Costly Medicare mistakes are avoidable. With a little research and understanding of your options, you can make the best decision when it comes to selecting the right Medicare plan. Understanding these common Medicare missteps and taking action to avoid them is the best way to assure your retirement health care is fool proof.
Having the same Medicare Part D plan as your spouse
Many retirees assume they should have the same Medicare Part D plan as their spouse, but this is far from the truth. You and your spouse may not have the same prescription needs. Therefore, you’ll need to have different Medicare Part D plans to support your individual prescription usage. It’s important to review the coverage of each drug before deciding on a plan.
If you want to estimate your prescription costs you can visit the Medicare Plan Finder. This resource allows you to look at various prescriptions and dosages to determine the most suitable plan for your needs. A word of caution, if you and your spouse sign up for plans, they may require you to visit different pharmacies. Some plans will only give you the best rates at certain locations. If you don’t choose these pharmacies you could end up spending a lot more on your prescriptions.
Using an out-of-network health professional
Medicare Advantage Plans cover both medical costs and prescription drugs. If you choose to get coverage through a Medicare Advantage Plan, you’ll need to review the plan’s in-network doctors and hospitals in order to minimize your costs. If you choose to use an out-of-network medical professional, you could end up footing the entire bill. Medical care costs enough as it is, you don’t need this added expense.
Each year you will need to verify your doctors are still in-network. You will also want to compare out-of-pocket expenses for your medications and health conditions under plans in your area. Once you identify a plan that meets your medical needs contact the insurer and your doctors to make sure they will be in-network for the next year.
If you discover there are better options you can switch your plan during the open enrollment period from October 15th through December 7th.
Choosing to stick with one Medicare Advantage plan all year
While Medicare Advantage plan’s open enrollment is between October 15th and December 7th, you may be able to swap plans during the year. In 2019, you’re able to switch plans from January 1st to March 31st.
However, if you experience certain life events you may be able to change your plan outside of an open enrollment period. For instance, if you move during the year and your plan is not offered in your new area of residence, you may be able to change coverage. Additionally, if you have a five-star quality rating Medicare Advantage Plan in your area, you can change your plan at any time.
Forgoing a suitable Medigap Plan
The gaps in Medicare are considerable, leaving you to pay for costly deductibles and 20% of all your outpatient costs. Medicare Supplement plans, or Medigap and Medicare Advantage plans, help cover the difference.
In many cases, preexisting conditions can impact your Medigap options. Even if you have a preexisting health condition, you can buy a Medicare supplement plan within six months of reenrolling in Medicare Part B. However, if you decide to switch insurers after that period, you may face rejection due to your health conditions.
Eligibility can vary by state and insurer. For example, some states will let you switch policies regardless of your health conditions. You can review the rules and plans available on the National Association of Insurance Commissioners site. You can also visit Medicare.gov to discover policies in your area.
Forgetting to sign up for Medicare Part B if you have retiree or COBRA coverage
If you’re taking Social Security benefits, you’ll need to act on your Medicare benefits. Once you reach 65 and you start taking your Social Security benefits, automatic enrollment in Medicare Part A and Medicare Part B will occur. You can choose to delay your selection of Medicare Part B depending on your current insurance situation. If you’re 64 and nine months, you can begin the sign up process for your Medicare options. You’ll have seven months from the three month timeframe prior to your 65th birthday to sign up.
If your spouse is still working and has you on their insurance plan, you can forgo choosing your Medicare Part B. Many retirees sign up for Medicare Part A as soon as they reach 65, while others delay the process because they would rather continue contributing to their Health Savings Account.
Another important point to note is that if you work for a company that has less than 20 employees, you must sign up for Medicare Part A and B. At this point, Medicare will become your primary form of health insurance coverage.
Overlooking the Medicare Part B enrollment deadline
If you plan to work into retirement, you may not need to apply for coverage right away. If you have coverage through your employer and the organization has over 20 employees, you don’t have to sign up for Medicare Part B, avoiding these extra premiums.
Once you leave your job you will have eight months to apply for a Medicare Part B plan. If you forget to act on this matter, you’ll go without coverage for several months. You’ll also be subject to a 10% lifetime late-enrollment penalty. You can review penalty details here.
Not consulting with your financial planner before making financial decisions
The standard 2019 Part B premium was about $135.50 per month. The majority of taxpayers pay this amount. However, if your adjusted gross income surpassed a certain threshold for the previous 2 years, you’ll pay the standard premium amount and Income Related Monthly Adjustment Amount (IRMAA).
If your income exceeds a certain threshold, you may have to pay more for Medicare Parts B and D. Both parts will require a surcharge payment. For example, if you and your spouse file jointly and earn over $170,000 annually, you will pay $189.60 in a monthly premium for Medicare Part B. Additionally, depending on their income level your Part D coverage can increase from $13.00 to $74.80 a month.
If you’re close to the income cutoff, monitor the financial choices you make that will result in an increase to your adjusted gross income. It’s wise to consult with your financial planner before making any financial decisions. A financial planner can help you determine if the decisions you’re making will impact your taxation and income level. They can also help you weigh out the benefits and consequences of implementing this financial move.
Taking the premium amount you’re given
When you apply for Medicare, the Social Security Administration will base your premium amounts on your most recent tax return. Your Part B and Part D premiums will be higher if you earned more than $85,000 if single or $170,000 if married and filing jointly. Luckily, it’s possible to lower this amount if you’ve experienced a life change such as marriage, divorce, or less work hours, that reduced your adjusted gross income.
In that case, you can contact the Social Security Administration to use your more recent income instead. You’ll need to provide evidence of this life occurrence. Evidence could include a divorce decree or signed notice from an employer.
Enrolling in Medicare Part A while wanting to continue to fund your HSA
The purpose of Health Savings Accounts (HSA) are to help you save for your health care costs. If you still have financial resources to contribute to your HSA account once you reach age 65, you will need to delay your Medicare enrollment. If you sign up for Medicare Part A, you can no longer contribute to your HSA account.
If you have health care coverage through your current employer you can continue to contribute. If you are already taking Social Security or you’re employed by a company with less than 20 employees, you must sign up for Medicare Part A.
A word of caution, you’ll want to monitor your HSA contribution amount because you must prorate your contributions based on the number of months prior to your Medicare coverage taking effect.
The bottom line
Medicare is a complex service. Partnering with a financial planner can help you avoid the costly Medicare mistakes many retirees may experience. By partnering with a financial planner you now have a financial expert in your corner guiding you through your financial journey.
If you’re ready to take control of your financial future and create a path to increase your odds of success, please contact our team today.