It sounds so easy and uncomplicated: Reach age 65, sign up for Medicare, and your health insurance is taken care of for the rest of your life. But seldom are things as easy as they sound. That is certainly the case with Medicare, the health insurance system in place for more than 55 million Americans. While signing up for Medicare sounds relatively simple, there are a lot of moving parts that require decisions that will impact your pocketbook and your insurance coverage.
As important as Medicare is in the life of our senior and disabled citizens, there are very few resources that provide proper guidance on working your way through the Medicare maze—and it’s certainly not a set-it-and-forget-it kind of decision. This post, and upcoming posts that we will make on this subject, will attempt to clear up some of the confusion and misinformation surrounding this very important topic.
Our first piece of advice on this topic is that you must be proactive in dealing with this complicated program. The book Get What’s Yours for Medicare (Phillip Moeller, 2016) points out that “No One Told Me” is a scary cautionary Medicare tale. Prepare yourself so that you don’t have to ever say that no one told you.
Before we get into how the enrollment process works, it would be good to go over the Medicare basics. Medicare has three parts: Part A provides insurance for expenses incurred at hospitals and is generally premium-free. Part B provides coverage for doctors, as well as outpatient and medical equipment expenses. And Part D is prescription drug coverage. We know—what happened to Part C? We’ll cover that in a future post.
We recommend six steps when going through the Medicare enrollment process:
Check your timing.
Choose your Medicare path.
Select your specific plans.
Enroll in Medicare (note that this is the fourth step, not the first!).
Enroll in your specific plan(s).
Review your coverage annually.
There are some decent resources that can help with steps three through six. But there aren’t many that will help with the first two steps. Yet it’s steps one and two where 90% of Medicare mistakes are made. We should not take those mistakes lightly because just one mistake can cost you thousands of dollars and may not be able to be undone. This post will offer guidance on the first step, and future posts will address the rest.
Check Your Timing
To get started, we must first determine the best time for you to enroll in Medicare. At age 65, if you are a U.S. citizen, you are eligible to begin Medicare—but being eligible doesn’t mean that you have to sign up right then. If you are already receiving Social Security when you turn 65 (which is another topic we will discuss in a future post), you should be automatically enrolled in Medicare Parts A and B—but, again, this doesn’t necessarily mean that you have to accept, and pay for, Part B. By receiving Social Security benefits, you are automatically enrolled in Part A. Your decision to sign up for Part B is going to be determined by whether you have coverage through an employer group health insurance policy. This is the case whether you are receiving Social Security benefits or not.
So if you are turning 65 and are not covered by a group health policy through an employer, you’ll want to sign up during your initial enrollment period, which is the seven-month window surrounding your birth month (the window includes the three months before your birth month, your birth month, and the three months after). If you are covered by a group health insurance policy, you’ll need to enroll during a special enrollment period. For Parts A and B, this means that you can enroll at any time while you are still covered, or within eight months after coverage or employment ends (whichever is first). For Part D, you’ll have 63 days after the coverage or employment ends (again, whichever is first).
Of course, there is always an exception to make things more complicated. If you are covered by an employer group plan with fewer than 20 employees, then you must sign up during your initial enrollment period. This is because, for small employers, the group plan will stop being the “primary” payer of claims and will become “secondary” to Medicare.
If you make a mistake in this phase of your enrollment, you could end up paying late enrollment penalties. And these are not small, slap-on-the-wrist kinds of penalties. In most cases, if you don’t sign up when you are first eligible, your premium can go up 10% for each 12-month period that you would have had coverage. And those increases don’t go away after a year or two. They follow you for life. Or you could end up with a more costly coverage that you cannot switch out of. You could face long delays in enrollment of up to a year and a half without coverage. And finally, you could end up having to pay back health care costs that you thought were covered.
It’s obvious that the basic step of signing up for Medicare is anything but basic. And that’s just signing up. Deciding which path and which plans are best for you isn’t exactly a picnic either. We’ll discuss those in future posts.