Navigating the Medicare Maze: 6 Mistakes to Avoid

By Charles R. Wolpoff, CFP®, JD, LL.M, AIF®, ChFEBCSM

At The Kelly Group, we are never surprised when registration fills up for our Medicare course at Harford Community College. While we like to think we do a good job with the course, we also realize it fills a significant need. Once you turn age 65, the general rule is that Medicare must be your primary medical insurance. While Medicare is a very good program, navigating its complexities can be challenging. Thus, people about to enter the Medicare world often seek guidance in order to avoid committing costly mistakes.

Here are six of the more common mistakes Medicare beneficiaries make and how to avoid them:

Not understanding the appropriate enrollment period. One of the most critical mistakes is failing to enroll in Medicare at the right time. There are three main enrollment periods to be aware of:

1. Initial Enrollment Period (IEP): This seven-month window begins three months before your 65th birthday, includes your birth month, and extends three months after. 

   A.  Special Enrollment Period (SEP): If you are still working for an employer with 20 or more employees and covered by employer insurance when you turn 65 (or if your spouse fits these criteria and you are covered by your spouse’s plan) you may qualify for a SEP. This allows you to enroll in Medicare without penalties within eight months of losing your job-based coverage.

   B. General Enrollment Period (GEP): If you miss your IEP and don't qualify for a SEP, you can sign up during the GEP, which runs from Jan. 1 to March 31 each year. Medicare will be effective the month after you enroll. However, this may result in late enrollment penalties.

C. Failing to enroll during the appropriate period can lead to gaps in health insurance coverage—which could be disastrous if you need medical care during those gaps— and lifetime penalties in the form of higher premiums.

2. Believing You Don't Need to Sign Up if on COBRA or a Retiree Plan. A common misconception is that COBRA or retiree health plans negate the need to enroll in Medicare. This is incorrect and relying on this assumption can be costly. If you rely on these plans and delay Medicare enrollment, you may face late enrollment penalties and gaps in coverage. (For federal retirees on FEHB coverage, different rules may apply.)

3. Assuming Original Medicare Covers Everything. Many beneficiaries incorrectly assume that Original Medicare (Parts A and B) covers all medical expenses. In reality, there are significant gaps in coverage, including most dental, vision, and hearing services, as well as long-term care. Original Medicare also doesn't have an out-of-pocket maximum, which can lead to substantial costs for beneficiaries. This is why most people need some form of supplemental coverage, either through a Medicare Advantage plan or a Medigap policy.

4. Misunderstanding the Medigap Enrollment Rules. The best time to enroll in a Medicare Supplement (Medigap) plan is during the six-month Medigap Open Enrollment Period, which begins the month you are 65 and enrolled in Part B. After this period, insurers can deny coverage or charge higher premiums based on your health status. However, Maryland has introduced a Birthday Rule that allows policyholders in Maryland to switch to a Medigap plan of equal or lesser benefits during an annual 30-day period following their birthday, without undergoing medical underwriting. This rule provides an opportunity for beneficiaries to potentially find better rates or more suitable coverage annually, even if they have developed health conditions since their initial enrollment.

5. Neglecting to Review Medicare Part D Coverage. A crucial mistake is failing to review your Medicare Part D prescription drug coverage during the Annual Enrollment Period (AEP) from October 15 to December 7. This annual review is particularly important for Part D plans because coverage details can change yearly. Key reasons to review your Part D coverage annually include:

• Cost changes: Your plan's premiums, deductibles or copayments may be changing.

• Formulary updates: The list of covered medications (formulary) can change each year.

• Potential savings: Reviewing your plan could lead to significant cost savings.

6. Ignoring the Income-Related Monthly Adjustment Amount (IRMAA). High-income beneficiaries may be subject to the IRMAA, which increases premiums for Parts B and D based on income. Some individuals fail to plan for these additional costs or don’t realize that the IRMAA is generally based on income from two tax years prior. This oversight can lead to unexpected expenses in retirement. IRMAA is an annual calculation, based on Modified Adjusted Gross Income (MAGI), which is Adjusted Gross Income plus tax-exempt interest. It is important to note that the IRMAA can be appealed if your income has decreased due to one of specified life-changing events, including work stoppage (i.e., retirement). To appeal an IRMAA decision, you need to file Form SSA-44 with your local Social Security office. This form allows you to request a recalculation of your IRMAA based on your current, lower income.

Navigating Medicare’s complexities requires knowledge, preparation, and diligence. By avoiding these and other common pitfalls, you can help ensure proper coverage while minimizing unnecessary costs, helping to safeguard your health and financial well-being in retirement.

Ready to sign up for The Kelly Group’s one-night Community College Course? Sign up today: https://www.harford.edu/academics/noncredit-registration.php