For boomers who haven’t crossed the Medicare road yet, that moment is likely coming: You must be enrolled in Medicare at age 65 and can actually sign up as early as three months before your 65th birthday, assuming you're eligible for the federal health insurance program.
But my 30-plus years working in the health care industry has taught me that people often make costly errors when signing up, especially while choosing among Medicare Advantage plans. They’re the alternative to traditional Medicare sold by private health insurers and also known as Medicare Part C. Nearly 1 in 4 people on Medicare have Advantage plans, rather than going with original Medicare.
(MORE: How to Prepare to Enroll in Medicare)
Common Medicare mistakes can cost you thousands of dollars. In a moment, I’ll walk you through the four big errors to avoid.
It’s easy to get confused about the rules, thanks to the program's own peculiar alphabet soup and jargon.
Aside from Medicare Part C, there’s also Part A (covering hospital care), Part B (doctors’ services) and Part D (the drug benefit). You can get details on each at Medicare.gov.
In a Next Avenue article, writer Carol Orsborn, who recently signed up for Medicare, said that by the time she made her final decisions about which coverage to take, she had received enough direct mail solicitations to fill six hanging folders with hundreds of brochures. She also made dozens of calls, visited numerous websites and talked to assorted friends and family members.
So before you sign on the dotted line for a Medicare Advantage plan, keep in mind that the choice is far more important than deciding which television show to watch tonight. You’ll want to steer clear of any Advantage pitfalls before you enroll. That’ll save you time, money and frustration.
(MORE: What Are Private Medicare Advantage Plans?)
Here are the four mistakes to avoid when enrolling in Medicare:
1. Judging Medicare Advantage plans only by the cost of their premiums. Zero- or low-premium plans look attractive. After all, you get health care benefits and pay little or nothing up front. But zero-premium does not mean zero expenses.
When comparing Medicare Advantage plans, you’ll want to dig into the details to learn about all of the out-of-pocket costs you could incur, including the deductible and the coinsurance and copayments for the services you’ll use.
Otherwise, you might be in for nasty surprises. Here’s an example:
George suspects he’ll need a knee replacement in the near future and his doctor has said he’ll probably need several weeks of outpatient therapy afterward. He finds and signs up for a zero-premium Medicare Advantage plan. But he then finds himself owing copayments for outpatient therapy of $225 per visit.
But George might be better off going with a plan that has a $35 monthly premium and a maximum copayment for therapy of $45 per visit.
2. Overlooking the quality ratings of Medicare Advantage plans. The federal Centers for Medicare and Medicare Services collect data about Medicare Advantage plans then give each one a rating on a scale of one star (Poor) to five stars (Excellent). The more stars, the better the plan has worked for members enrolled in it.
The stars measure how well a Medicare Advantage plan ranks based on such things as its members’ experiences and complaints and its customer service.
(MORE: 5 Myths About Medicare Dispelled)
When you’re choosing among Medicare Advantage plans, look for the ones with the most stars. You can learn more about the ratings at the Center for Medicare and Medicaid Service’s online brochure about them.
Incidentally, you can switch to a plan with a 5-star rating any time during the year, if there’s one available where you live.
3. Paying for prescription drug coverage in the Medicare “doughnut hole” that you don’t really need. A Medicare beneficiary lands in the doughnut hole this year when his total annual cost of medications (paid by the Medicare Part D plan and the individual) reaches $2,940. The beneficiary is then responsible for footing the bill for the cost of all medications until they exceed $4,750. (The doughnut hole is scheduled to close in 2020.)
Some plans will pay for the cost of medications in the gap, charging about $30 to $60 more a month for this feature.
But only about 1 in 5 Medicare beneficiaries end up in the doughnut hole, so paying for this extra coverage may be unnecessary. You’re likely to find yourself in it if you take three or four brand-name medications.
The Medicare Prescription Drug Plan Finder can help you determine whether you’ll land in the doughnut hole based on your prescriptions. Once you find out, you can then decide whether the additional coverage is worth the extra premium.
4. Not enrolling in Medicare because you have existing health coverage. Too many people approaching 65 think they can skip signing up for Medicare if they already have private insurance. Big mistake.
The only insurance that can possibly let you delay Medicare enrollment is a group health plan sponsored by an employer with 20 or more employees. Other types of coverage, including COBRA, are not acceptable substitutes for Medicare.
If you’re supposed to enroll in Medicare but fail to do so when you’re first eligible, you can get socked with steep late-enrollment penalties.
For example, the late enrollment penalty for Medicare Part B is equal to 10 percent of the Part B premium for every year you don’t enroll. That’s an additional $10.49 every month in 2013.
The penalty for Part D equals 1 percent of the cost of a standard Medicare drug plan premium for every month you delay enrolling.
Here’s an example:
Janice forgot to enroll in Medicare until after her 66th birthday. As a result, she must pay a penalty of $10.49 a month for Part B and $4.65 a month for Part D for the rest of her life.