Although Medicare isn’t the most glamorous topic, it’s essential to educate yourself on this federal health care coverage before diving headfirst into enrollment.
When turning 65 – and even before – you’ll benefit from gaining maximum knowledge about Medicare. This will ensure you avoid missing your enrollment deadlines, which could result in the need to pay lifelong Medicare penalties.
Medicare can be confusing for first-time enrollees or even seasoned pros. Too often, we hear people say, “I wish I knew that sooner” when learning facts about Medicare.
Luckily, my goal is to educate you, so you won’t be singing that tune. Following are the top five things every 65-year-old needs to know about Medicare before enrolling.
#1: Medicare Enrollment Periods
Unfortunately, you can’t enroll in Original Medicare whenever. There are specific windows when Medicare enrollment is open for eligible beneficiaries.
Initial Enrollment Period
The Initial Enrollment Period is a seven-month window beginning three months before your 65th birth month and lasting through the third month following. During this time, you are eligible to enroll in all parts of Original Medicare. This enrollment period is unique to each beneficiary. Unless you become eligible for Medicare before age 65, this is a once-in-a-lifetime opportunity.
Medicare Supplement Open Enrollment Period
Beginning on the first day of the month you turn 65 or become eligible for Medicare, the Medicare Supplement Open Enrollment Period allows you to enroll in a Medicare Supplement (Medigap) plan without having to pass medical underwriting. This means that a plan can’t deny you due to pre-existing health conditions. It runs for six months following your 65th birth month.
Medicare General Enrollment Period
The Medicare General Enrollment Period (GEP) is for those who delay Medicare Part A or Part B coverage and don’t qualify for a Special Enrollment Period. It starts on January 1 and ends on March 31 each year. Coverage elected during this time will become effective on July 1.
Annual Enrollment Period
Each fall the Annual Enrollment Period is available for beneficiaries to make changes to their Medicare Advantage (Part C) or Medicare Part D plans. It runs from October 15 to December 7 and coverage begins January 1.
Medicare Advantage Open Enrollment Period
The Medicare Advantage Open Enrollment Period starts on January 1 and ends on March 31 annually. During this time, those with Medicare Advantage can make changes to their existing plan or return to Original Medicare. Coverage changes are effective the first day of the following month.
Special Enrollment Period
Special Enrollment Periods allow enrollment for beneficiaries who delay Medicare coverage or have life-changing events. Depending on the circumstance, they can last up to eight months after the qualifying event.
#2: Medicare Enrollment Penalties
If you don’t enroll in Medicare when you’re first eligible, you could rack up penalties for when you eventually enroll. Delaying your Medicare Part A, Part B, or Part D enrollment without creditable coverage in place will result in a penalty for each.
You’re eligible for premium-free Medicare Part A if you or your spouse has Medicare tax credits for 40 or more quarters, which is equivalent to 10 years. The Medicare Part A penalty is only assessed for those who don’t qualify for premium-free Medicare Part A and delay enrollment without creditable coverage.
Specifically, creditable coverage is what Medicare considers to be as good as the coverage it provides. If you receive the Medicare Part A penalty, you could be responsible for a 10% premium increase each month and pay the higher premium twice the amount of years you chose not to sign up.
If you’re eligible for Medicare Part B but delay enrollment without creditable coverage, you’ll need to pay the Medicare Part B penalty. It equals 10% of the base Medicare Part B premium for each 12-month period you delay. It is important to know that this penalty never goes away as long as you are enrolled in Medicare Part B.
Anyone who delays Medicare Part D benefits without creditable coverage will face the Medicare Part D penalty when they eventually pick up the prescription drug coverage. This penalty equals 1% of the year’s average premium price for each month you delay enrollment without creditable coverage.
That dollar amount is tacked onto your premium and rounded up to the nearest $0.10. You will be required to pay this penalty as long as you are enrolled in Part D.
#3: Medicare Prescription Drug Coverage
Although Medicare Part D is not mandatory, know that Original Medicare alone doesn’t offer prescription drug coverage. Many beneficiaries overlook Part D enrollment at first because they don’t take prescription drugs, or all their meds have low out-of-pocket costs.
Those who don’t enroll in Part D when first eligible often enroll later if they need high-tier or more expensive medications. This results in a steep Part D penalty that is avoidable by enrolling in Part D when first eligible. Paying a low premium for basic coverage each month now is a better money-saving solution than delaying and facing penalties in the future.
If you choose to enroll in a Medicare Advantage plan, you may have drug coverage included in your plan. Medicare Advantage or Medicare Advantage Prescription Drug Plans are available through private insurance companies. Regardless of which option you choose, be sure to check the plan’s formulary and ensure your medications will receive coverage.
#4: Medicare Supplement vs. Medicare Advantage
Contrary to popular belief, Medicare Supplement and Medicare Advantage plans are not the same. A Medicare Supplement plan pays secondary to Original Medicare benefits, and Medicare Advantage pays in place of Original Medicare.
Although both types of coverage provide additional benefits, they’re very different in structure. A Medicare Advantage Plan involves networks, low monthly premiums, high maximum out-of-pocket costs, and may include dental, vision, and hearing benefits.
A Medigap plan allows you to see any Medicare-accepting doctor nationwide with low out-of-pocket costs but with higher monthly premium. Medigap also offers emergency coverage outside of the U.S., while a Medicare Advantage plan won’t travel with you – sometimes not even as far as the next county.
There is no one size fits all plan for Medicare coverage. Some people prefer a Medicare Advantage plan while Medigap works best for others.
#5: Medicare Supplement Rate Lock
To round out the list, one of the best-kept secrets of Medicare is Medigap rate-lock protection.
Most major Medicare Supplement plan carriers let you enroll in a plan up to six months before your Medicare Part A and Part B effective date – with no need to answer health questions. This means that beneficiaries can enroll in Medigap at age 64.5, so you don’t need to wait until your 65th to start your search!
Often, beneficiaries think they aren’t able to enroll in a Medigap plan until the first day of their 65th birth month. Yet, by enrolling on the first day of your birth month, you’ll be without Medigap coverage until the first of the following month.
Using This Knowledge
When applying for Medicare, it is important to understand all angles of how the health care program works. Being educated on Medicare makes your enrollment journey as easy and successful as possible!
Which Medicare enrollment period have you made use of? Which one have you missed on? Are you paying penalties as a result? What difficulties have you faced when deciding which plan works best for you?