The Medicare GOTCHA That May Surprise You!

Think you know all about Medicare? Here are a few unpleasant facts that may surprise you!

Medigap

Let’s start with a big one which is Medigap. Medigap plans are also known as Medicare Supplement Plans. They are different from MA which we will talk about later in the video. They are a voluntary form of supplemental insurance that fills in the financial gaps of Original Medicare.

Medicare is great, low-cost, comprehensive health coverage, but there are still costs. Not only are there premiums, but there are copays coinsurance, and deductibles. There is also no out of pocket maximum.

If you enroll in a Medigap plan, you will pay an extra monthly premium but your supplement plan will largely take care of or possibly entirely cover deductibles and copays and coinsurance. That means you will have no medical expenses when you actually use your insurance.

Many costs associated with Medicare are very low when you are younger and healthier, but as you age your medical needs will likely become more extensive. Or, if you are diagnosed with a serious medical issue, you will likely find that the costs with Original Medicare alone are far too exorbitant especially because there is no out of pocket maximum.

At this point, you may want to enroll in a Medigap plan. However, once you are older and have more extensive medical needs it is likely that you will be denied. At the very least, you will certainly be charged much more than if you had enrolled when you were younger and healthier. This is because medigap plans may require medical underwriting.

However, if you enroll in the 6 months after you turn 65 and enroll in Part B, you will not be subject to medical underwriting. This is the best time to enroll in a Medigap plan. You may not utilize your plan as much in the earlier years, but your later self will thank you!

Late Enrollment Penalty

Speaking of enrollment, there are some other enrollment periods and penalties you should be aware of. Specially, the Part B and Part D late enrollment penalties.

Part B

Let’s start with Part B as it is significantly larger than Part D. You will first become eligible for Original Medicare (Part A & B) in the 7 month window surrounding your 65th birthday. You will likely be automatically enrolled during this time and if so, you will receive your Medicare card in the mail.

If you do not receive your card in the mail or are not automatically enrolled, it is imperative that you call Social Security.

You may also wish to defer Part B if you are maintaining creditable coverage through your employer by working past the age of 65. If this is the case, then when you do retire and lose coverage, it is very important you contact Social Security at that time.

If you are subject to the late penalty you will have to pay 10% of the base monthly premium for each full 12 month period you are without Part B. 

In 2024, the Part B base monthly premium is $174.70. So, if you go without Part B for 12 months you would have to pay $17.40 in addition to whatever your Part B premium is. If you go without coverage for 24 months, it would be $34.80 and so on and so forth. 

And remember, this is not a one time penalty. It gets tacked on to your monthly premium forever.

Part D

Then there is the Part D late enrollment penalty. Part D is your prescription drug coverage and you will certainly need some type of prescription drug plan as you get older.

If, after becoming eligible, you for a period of more than 63 days in a row without creditable prescription drug coverage, you will be subject to the Part D late penalty. 

It is calculated by multiplying 1% of the “national base beneficiary premium” ($34.70 in 2024) times the number of full, uncovered months you didn’t have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium.

So, if you go three months without coverage, it would be an additional $1.04, 4 months= $1.39, 5 months= $1.74, etc. There are plenty of free calculators to help you calculate your Part D late enrollment penalty if applicable.

Medicare Advantage

Another Medicare “surprise” isn’t so much a surprise, more so a common misunderstanding. Many people think that when they sign up for “Medicare Advantage” they are signing up for Original Medicare and that is simply not the case. They are completely different.