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Expensive Medicare Mistakes to Avoid

Once you turn 65, Medicare provides the essential healthcare coverage you need—and the peace of mind that you’re protected. But Medicare’s rules can be confusing, and mistakes can be costly. Missing deadlines, delaying enrollment or choosing the wrong plan can cost you a bundle when it comes to Medicare. If you miss deadlines, delay enrollment, or choose the wrong plan, you could end up with high premiums and big out-of-pocket costs. 

Want to get the most out of your Medicare coverage, while also saving money? Stay with us as we cover the most common mistakes new Medicare enrollees make—and how you can avoid them.

Mistake 1: Not Signing up for Medicare at the Right Time

When it comes to Medicare, timing is everything. If you are 65 or older, once you stop working and lose your health insurance coverage you’ll need to enroll for Medicare parts A and B. It’s important that you sign up as early as possible to avoid a late-enrollment penalty, which you will be required to pay for as long as you have Medicare. 

To avoid significant penalty charges, you’ll need to enroll for Medicare during the initial enrollment period (IEP). This seven-month initial period begins three months before the month of your 65th birthday. It ends three months after your birthday month. To ensure that you’ve got coverage by the time you turn 65, make sure to sign up in the first three months of the enrollment period.

If you don’t sign up during your IEP, you will get another chance to enroll during Medicare’s annual general enrollment period, from January 1 through March 31 of each year. However, if you sign up during this time, you’ll have to wait until July for coverage to begin. This late enrollment may also increase the amount of your monthly premiums for Medicare Part B, which covers your doctor visits and other outpatient services.

Mistake 2: Not Considering a Medicare Advantage Plan

If you are eligible for Medicare, you have a choice to receive your benefits through original Medicare or a Medicare Advantage plan, also known as “Part C” or an “MA plan”.

A Medicare Advantage plan is a private insurance alternative to original Medicare. These plans provide the same benefits as traditional Medicare, covering Part A (hospitalization) Part B (doctor visits) and usually Part D (prescriptions). However, they may also offer certain benefits that original Medicare does not cover, such as dental care, vision care, and hearing aids. Certain MA plans also provide uncommon services, such as paying for wheelchair ramps and transportation to medical appointments.

It’s important to know that each Medicare Advantage Plan can charge different out-of-pocket costs and may enforce different rules for how you get services (such as requiring a referral before you can see a specialist, etc). Advantage policies often charge lower premiums than medigap plans but have higher cost-sharing. 

Mistake 3: Going Out-of-Network in Your Medicare Advantage Plan

Most Medicare Advantage plans fall into the category of health maintenance organizations (HMOs) or preferred provider organizations (PPOs). An HMO plan requires referrals to specialists and relies on your primary care physician to coordinate your healthcare needs. A PPO comes with more flexibility, offering a network of doctors, hospitals and medical facilities that contract with your plan to provide services.

Typically, MA plans require you to use the plan’s network of doctors and hospitals to get the lowest co-payments. Some plans won’t cover out-of-network providers at all, except in an emergency. If you choose an MA plan for your coverage, contact your doctor to make sure they’ll be included in the network for the coming plan year.

Need to change your Medicare Advantage plan? Open enrollment occurs each year from October 15 to December 7. During this time, you can compare out-of-pocket costs for your medications and general health conditions under the plans available in your area.

Mistake 4: Choosing Your Plan Based on Premiums

It makes sense to focus on the monthly premium when you’re choosing a Medicare plan, but your premium is only one piece of the pie. After all, a plan with a low monthly premium may charge a large deductible or have high copayments. This might make sense if you rarely go to the doctor and don’t take many medications. But if you use health care services often, a plan with a slightly higher premium but a lower deductible may save you a lot of money. 

It’s important to consider all the out-of-pocket costs so you can find a great plan to suit your healthcare needs. In addition to your premium, you also need to factor in the cost of a deductible, copayments, and coinsurance—and how each will work with your coverage.

Mistake 5: Not Choosing Drug Coverage That Covers Your Prescriptions

It’s important to make sure your plan covers your prescriptions, whether you plan to get them covered through a stand-alone Part D plan or under a Medicare Advantage plan. Each Medicare Part D plan has a list of covered drugs, called a formulary. If your prescriptions aren’t listed on your policy’s formulary, you may have to request an exception or pay out of pocket.

It’s also important to find out whether your plan will give you a good deal at your preferred pharmacy, or through mail order. Each Part D has a network of pharmacies that include both preferred and non-preferred pharmacies. Typically, you’ll pay less for your prescriptions at preferred pharmacies. You can use the Medicare Plan Finder to find out if your drugs will be covered under a particular plan and estimate any out-of-pocket costs.

Mistake 6: Not Understanding Your Out-of-Pocket Costs

Although Medicare helps you save a bundle on healthcare costs, you still need to be prepared for some often substantial out-of-pocket expenses. The amount you’ll pay depends on the coverage you choose, the health care services and benefits you use during the year, and if your plan has rules about network vs out-of-network costs. Here’s a rundown of what you should expect:

  • Premium: Most people don’t pay a monthly premium for Part A, which covers hospital services. You will be responsible for the Part B premium, which will be deducted from your monthly benefit if you are collecting Social Security. If you participate in a Medicare Advantage (MA) plan or a Part D plan, you may also owe a monthly premium, depending on the policy you choose. 
  • Deductible: This refers to the set amount you pay out of pocket for covered services before Medicare or your plan begins to pay. Parts A and B in traditional Medicare have annual deductibles, and some MA and Part D prescription drug plans also have deductibles. 
  • Copayment: A fixed amount you pay at the time you receive a covered service or benefit. For example, you may have a flat copay of $25 every time you see a doctor or  $15 when you fill a prescription.
  • Coinsurance: This is the amount you may be required to pay as your share for the cost of a covered service. If you have original Medicare, your plan will cover 80% of the cost of a service—for example, a blood test—and you pay the remaining 20%.

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