10 Costly Medicare Mistakes, and How to Avoid Them
Key takeaways:
Don’t wait to enroll in Medicare Part B or a Part D prescription plan or overlook your one-time Medigap open enrollment period. You may pay higher premiums. If you have to pay for Medicare Part A, you can also be charged a late enrollment penalty.
Choose plans with benefits that fit your health needs.
If you aren’t happy with your Medicare coverage or prescription plan, you will have at least one open enrollment period every year to switch.
If you switch from Medicare Advantage to original Medicare and want to buy a Medigap plan, you may be subject to medical underwriting. Unless you have special circumstances, you could be approved, approved with a higher premium, or denied coverage.
Table of contents
Medicare has complex rules and important deadlines that you need to be aware of. To get you started on the right track, here are some common missteps you can avoid when navigating enrollment, coverage, and costs.
1. Assuming you’ll be automatically enrolled
Most people in the U.S. become eligible for Medicare around the time they turn 65. But you will not be automatically enrolled in original Medicare (Part A and Part B) unless you are already receiving Social Security or Railroad Retirement Board benefits.
And turning 65 doesn’t mean that Medicare is your only option for healthcare coverage. In fact, many people will continue to work after age 65. In that case, you can delay signing up for Medicare coverage until you leave the workforce or coordinate benefits between Medicare and your employer-provided coverage.
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Whatever strategy you choose, you’ll likely need to actively enroll in Medicare. This ensures that you remain in control of the important decisions that affect your healthcare. To do this, you’ll need to know and meet enrollment deadlines.
If you are turning 65 and don’t have qualifying coverage from an employer, you need to sign up for Medicare within your 7-month initial enrollment period — that’s 3 months before you turn 65, your birth month, and 3 months after.
You can join after that period ends — without late enrollment penalties — if you have other coverage that is similar in value to Medicare, such as an employer-sponsored plan. However, if you work for an employer with fewer than 20 employees, you must sign up for Medicare during your initial enrollment period.
You’ll need to apply for Medicare online, in person, or by phone. Make sure you receive your “Welcome to Medicare” package. If you wait too long to enroll, you will face lifelong penalties. These are added to your premiums for Medicare Part A (if you don’t get premium-free coverage), Medicare Part B, and Part D. We’ll talk more about late enrollment penalties later.
2. Not understanding your coverage options
If you plan to enroll in Medicare, here are some of the options you’ll need to consider:
Are the services covered under original Medicare adequate for you? Or, do you have health concerns that would be better addressed by a Medicare Advantage (MA) plan, which often includes vision, dental, and hearing benefits?
If you choose MA, you have a 12-month “trial right” to see if you like the private plan. Within a year, you can switch to original Medicare without penalty and without medical underwriting or being charged more — and even being denied — if you want to buy a Medigap plan.
Do you take any medications on a regular basis, or do you expect to take any in the future? If so, you’ll want to enroll in a Medicare Part D plan at the same time that you join Part B.
Do you plan to travel internationally or expect to have a lot of out-of-pocket costs? If so, you may want to choose original Medicare and look into a Medigap policy, which will help pay your share of medical expenses and cover some medical care abroad.
Most people don’t pay a premium for Part A. You pay your Part B premium whether you have original Medicare or MA. Some MA plans also charge an additional premium for coverage that is equivalent to Part A and Part B — and may or may not include Part D.
Original Medicare is widely accepted by almost every healthcare professional (HCP) in the U.S. MA plans may offer more benefits, but also come with limitations such as tighter HCP networks, out-of-pocket maximums that most people don’t reach (with no access to Medigap), and prior authorizations that can delay or prevent needed care.
Choosing original Medicare can give you the widest access to HCPs, but may come with monthly premiums for Part D and Medigap. An all-inclusive MA plan includes Part D and extra benefits, but may limit your HCPs, hospitals, and approved care.
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3. Neglecting to enroll in a Part D plan when you first become eligible
If you’re not taking any prescription medications when you first become eligible for Medicare, you may be tempted to delay enrolling in a Part D plan. Unfortunately, not signing up for a prescription plan when you first join Medicare can result in permanent late enrollment penalties added to your premiums if — or, more likely, when — you enroll later.
As you age, you’ll probably need to take at least one prescription medication on a regular basis. More than half of adults age 65 and older — 54% — take four or more prescriptions. That’s why enrolling in the most affordable Part D plan as soon as possible is often a good choice, even if you don’t need medication coverage yet. While paying those monthly premiums may seem unnecessary now, it will likely save you money in the long run.
4. Not enrolling in the right Part D plan
If you’re already taking multiple medications, you’ll need a Part D plan with a formulary that covers your drugs. Every plan’s formulary is different, so compare the plans that are available to you.
You’ll also want to check that your pharmacies are in your plan’s network. And find out if a plan has restrictions, such as prior authorization or supply limits on your needed medications.
5. Assuming that your Part D plan will always offer the best prices on your prescriptions
Because every Part D plan has a unique formulary, your copay or coinsurance for the same medication can vary widely between two different plans. That’s why it’s always smart to check GoodRx to see if you can get the same medication for less money. While GoodRx won’t always beat your Plan D cost-sharing, in many instances using our coupon can cost you less out of pocket.
6. Leaving benefits on the table
Did you know that some MA plans offer gym or wellness benefits or cover your Uber or Lyft ride to your doctor’s appointments? Many people are unaware that Medicare Part B covers acupuncture for chronic low back pain.
Take the time to review your plan documents so you can use all of your benefits.
7. Not considering cost-sharing
Original Medicare has no cap on what you can spend out of pocket. For this reason, many people purchase Medigap supplement insurance to pay for deductibles, copays, coinsurance, and other out-of-pocket costs. The 10 nationally standardized Medigap plans offer a variety of different benefits.
MA plans must have out-of-pocket limits. In 2024, the out-of-pocket spending maximum for MA plans can’t exceed:
$8,850 for in-network covered services
$13,300 for in-network and out-of-network covered services combined
As mentioned earlier, it’s important to note that most MA enrollees do not reach their annual out-of-pocket limits.
8. Assuming you have to keep the same coverage forever
Enrolling in a Medicare or MA is not a lifelong commitment: The plan that works for you when you first enroll might not be the best fit 5 or 10 years down the road.
You may consider switching if you find that your plan isn’t providing the coverage you need. You can make changes during Medicare open enrollment (October 15 through December 7). If you have an MA plan, you can also make changes during MA open enrollment (January 1 through March 31).
9. Assuming that one coverage solution fits all
Newcomers to Medicare often choose the same coverage that a loved one or close friend has — simply because that person is happy with their coverage. But when it comes to health insurance, your needs probably won’t match those of your spouse, sibling, or best friend. That’s why it’s important to pay close attention to coverage details when selecting a Part D, MA, or Medigap plan.
10. Signing up for Medicare when you’re still planning to contribute to your HSA
If you have a health savings account (HSA) that you want to continue making contributions to, you will need to delay your enrollment in Medicare, including Part A. While you will still be able to use the funds in your HSA, once you begin receiving Medicare benefits, you are forbidden from making additional contributions to your account.
How to avoid these Medicare pitfalls
Here are ways to prepare for Medicare enrollment and avoid these 10 Medicare pitfalls:
Don’t miss your 7-month initial enrollment period.
Collect the documents you need to enroll online, by phone, or in person.
Consider whether the plan you have and/or the plan you intend to choose meets your health needs.
Figure out whether or not you’ll need a Medigap supplement plan, which is only available with original Medicare.
Sign up for Medigap during your Medigap open enrollment period, which is the first 6 months you are both age 65 and enrolled in Medicare Part B.
Contact 1-800-MEDICARE (1-800-633-4227) or your State Health Insurance Assistance Program (SHIP) for free help.
The bottom line
When enrolling in original Medicare, Medicare Advantage, Part D plans, and Medigap supplement insurance, consider benefits and your specific needs. Your choices will affect what you pay out of pocket when you need care. With both original Medicare or Medicare Advantage, you still pay a Part B premium.
Choosing original Medicare can give you the widest access to health professionals, but may come with monthly premiums for Part D, and Medigap. Medicare Advantage plans often include extra benefits, but may limit your health professionals, hospitals, and approved care. You also may be charged an additional monthly cost beyond your Part B premium with a Medicare Advantage plan.
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References
Centers for Medicare & Medicaid Services. (2023). 5 things you need to know about signing up for Medicare.
Centers for Medicare & Medicaid Services. (2024). Information partners can use on: The Part D late enrollment penalty.
KFF. (n.d.). There are a lot of Medicare Advantage plan options in my area. How do I decide which plan is best for me?
Kirzinger, A., et al. (2019). Data note: Prescription drugs and older adults. KFF.
Medicare.gov. (n.d.). Acupuncture.
Medicare.gov. (n.d.). Avoid late enrollment penalties.
Medicare.gov. (n.d.). Get ready to buy: Your Medigap open enrollment period.
Medicare.gov. (n.d.). How Medicare works with other insurance.
Medicare.gov. (n.d.). Retiree insurance & Medicare.
Medicare.gov. (n.d.). ‘Welcome to Medicare’ package (not automatically enrolled).
Medicare.gov. (n.d.). When does Medicare coverage start?
Medicare Interactive. (n.d.). Health savings accounts (HSAs) and Medicare.
