By Kimberly Lankford, Contributing Editor |
October 12, 2018
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Medicare covers the bulk of your
health care expenses after you turn 65. But Medicare's rules can be confusing
and mistakes costly. If you don't make the right choices to fill in the gaps,
you could end up with high premiums and big out-of-pocket costs. Worse, if you
miss key deadlines when signing up for Medicare, you could have a gap in
coverage, miss out on valuable tax breaks, or get stuck with a penalty for the
rest of your life.
Here are 11 common Medicare
mistakes you should avoid making.
Keeping Your Part D Plan on Autopilot
Open enrollment for Medicare Part D
and Medicare Advantage plans runs from October 15 to December 7 every year, and
it's a good time to review all of your options. The cost and coverage can vary
a lot from year to year—some plans boost premiums more than others, increase
your share of the cost of your drugs, add new hurdles before covering your
medications, or require you to go to certain pharmacies to get the best rates.
And if you've been prescribed new medications or your drugs have gone generic
over the past year, a different plan may now be a better deal for you.
It's easy to compare all of the
plans available in your area during open enrollment. Go to the Medicare Plan
Finder and type in your drugs and dosages to see how much you'd pay
for premiums plus co-payments for plans in your area. See How to Find the
Best Medicare Drug Plan for You for 2019 for more information about
picking a plan.
Buying the Same Part D Plan as Your Spouse
There are no spousal discounts for
Medicare Part D prescription-drug plans, and most spouses don't take the same
medications. One plan may have much better coverage for your drugs while
another may be better for your spouse's situation. "You need to look at
the coverage for your specific drugs," says Tricia Blazier, of Allsup
Medicare Advisor, which helps people with their Medicare decisions.
You can look your drugs and dosages
using the Medicare Plan Finder to estimate out-of-pocket costs for each
of you under the plans in your area. Just be careful if you and your spouse
sign up for plans with different preferred pharmacies—some plans only give you
the best rates if you use certain pharmacies, so you could end up paying a lot
more if you get your drugs somewhere else.
Going Out-of-Network in Your Medicare Advantage Plan
If you choose to get your coverage
through a private Medicare Advantage plan, which covers both medical expenses
and prescription drugs, you usually need to use the plan's network of doctors
and hospitals to get the lowest co-payments (and some plans won't cover
out-of-network providers at all, except in an emergency). As with any PPO or
HMO, it's important to make sure your doctors, hospitals and other providers
are covered in your plan from year to year.
You can switch Medicare Advantage
plans during open enrollment each year from October 15 to December 7, and you
can compare out-of-pocket costs for your medications and general health
condition under the plans available in your area by using the Medicare Plan
Finder. After you've narrowed the list to a few plans, contact both
the insurer and your doctor to make sure they'll be included in the network for
the coming plan year.
Not Switching Medicare Advantage Plans Mid Year If Needed
Even though open enrollment for
Medicare Advantage plans runs from October 15 to December 7, you may still be
able to change plans during the year. In 2019, you have a new opportunity to
change plans after open enrollment. You now have from January 1 to March 31 to
switch to a different Medicare Advantage plan.
You can also switch plans outside
of open enrollment if you have certain life changes, such as moving to an
address that isn't in your plan's service area (see Special Enrollment Periods for more information). And if you
have a Medicare Advantage plan in your area with a five-star quality rating,
you can switch into that plan anytime during the year (you can use the Medicare Plan
Finder to see whether a five-star plan is available in your area).
Not Picking the Right Medigap Plan
If you buy a Medicare supplement
plan within six months of enrolling in Medicare Part B, you can get any plan in
your area even if you have a preexisting medical condition. But if you try to
switch plans after that, insurers in most states can reject you or charge more
because of your health. It's important to pick your plan carefully. See How Preexisting
Conditions Can Affect Medigap Insurance for more information on
choosing a plan.
Some states let you switch into
certain plans regardless of your health, and some insurers let you switch to
another one of their plans without a new medical exam. Find out about your
state's rules and the plans available at your state insurance
department Web site. You can also find more information about medigap
policies in your area at Medicare.gov.
Forgetting That You Can Sign Up for Medicare at 65
If you're already receiving Social
Security benefits, you'll automatically be enrolled in Medicare Part A and Part
B when you turn 65 (although you can turn down Part B coverage and sign up for
it later). But if you aren't receiving Social Security benefits, you'll need to
take action to sign up for Medicare. If you're at least 64 years and 9 months
old, you can sign up online.
You have a seven-month window to sign up—from three months before your 65th
birthday month to three months afterward (you can enroll in Social Security
later).
You may want to delay signing up
for Part B if you or your spouse has coverage through your current employer.
Most people sign up for Part A at 65, though, since it's usually free—although
you may want to delay signing up if you plan to continue contributing to a
health savings account. See the Social Security Administration's Applying for
Medicare Only for more information. If you work for an employer with
fewer than 20 employees, you must sign up for Part A and usually need to sign
up for Part B, which will become your primary insurance (ask your employer whether
you can delaying signing up for Part B).
Not Signing Up for Part B If You Have Retiree or COBRA Coverage
When you turn 65, Medicare is
generally considered to be your primary insurance, and any other coverage you
have is secondary, unless you or your spouse has insurance through a current
employer with 20 or more employees. But the coverage must be with a current
employer. Other employer-related coverage, such as retiree coverage, COBRA
coverage, or severance benefits, isn't considered to be primary coverage after
you turn 65. That means if you don't sign up for Medicare, you may have gaps in
coverage and be subject to a lifetime late-enrollment penalty of 10% of the
current Part B premium for every year you should have been enrolled in Part B
but were not.
You may also have to wait to get
coverage: If you miss the window for enrolling when you turn 65 or eight months
after you leave your job, you can only sign up for Medicare between January and
March each year, with coverage starting on July 1. For more information, see
the Medicare Rights Center's Medicare Interactive page about the rules for job-based
insurance after age 65.
Forgetting About the Part B Enrollment Deadline After Leaving Your
Job
If you have coverage through an
employer with 20 or more employees, you don't have to sign up for Medicare at
65. Instead, you may choose to keep coverage through your employer so you don't
have to pay the Part B premiums. But you need to sign up within eight months
after you leave your job or you may have to wait until the next enrollment
period (January through March, for coverage to begin on July 1). That means you
could go for several months without coverage. You may also get hit with the 10%
lifetime late-enrollment penalty.
Making Financial Moves That Boost Your Medicare Premiums
Most people pay $134 per month for
Medicare Part B premiums in 2018. But if you're single and your adjusted gross
income is more than $85,000 (or more than $170,000 for joint filers), you'll
have to pay from $187.50 to $428.60 per month in 2018. And you'll have to pay a
high-income surcharge for your Part D prescription-drug coverage, too, which
can boost your premiums by $13 to $74.80 per month.
If you're near the income cutoff,
be careful about financial moves that could increase your adjusted gross income
and make you subject to the surcharge, such as rolling over a traditional IRA
to a Roth or making big withdrawals from tax-deferred retirement accounts. To
stay below the limits, you may want to spread your Roth conversions over
several years or withdraw money from Roths rather than just from tax-deferred
accounts.
Not Contesting the High-Income Surcharge for the Year You Retire
Your Part B and Part D premiums are
higher if you earned more than $85,000 if single or $170,000 if married filing
jointly. The Social Security Administration uses your most recent tax return on
file (generally 2016 for 2018 premiums) to determine whether you're subject to
the surcharge. But you may be able to get the surcharge reduced if your income
has dropped since then because of certain life-changing events, such as
marriage, divorce, death of a spouse, retirement or a reduction in work hours.
In that case, you can ask Social Security to use your more recent income
instead (you'll need to provide evidence of the life-changing event, such as a
signed statement from your employer that you retired). See the Social Security
Administration's Medicare Premiums: Rules for Higher-Income Beneficiaries for
more information.
Signing Up for Medicare Part A If You Want to Contribute to an HSA
You can't contribute to a health
savings account after you sign up for Medicare, but that doesn't necessarily
mean that you have to stop making HSA contributions at age 65. If you or your
spouse has health insurance through your current job, you can delay signing up
for Part A and Part B and keep contributing to an HSA. This isn't an option if
you have already signed up for Social Security or your employer has fewer than
20 employees—in that case, you can't delay signing up for Part A. Be careful
about your contributions in the year you leave your job and sign up for
Medicare—you must prorate your HSA contributions based on the number of months
before you were covered by Medicare. See FAQs About
Health Savings Accounts for more information.
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