Common Medicare Mistakes and Misunderstandings
On the surface, Medicare may seem straightforward—turn 65, sign up, receive benefits. However, Medicare has many moving parts, penalties, fees, rules, and policies that can make the average person’s head spin. Plus, a simple mistake can be very costly and detrimental to retirement planning. Here are some of the most common mistakes and misunderstandings when it comes to Medicare.
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1. Signing Up for Medicare Part B
Medicare beneficiaries must sign up for Part B as soon as they are eligible. If they fail to sign up within 12 months of being eligible, they will encounter a 10% penalty for every 12 months until they enroll. This penalty will not go away unless they qualify for financial assistance or for Medicaid. If your client has employer coverage of 20 or more employees, they can delay Part B until they retire or end their employer coverage.
2. Medicare Part B Premiums
Yes, beneficiaries need to pay a premium for Medicare Part B (unless they qualify for financial assistance), and they must continue paying this premium even after they sign up for a Medicare Supplement or Advantage Plan. If your client is a high earner, they will likely pay a higher premium than the average person. (See #7 for more information.)
3. Prescription Drug Plans
Medicare prescription drug coverage is optional and always guaranteed acceptance. However, if a beneficiary does not sign up when first eligible, they will encounter a penalty if they decide to sign up for coverage later (unless they have creditable coverage). The penalty is 1% of the average for each month, and it’s a lifetime penalty unless they go on Medicaid or qualify for financial assistance.
4. Guaranteed Issue Rights for Medicare Supplements
The best time to enroll in a Medicare Supplement (Medigap) Plan is within six months of enrolling into Part B. While beneficiaries can get guaranteed issue into a Medicare Supplement at other times, underwriting is typically required to enroll outside the six-month period.
5. Annual Enrollment (or Open Enrollment)
The Medicare Annual Enrollment Period (every October 15 through December 7) does not include enrollment into a Medicare Supplement without underwriting. This enrollment time allows beneficiaries to change their Advantage Plan, Prescription Drug Plan, or possibly change from a Medicare Supplement to an Advantage Plan. It’s crucial that beneficiaries understand their rights and when they are allowed to make changes to their Medicare plans.
6. Medicare Advantage Plans
Advantage Plans must be as good as Original Medicare or better. However, in order to avoid costly bills, beneficiaries need to understand the benefits, network, prior authorizations, and other nuances. Advantage Plans are always guaranteed acceptance and never require underwriting as long as the beneficiary lives in the plan’s service area.
7. IRMAA (Income-Related Monthly Adjustment Amount)
This sliding scale adjusts Medicare Part B premiums and prescription drug premiums based on the beneficiary’s previous year’s income tax filings. The higher their gross income, the higher the premium amount. It’s important for Medicare beneficiaries to have an advisor help them plan for any extra costs they might encounter during their retirement years.
As you can see, based on this list of common Medicare mistakes and misunderstandings, it’s crucial for any beneficiary to have a trusted advisor to guide them as they navigate the intricacies of Medicare. If you want to learn more about being a trusted Medicare advisor, schedule a call with us today.