Warning to New Medicare Beneficiaries

New to Medicare? Here are some huge warnings to prevent you from making some MAJOR mistakes.

What is Medicare

Let’s start with Original Medicare. First a brief run down over what it is and what it covers.

Original Medicare is Part A, your hospital insurance, and Part B your medical insurance. They will cover most of your medical needs, but there are some notable exceptions such as dental, vision, hearing and prescription drugs. 

There are premiums, copays and coinsurance and deductibles to be aware of. You will likey not have a monthly premium for Part A if you qualify through yours or your spouse’s work history. If you or your spouse have worked at least 40 quarters (basically 10 years) then there is no monthly premium for Part A. If not, you’ll pay either $278 or $506 each month for Part A. 

There is also a premium for Part B and that is determined by your income.

Warning 1: Late Enrollment Penalty

The first major warning we want to issue has to do with enrollment and the late enrollment penalty.

If you are receiving social security or railroad retirement benefits at least 4 months before you turn 65, you should receive your card in the mail 3 months before you turn 65. If you would like to enroll at this time, there is nothing further to be done! 

If you wish to defer Original Medicare (specifically Part B) you will need to follow the instructions on the back of the card and send it back. If you keep the card, you will keep Medicare Part B and you will be charged for it.

If you do NOT receive your card in the mail. Make sure to contact Social Security to enroll. You can reach them at the number on the screen. You can do so in the 7 months surrounding your 65th birthday. 

You can also enroll during the general enrollment period which is every year from Jan 1-Mar. 31 or during a SEP if you qualify. 

If you do not enroll when you are first eligible and don’t qualify for a SEP, you may be subject to a late enrollment penalty. Also, if you defer Part B, in favor of your employer-sponsored group health insurance, make sure to enroll during your SEP when your coverage ends otherwise you may also be subject to a late enrollment penalty. 

There is also a Part D late enrollment penalty. If you go more than 63 days without creditable prescription drug coverage then you may encounter this penalty. But honestly, even if you go a lengthy amount of time without Part D, the penalty is rather low so it is not a major concern.

Warning 2: Medigap

Another huge warning to new Medicare beneficiaries has to do with Medigap. So although Original Medicare offers truly comprehensive coverage there are deductibles coinsurance and copays. Also, there is no out of pocket maximum. So if you have major medical needs, you could end up with major medical bills.

Medigap plans will cover these financial gaps. There are 10 different plans to choose from at varying price points with carrying levels of coverage. 

You can enroll in a Medigap plan at any point, however, if you do so outside the 6 months after turning 65 and enrolling Medicare Part B, you may be subject to medical underwriting. 

You may not think that this is a big deal, but on the contrary, it can be extremely problematic. Not only can you be charged more based on your medical history, but you could be denied outright.

Often people wait until they are major medical needs to enroll in a Medigap plan. At that point, they often find themselves unable to afford their Medigap plan. Even more frequently they are denied and left with only Original Medicare. If you need to be hospitalized, there is a $1600 deductible and copays can be hundreds of dollars per day. 20% of expensive tests or chemotherapy drugs under Part B can also be extremely costly without Medigap. 

Please do not wait to enroll in a Medigap plan. You may not need it now, but you will want it in place at a later date should you need it then.

Warning 3: Medicare Advantage

Finally, please proceed with caution with regard to Medicare Advantage. Medicare Advantage Plans (aka Part C or Managed Care Plans) replace Original Medicare entirely.

They must offer at least the same benefits as Original Medicare. However, the often offer additional benefits like dental, vision, hearing, and prescription drugs. Additionally, these plans usually have lower copays and deductibles and will impose an out of pocket maximum.

All of this and frequently, you only need to continue to pay for Part B.

If this sounds too good to be true, too often is. Medicare Advantage Plans often come with restrictive networks. Even if you choose a PPO, there is still the issue of preauthorization.