Medicare Part 2 - Medicare misunderstandings and Mistakes - ep #80
Welcome to episode 80 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This episode is part 2 of a 2 part series on Medicare, which is the Federal health insurance program that helps pay for the health care costs of retirees. In episode 79, which was part 1 of this series, I shared what one needs to understand about Medicare and in this episode, I’ll share the most common Misunderstandings and Mistakes people make with Medicare.
In the tips, tricks, and strategies portion, I will share a tip regarding choosing between Medicare Advantage and Medicare Supplement Insurance.
In this episode...
Medicare Isn't Cheap [2:23]
Late Medicare Enrollment [4:47]
Skipping Part D [5:46]
Enrollment isn't One-time [6:48]
Ignoring Pre-existing Conditions [7:50]
MAIN
In Episode 79 of the One for the Money podcast, I shared how expensive healthcare can be in retirement, even with Medicare covering a lot of the expenses. According to a survey released by the investment company Fidelity in August of 2024, most individuals expect healthcare costs in retirement to be~ $75,000 per person or $150,000 per couple but the actual expenses are $165,000 per person or $330k per couple. That is more than double what people estimate they will have to shell out.
Medicare will play a major role with regard to their health care in retirement. However, the Medicare system itself can be challenging to fully comprehend given the various coverage options, expenses, and deadlines involved.
Due to these misunderstandings far too many Americans make critical mistakes regarding their Medicare coverage. Here are five of the most common mistakes
First, many Americans might assume (given that they've paid into the Medicare system through payroll taxes throughout their careers) that Medicare coverage is completely free. Whereas, in reality, several parts of Medicare (e.g., Part B medical coverage (doctor visits) Part C, and Part D (which provides prescription drug coverage) require you to pay premiums. Further, even if one understands that they will have to pay premiums, they might not be familiar with Income-Related Monthly Adjustment Amount (IRMAA) surcharges (aka IRMAA), which apply to retirees with higher incomes in retirement which can increase their costs further. And so the Mistake people make is thinking Medicare is inexpensive or free but Medicare does not cover 100% of your healthcare costs.
Medicare Part A covers inpatient hospital care, skilled nursing facility stays, hospice care, and some home health care,
Part A Deductible and Coinsurance Amounts for Calendar Years 2024 and 2025
by Type of Cost Sharing
Inpatient hospital deductible:
$1,632 (2024)
$1,676 (2025)
Daily hospital coinsurance for the 61st-90th day:
$408 (2024)
$419 (2025)
Daily hospital coinsurance for lifetime reserve days:
$816 (2024)
$838 (2025)
Skilled nursing facility daily coinsurance (days 21-100):
$204.00 (2024)
$209.50 (2025)
Medicare Part B (Medical Insurance):.
Part B is optional and available to anyone who qualifies for Part A. It requires a monthly premium, regardless of work history.
Part B covers doctor visits, outpatient care, medical services like lab tests, and most preventive services.
Premiums for part B in 2025 are as low as 185/mo or as high as 628.90/month based on your income from the previous years. Those higher premiums are a result of the IRMAA charges I mentioned previously.
Medicare Parts C and D also have premiums. In 2025, the average monthly premium for Medicare Advantage (Part C) is projected to be $17, but it can vary from $0 to over $200
The average projected premium for 2025 for all Part D plans is $47/month
Healthcare in retirement is much less expensive with Medicare but it certainly isn’t close to being free.
The second mistake people make with Medicare is Enrolling in Medicare late
Speaking of costs, one mistake that can increase your monthly costs is Enrolling late in Medicare incurs penalties that result in higher premiums — for life. The later you enroll, the heavier the penalties.
There are different enrollment periods, depending on your situation. For example are you working past age 65 and will you be covered by an employer healthcare plan?
It is important that you know which period applies to you, so you don’t enroll late.
Late penalties apply mostly to Parts B and D of Medicare.
The important enrollment deadlines (e.g., the 7-month-long initial enrollment period, which includes the 3 months before they turn 65, the month they turn 65, and the 3 months after they turn 65), which, if missed can lead to penalties on premiums for the rest of their life.
A third mistake people make with Medicare is assuming they don't need to sign up for a Part D prescription plan because they currently don't take many prescription drugs.
Not signing up for a prescription drug plan
You may think, “Why should I pay for a prescription drug plan if I don’t take prescription drugs?” Things change, unfortunately, and you might need to take them in the future.
Without prescription drug insurance, you could be paying a great deal for medicine.
If you wait to sign up until you need coverage, you must wait until the next open enrollment period and pay late penalties for life.
All Rx drug plans have a catastrophic coverage provision, an out-of-pocket threshold above which you have no copays or coinsurance. Even an inexpensive drug plan is better than none.
Mistake #3A: Enrolling in the same prescription drug plan as your spouse just because your spouse is enrolled in that plan. Given that you will likely have different prescription needs, each might benefit from different types of plans (e.g., how different drugs are covered).
The fourth mistake Americans make with Medicare is assuming that Medicare enrollment is a one-time task and that they will remain on the same coverage for the rest of their lives; however, the annual open enrollment period offers the opportunity to make a range of changes to coverages (given that premiums, deductibles, and/or coverages for certain plans can change each year).
Don’t do that! Unless the plan adequately addresses your own health needs, too.
Mistake #4A: failing to review your Medicare Advantage also known as Medicare Part C coverage annually .
When you enroll in a Medicare Advantage plan, you will receive an Annual Notice of Change (ANOC) every September. It is critical to review this document each year to be aware of any changes to your plan.
Mistake 4B is not understanding the difference between Medicare Advantage and Medicare Supplement. One is not required to enroll in Medicare Advantage instead one can enroll in a Medicare Supplement Plan which is also referred to as Medigap plans. I go more into the differences at the end of this episode.
The 5th mistake people make with Medicare because of their misunderstandings is assuming pre-existing conditions don’t matter.
Pre-existing conditions don’t matter when you first enroll in Medicare.
When you first enroll in Medicare Part B, you have six months to enroll in a Medigap plan, or switch plans, with “no questions asked”.
This initial six-month period is called the Guaranteed Issue (GI) period.
It occurs only once for most people; it is not annual!
There are a few exceptions where your guarantee issue period can be renewed but those tend to be rare.
What I have just shared are 5 of the more common misunderstandings that lead to mistakes regarding Medicare. Now, if all of this information regarding Medicare, has you confused, It’s completely understandable. Most everyone thinks you retire and you get free health care provided by the government. But when you start getting into all of the details it can get incredibly overwhelming. For example, there are Medicare Parts A part B part C part D there's Medigap then there's Medicare Supplement and then there's Medicare Advantage which can make your head swim.
And while healthcare in retirement can be expensive even with Medicare (165K per person or $330k per couple) and can be even more expensive than that if you don’t plan well when selecting your Medicare options.
I strongly recommend my clients and others engage with the specialized Medicare experts who understand this information. There are companies out there that provide this such as Boomer Benefits, or Health Pilot. I'm not endorsing these necessarily but wanted to give you an idea of what you can use to help you make some of the most important decisions you will make in retirement.
TIPS, TRICKS AND STRATEGIES
Welcome to the tips, tricks, and strategies portion of the podcast where I will share a tip regarding choosing between Medicare Advantage and Medigap also known as Medical Supplemental Insurance.
Medigap vs Medicare Advantage:
The right plan for someone depends on different factors including someone’s budget, health status, lifestyle, personal preferences, and more.
Medigap Enrollments:
If you enroll in a Medigap plan during your one-time open enrollment window (within 6 months of your Part B effective date), there are no health questions. The insurance company will approve your application. A majority of Medigap enrollees will enroll in a Medigap plan during this window.
There are also no waiting periods or pre-existing condition exclusions when you apply during this window. If you miss this window and apply later on, then you will usually be required to answer a number of medical questions and be underwritten. Underwriting rules will vary with each carrier and state. The underwriter at the insurance company can accept or decline you based on your medical history.
About Medicare Advantage:
More than 54% of beneficiaries choose to enroll in Medicare Advantage policies, which are private insurance plans. They usually have lower premiums than Medigap plans….sometimes even a $0 premium on some plans in some areas. There are several kinds of Advantage programs such as HMOs, PPOs, PFFS (private-fee-for-service), and SNPs (Special Needs Plans). When a plan has a $0 premium, it means that you will pay no additional premiums for the plan itself. You will still pay for your Part B premiums monthly. A beneficiary must be enrolled in both Medicare Part A and Medicare Part B to be eligible for a Medicare Advantage plan. However, you don’t need to enroll in a Part D plan since most Advantage plans include prescription drug benefits.
If you want to keep your doctor and they are not part of a medicare advantage plan, then you definitely want to stay with the Medicare supplemental plan. If you want your services bundled, including a drug plan all while paying lower premiums, then you should consider Medicare Advantage plans. But if you need more health care Medicare Advantage can cost more than Medigap plans. Finally, if you plan to travel a lot during the first few years of retirement, also known as the go-go hears, then you may want to consider Medigap plans as they provide international coverage.
There are many other factors to consider, so I would enlist the help of Medicare specialists to help you weigh your options.
References
The Five Biggest Medicare Mistakes - Sensible Financial Planning
5 things you need to know about signing up for Medicare | CMS
Connect with Jonny on LinkedIn
Subscribe to ONE FOR THE MONEY on
Apple Podcasts, Spotify, Google Podcasts
Audio Production by
