Medicare is the government healthcare program for people age 65 or older. While Medicare offers a broad range of plans, sorting through all of the different options available to you can be confusing and time consuming, and enrolling late could result in paying more throughout your lifetime. Below are five things to consider before enrolling in Medicare to help you avoid costly mistakes and take charge of your healthcare costs in retirement.
1. Missing your window for enrolling in Medicare can be costly
Your Initial Enrollment Period (IEP) lasts for 7 months, starting three months before you turn 65, and ending three months after the month you turn 65. However, some people may be eligible for Medicare earlier if they have a disability, End-Stage Renal Disease (ESRD), or ALS (also called Lou Gehrig’s disease). Enrolling in Medicare during your IEP will ensure you begin receiving benefits as soon as possible and avoid any late enrollment penalties.1
If you’re already receiving Social Security benefits when you turn 65, you’ll be automatically enrolled in Medicare Parts A and B (referred to collectively as Original Medicare). Medicare Part A is hospitalization coverage and Part B helps to cover outpatient care, such as doctor appointments, durable medical equipment, and other services that Part A does not cover.
However, if you haven’t begun taking Social Security benefits yet, you’ll need to actively enroll in Medicare to begin receiving benefits. Visit www.ssa.gov/benefits/medicare and select “Apply for Medicare Only” to learn more.
2. Medicare isn’t free
While most people don’t pay a premium for Part A coverage, most pay a monthly premium for Part B coverage upon enrolling in Medicare. This premium, which is $174.70 in 2024, is subject to change each year and may be higher depending on your income. If you delay enrolling in Part B when you’re first eligible, you may pay a higher premium for the remainder of your life. The penalty for late enrollment in Medicare Part B is an additional 10% of the standard monthly premium for each 12-month period that enrollment is delayed. This penalty is added to the monthly Part B premium and is lifelong unless certain circumstances apply when enrolling in Medicare. For example, you won’t have to pay a Part B penalty if you qualify for a Special Enrollment Period, such as when you and/or your spouse are still working and are covered under an employer’s healthcare plan.
Deductibles also apply to Medicare Parts A and B. The deductible for Part A in 2024 is $1,632 for each inpatient hospital benefit period, before Original Medicare starts to pay, and there’s no limit to the number of benefit periods you can have in a year. This means you may pay the deductible more than once in a year. Part B has an annual deductible of $240 in 2024, so you only pay this once a year.2
3. It pays to close the gap
Original Medicare is estimated to cover about 80% of the cost of the healthcare services older Americans receive. However, something to keep in mind when enrolling in Medicare is the fact that what it doesn’t cover could cost you tens of thousands of dollars over the course of your life in retirement.
There are several options available to you to help close this gap. A Medicare Supplement Insurance (Medigap) plan can be purchased to help pay for some of the expenses that Original Medicare does not. (To get a Medigap policy, you must be enrolled in Medicare Parts A and B and continue paying your Part B premium.) Medigap usually helps pay your portion of the costs (like deductibles and coinsurance) for services covered under Original Medicare. Some Medigap policies include extra benefits, like coverage when you travel out of the country. However, Medigap plans sold after 2005 do not include prescription drug coverage.
Medicare Advantage (Part C) plans are another option for those enrolling in Medicare. These plans include everything covered by Original Medicare and often include additional benefits, such as prescription drug coverage and/or dental and vision benefits, which are not included under Original Medicare. However, you may be limited to providers in the plan’s network and most require prior authorization to see specialists, receive out-of-network or non-emergency hospital care, and more.
Original Medicare also does not cover prescription drugs, which can add up fast if you develop one or more chronic conditions. Fortunately, when enrolling in Medicare, you can purchase a Plan D prescription drug plan to help offset the cost of prescription medications. Part D plan costs and coverages vary by state and by insurance provider. When choosing a drug plan, monthly premiums are only one cost factor. Make sure that the plan you’re considering covers the prescription drugs you currently take. You may have to pay more for Part D based on your income or if you don’t elect a drug plan during your IEP. To avoid paying this penalty, join a drug plan when you’re first eligible to enroll in Medicare and make sure you don’t go 63 days or more without creditable drug coverage (coverage that’s similar in value to Part D).
4. Always read the fine print
Because Medicare is fraught with complex rules and regulations, what you don’t know really can hurt you. For instance, it’s important to understand that you can’t have both a Medicare Advantage plan and a Medigap policy. If, after enrolling in Medicare, you switch from a Medigap policy to a Medicare Advantage plan and are later dissatisfied with your choice, you’ll have a single 12-month period (your trial right period) to get your Medigap policy back if the same insurance company still sells it once you return to Original Medicare. After that period, you might have to wait to drop your Medicare Advantage Plan, and you might not be able to buy a Medigap policy, or it may cost more.3
It’s also important to understand that Medicare does not pay for long-term care services, such as home health aides, nursing home care, or assisted living. These are additional costs that a growing number of Americans may encounter later in life due to longer average lifespans. So it’s important to factor these costs into your planning.
5. Get the help you need before enrolling in Medicare
It really does pay to do your homework and learn as much as you can about this important healthcare benefit before enrolling in Medicare. Fortunately, you don’t have to do it alone. We’re happy to connect you with one of our strategic partners experienced in Medicare planning who can help you compare plans, options, and costs.
For more information about making the right choices for you and your wallet when enrolling in Medicare, listen to the latest podcast episode of Frank Wealth Insights, featuring our special guest, Rodika Koloda from Insurance Systems Group.
To learn how your team of independent wealth planning professionals at Return on Life® Wealth Partners can help you and your family pursue the Return on Life® you desire, contact us today for a free consultation.
About Return on Life® Wealth Partners
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1“Who’s Eligible for Medicare,” https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html
2“Medicare Costs,” https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties
3“Learn How Medigap Works,” https://www.medicare.gov/health-drug-plans/medigap/basics/how-medigap-works
This information does not include all of the details contained in any applicable insurance contracts, plan documents and trust agreements you may have with an applicable retirement benefit program. If there is any discrepancy between this information and the governing documents, the governing documents of an applicable program will control. Return on Life Wealth Partners does not offer any plans and therefore does not reserve any right to amend, modify, reduce, change or terminate benefits and plans.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific tax or legal issues with your qualified advisors.
The opinions expressed and material provided are for general information purposes only.
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