Choosing the wrong Medicare plan or missing an enrollment period can lead to costly and irreversible mistakes that impact your healthcare and finances for years to come. In this guide, we walk you through the most common pitfalls people make when first enrolling in Medicare and how to avoid them with confidence. From missing critical deadlines to selecting plans based on premiums alone, understanding these errors can help you make informed decisions that align with your long-term needs. Whether you’re new to Medicare or helping a loved one, this article offers expert insights to help you get it right the first time.
Costly Medicare Mistakes
Since the mid-1980s I have helped thousands of seniors with their Medicare and retirement financial decisions, witnessing numerous costly mistakes and preventable Medicare mistakes. These costly errors are commonly made by Medicare beneficiaries when navigating their options, often resulting from confusion and poor communication about Medicare’s complex rules and deadlines.
This article highlights the most common Medicare mistakes and provides essential information to help you avoid them. We’ll cover Medicare enrollment, enrollment periods, Medicare Advantage Plans, Medicare supplement plans, and Medicare Part D prescription drug plans, ensuring you have the knowledge to make informed decisions and avoid costly errors.
Medicare Enrollment Is Not Automatic
A common misconception is that Medicare enrollment happens automatically. Medicare enrollment is only automatic if you’ve been receiving Social Security benefits for at least four months before your Initial Enrollment Period. Otherwise, you must enroll yourself through Social Security.
Full Social Security retirement age is 67 + for many, but benefits can begin as early as 62, often with reduced amounts. If you’re receiving Social Security, it’s assumed you don’t have employer-sponsored insurance and need Medicare for healthcare coverage. However, only health insurance from a current employer (not retiree or COBRA coverage) with 20 or more employees allows you to delay Medicare enrollment without penalty. You must be actively working. Coverage from a former employer or COBRA does not qualify for this exception.
How to Opt-Out of Medicare Part B
There are very few group health insurance plans that equal Medicare in their depth of coverage and low cost. However, you can opt-out of Medicare Part B if you have creditable health insurance from your or your spouses employer. You can do this by calling Medicare directly or returning the opt-out postcard included in your Welcome Packet. As long as you have creditable employer coverage, you won’t face a late enrollment penalty. Employer insurance is considered primary coverage only if it is from a current employer (or spouse’s employer) with 20 or more employees.
Part A (hospital insurance) is usually premium-free if you or your spouse worked and paid Medicare taxes for at least ten years. You can keep Medicare Part A coverage even if you opt out of Medicare Part B.
Missing or Misunderstanding Enrollment Periods
Many Medicare mistakes stem from missing or misunderstanding key deadlines and enrollment periods which can lead to unexpected healthcare costs. Medicare has various enrollment windows, some triggered by loss of health insurance through no fault of your own, allowing special enrollment periods to avoid gaps in coverage.
Please be sure to understand key deadlines and enrollment periods is crucial to avoid penalties and ensure continuous coverage. If you are not certain, please reach out to us for help at no cost or obligation.
Medigap Seminars Insurance Agency Reviews.
Initial Enrollment Period
Your initial enrollment period for Medicare at age 65 is known as the seven month window: the three months before your birthday month, your birthday month, and the three months after. Your Medicare plan coverage typically starts on the first day of your birthday month, except if your birthday is on the first of the month, which shifts your enrollment period and start date one month earlier. During this seven month window, you should enroll in Medicare Parts A and Medicare Part B—usually online via the Social Security Administration website. Missing this seven month window without creditable coverage can lead to a lifetime late enrollment penalty. If you miss the initial enrollment, you must wait for the General Enrollment Period from January 1 to March 31 to sign up.
Medicare Advantage Plan & Part D Enrollment Period
Your initial enrollment period for Medicare Part B outpatient services is also the time period for signing up for Medicare Part D prescription drug coverage, a drug plan, or an Advantage plan. Many Medicare Plans have embedded Part D prescription drug coverage.
During the enrollment period, you can switch between different Medicare Advantage plans and drug plans to adjust your coverage as needed.
If you do not enroll in a Part D plan, either via Medicare Advantage plans or a Stand Alone Plan during this enrollment period you may be subject to a lifetime late enrollment penalty.
Medicare Mistake – MAPD / PD
One of the more harmful medicare mistakes to avoid is understanding that you cannot have a Stand-Alone Medicare Part D plan and an Advantage Plan at the same time. If you have a Medicare plan, with or without Part D coverage, Medicare will kick you out of that plan when you enroll in a Medicare Part D plan and visa versa. Additionally, if you delay signing up for coverage, the late enrollment penalty period is twice the number of years you waited to enroll, which can significantly increase your costs.
There are a few exceptions, but if you are doing all of this alone without the help of an Independent Medicare Insurance broker you must be confident in your knowledge. A Costly Medicare mistake can be permanent.
Medicare Part A & HSA
Health Savings Accounts (HSA) are popular for those with high deductible employer health plans, allowing tax-advantaged payments for healthcare. However, once Medicare plan coverage starts, HSA contributions are not allowed, and contributing afterward incurs a tax penalty.
Medicare Part A starts at the earliest of your Initial Enrollment or up to six months retroactive to your application date, which can differ from Part B’s start date. If you delay Medicare enrollment, Part A’s retroactive start is important to consider for HSA contributions.
Medicare advises stopping HSA contributions six months before Medicare starts only if your Medicare begins six months or more after your Initial Enrollment. If Medicare starts at your Initial Enrollment, you do not need to stop contributions early.
Note: HSA plans differ from Medicare savings programs, which are separate.
Medigap Open Enrollment Period
The Medigap open enrollment period lasts six months (180-days) from the start date of your Medicare Part B coverage. During this time, you can apply for any Medigap plan or Medicare supplement plan without medical underwriting, meaning no one can deny you coverage based on your health. Once 180-days have past since the start date of Medicare Part B, insurers may charge more or deny coverage depending on your health history, though some states have exceptions. Be sure to understand how your insurer defines the six-month period to avoid losing options. For more details, see our blog post on Medicare Enrollment Periods.
Special Enrollment Period
Special Enrollment Periods (SEPs) allow you to enroll in or switch Medicare plans outside the usual enrollment windows due to a life changing event, such as retirement or losing employer coverage through no fault of your own. Guarantee Issue rights during SEPs ensure you can get certain Medicare plans without medical underwriting and without waiting for the annual enrollment period. For more information, visit our blog on Special Enrollment Periods.
Other Enrollment Periods
Besides the initial and special enrollment periods, there are annual enrollment windows for Medicare Part D and Medicare Advantage plans, during which beneficiaries should review and possibly switch plans to ensure their coverage fits their needs. It is also important for Medicare beneficiaries to review their annual notice of change each year, as this document outlines any updates to their plan’s coverage and costs for the upcoming year. Medigap plans, however, are guaranteed renewable with consistent benefits nationwide, though premiums may increase. Learn more about these timelines in our Medicare Enrollment Periods blog post.
Understanding Creditable Coverage
A common Costly Medicare mistake is misunderstanding creditable coverage, which is primary health and drug coverage considered equivalent to Medicare. Employer-based insurance is the most common creditable coverage, but only if you work for a company with at least 20 employees and are actively employed. Retiree coverage does not count as creditable and can lead to late enrollment penalties if you miss Medicare enrollment.
Losing employer coverage involuntarily may qualify you for a Special Enrollment Period to sign up for Medicare.
COBRA
Assuming COBRA is creditable coverage is another costly error. Although COBRA continues your previous employer’s plan, it is generally not considered creditable for Medicare purposes, and missing your Initial Enrollment Period can result in penalties. Unlike active employer coverage, COBRA does not provide a Special Enrollment Period to switch to Medicare.
Medigap vs. Medicare Advantage Plans
Many consumers confuse Medicare supplement (Medigap) plans with Advantage plans. Medigap is a supplemental plan that fills gaps in Original Medicare by covering copayments, coinsurance, and deductibles. Both are offered by private insurers but differ significantly. Advantage plans replace Original Medicare and may include additional benefits but come with different limitations.
Medicare Advantage Plans
Advantage plans replace Original Medicare and require paying Part B premiums, which may include a high income surcharge (IRMAA) for higher earners. Medicare premiums can vary based on your income and the specific plan you choose. While some plans have no monthly premium and include prescription drug coverage, it is important to understand the monthly premiums and how they impact your overall healthcare costs. Reports indicate issues with denied or delayed services. One advantage is an annual out-of-pocket maximum, unlike Original Medicare without a supplement.
For more details, see our post on Medicare Enrollment Periods.
The PPO Myth
Many consumers and agents misunderstand Medicare PPO Plans. Over 90% of Medicare Advantage plans are either HMOs or PPOs. Agents often claim that PPO plans let you see any doctor who accepts Original Medicare, comparing them to Medicare supplements, but this isn’t entirely accurate.
Medicare PPOs encourage using in-network providers who have contracts with the insurer to offer services at lower costs. While you can ask out-of-network providers to accept your PPO plan, they usually decline.
Consumers often realize this limitation too late. For example, a cancer patient once couldn’t see preferred specialists because those providers refused the PPO insurance.
No Stand-Alone Part D Allowed
Some Advantage plans exclude prescription drug coverage, mainly for military members with VA drug benefits. However, enrolling in both a Medicare Advantage Plan and a stand-alone Part D plan is not allowed. Applying for one after the other cancels the first plan. When considering switching between plans, it’s important to compare plan costs, including premiums, deductibles, and out-of-pocket expenses.
If you’re a Snowbird or RVer, additional limitations may apply. See my article on the Best Medicare Plan for Snowbirds and RVers for details.
Employer Sponsored Group MAPD
One of the fastest growing areas of Medicare are employer sponsored Medicare Advantage plans. We are often asked by new retirees to compare their employer sponsored healthcare plan to Medicare supplement insurance. In every case, the employee had no idea that the coverage offered by their former employer is a group Advantage plans.
These may be group plans, but they have the weaknesses and pitfalls of a stand-alone Advantage plans.
Don’t Mess With TriCare for Life
This is one of my pet peeves. TriCare for Life is a benefit offered to retired career military, providing essential medical services. It’s one of the best, if not the best Medicare coverages available. Unfortunately many insurance agents try to sell Advantage plans to people with TriCare and do not understand the harm they cause. I published a video on this subject that goes into detail and is very important if you have Tricare. How Medicare Works With Tricare for Life
Who Buys Advantage Plans?
Almost half of consumers new to Medicare choose an Advantage plan. The majority of this group is the growing employer group market who were not given the option of a Medicare supplement and did not research their options.
But in the individual market there is a completely different demographic. According to a 2022 survey performed by eHealth, of these consumers, 73% who chose an Advantage plan were low income older adults who could not afford even $50 for a Medicare supplement. They chose an Advantage plan because it was premium free, helped them manage their monthly expenses, and placed a maximum limit on their out of pocket costs.
Medicare Supplement (Medigap) Plans
Medicare supplement plans are used to increase your benefits over and above what is provided by Original Medicare, helping to manage medical expenses. Medicare supplement insurance pays some or all of the copays, coinsurance and deductibles left as your responsibility with Original Medicare. Medigap plans can also help cover costs associated with a hospital stay, reducing your out-of-pocket expenses.
There is no lifetime limit on Medicare coverage, so beneficiaries can receive necessary medical care for as long as needed.
Unlike the Advantage Plan, your Original Medicare is not replaced. In fact, it remains your primary insurance coverage. This means you keep the benefits of Original Medicare in that you can see any medical provider or medical facility in the U.S. as long as they accept Original Medicare. It also means that you can choose your primary care physician without worrying about a network, and see any specialist you wish as long as they accept Original Medicare.
With a Medigap policy you can limit your maximum annual out of pocket costs to just a few hundred dollars. You can review the benefits provided by the Medicare supplement plans available and also compare maximum out of pocket limits for more information. A Medicare part of your overall health coverage strategy, Medigap plans offer valuable financial protection.
Issue age vs Attained Age vs Community Rated
Medicare supplement plans are priced in one of three ways. They are either Issue Age, Community rated or Attained Age. See page 18 of the Medigap Buyers Guide for details. Two common misconceptions with Medicare supplement plans is that 1. one pricing structure offers a lower lifetime cost than another and 2. that all pricing structures are available in all states. Neither is true.
Some states have Medicare rules that dictate that all Medigap policies offered in that state be priced as Issue Age, some as Community rated. If there is no specific rule then Attained Age pricing will likely be prevalent. No matter which pricing structure is offered, the insurance company can and will increase the price of the policy over your lifetime. All the insurance company has to do is justify and request a price increase from the state commissioners office.
I advise to be wary of any company offering a Community Rated or Issue Age pricing structure in a state that does not mandate all plans be priced that way. It is very likely they are trying to make you believe you are getting something you are not. In fact, one such company will also say their policy is offered at a discount, when in fact the term discount is used so that the annual price increases are not called price increases. They are a “reversal of a discount”. But to your pocket book, it’s a price increase.
Medigap Pricing Tables
A last thought on misconceptions about Medigap Plans. Many people look at the pricing tables to see what an insurance company might charge when they are older. They assume that the price shown is what they would pay when they are say 75 or 80. That is not the case. Those are the prices a NEW applicant will pay if they are that age today. Because of the mechanics of how insurance companies manage price increases, those table are not at all related to how much you will pay when you are that age.
Prescription Drug Coverage
Last, but not least in the list of potential Medicare mistakes is the “I am healthy. I don’t need Part D.” mistake, which can severely impact your healthcare needs. Medicare part D plans provide essential coverage for prescription drugs, helping you maintain your health and avoid high out-of-pocket costs.
I have seen this happen multiple times where an individual will put off enrolling in a Medicare part D plan. Then in the middle of the year they come down with cancer or some other major illness. They can’t just get a Medicare part D plan at anytime. They can only get a plan as of the next January 01. In one case, a gentleman had a blood cancer.
My Philosophy on Medicare
My philosophy on health insurance is simple, but will help you to get the right plan for the rest of your life. Get today the health insurance you will want to have when you become sick or injured. First, do your research. Find out what is available to you and identify a monthly premium budget. Seeking professional guidance is invaluable and consulting a qualified expert or advisor can help ensure you choose the right Medicare plan for your needs.
A good independent agent should talk to you about both your supplement and advantage plan alternatives. Then get the insurance policy TODAY that you would want to have when you are sick or injured. Don’t get a plan today with less coverage because you are healthy today. We never know when or how our health will deteriorate. We only know that it will. Once it has, you will not have the same ability to choose your coverage as you can when you are healthy.
