap plans in your area during an initial Medigap enrollment period. Then and only then are insurance companies forbidden from denying you coverage or demanding more money because of pre-existing conditions, Reuters says.
After that, the door will open for insurers in most states to ask about your state of health.
So if you lose your original Medigap coverage, depending on your health and where you live, you can pay significantly more for a Medigap plan later. Or you could be banned from certain plans.
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