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  • Writer's pictureTom Cianflone

Common Mistakes Choosing Medicare Coverage

Going on Medicare is a big decision. Don't mess it up. Here are some common mistakes to watch out for. As always, working with a licensed, local, independent agent is the best way to avoid costly mistakes like these. Contact me anytime with questions.

Starting Medicare at the wrong time

If you're in any of the following five circumstances, you should definitely enroll in Medicare at age 65:

  1. You get your healthcare through an ACA (aka, Obamacare) plan from the health insurance exchange. Can you keep an ACA plan after turning 65? Technically, yes. But you lose any advance premium tax credits you may be getting, meaning that you will pay full tilt for whatever plan you're on. You can do much better cost-wise on Medicare and have first-dollar coverage (no or minimal deductible on most Medicare plans). Remember, ACA was designed as a last resort health insurance solution for those who cannot get coverage any other way, for example, through an employer or through Medicare.

  2. You are on an employee retirement plan. These are plans offered by employers for those who have retired from working life before the age of 65. Once you turn 65, most of these plans pay second to Medicare. So, if you have not enrolled in Medicare, you become the first payer, something you don't want to be. Check with your HR department for the specifics of any employee retirement plan in which you may be enrolled.

  3. You are on COBRA. Even if your employer may be paying for your COBRA, staying on COBRA once you turn 65 is a bad choice. First, COBRA pays second to Medicare. So, if you have not enrolled in Medicare, you become the first payer, something you don't want to be. Second, and worse, COBRA is not considered creditable coverage by Medicare, so when you finally do enroll in Medicare, you will be subject to a Part B late enrollment penalty that you will pay for the rest of your life on Medicare.

  4. You are on Tricare for life. While you're on Tricare under age 65, Tricare pays first. But once you turn 65, Tricare for life pays second to Medicare. So, if you have not enrolled in Medicare, you become the first payer, something you don't want to be.

  5. You are still working and covered by employer group health, but you are working for an employer that has 19 employees or fewer. In this case, your employer group health pays second to Medicare. So, if you have not enrolled in Medicare, you become the first payer, something you don't want to be.

In all of the above cases, you should start talking to me three months before the month in which you will turn 65.

If you are working past the age of 65, covered by employer group health, and your employer has 20 or more employees, you DO NOT have to enroll in Medicare. Employer group health plans offered by employers with 20 or more employees are considered "creditable coverage" by Medicare, meaning, they offer coverage that is equal to or better than Medicare. This means you can continue on these plans and not switch to Medicare health coverage if it doesn't make sense to do so. Whether it makes sense to keep employer group health or switch to Medicare is a purely financial decision and I can help you compare your options to see if Medicare is a better deal for you. If you continue with employer group health, you will have a special enrollment period (SEP) available to you when you decide to leave employer group health that will let you enroll in Medicare after age 65 without a late enrollment penalty. And one more reason not to enroll in Medicare in this situation: if you are taking advantage of a health savings account (HSA) offered by your employer, you can no longer contribute to the HSA once you enroll in Medicare Part A. If you are working past 65 and on employer group health as described here, you should start talking to me three months before your employer group health plan will terminate.

Enrolling into Medicare A & B only

Some think that once they have their red, white and blue Medicare card they are all set; they don't need additional insurance. This is not at all the case. Original Medicare (having just Part A and Part B) leaves you open to serious financial exposure in the event of a serious medical event. Original Medicare pays for NOTHING 100% except preventative screenings. There are three coverage gaps in Part A and three coverage gaps in Part B in which you will be obligated for co-pays or coinsurance. The staggering amount of medical debt on the books in the United States in 2023 suggests that many do not have the safety net to manage their financial obligations related to medical care. Of the $200B (that's 'billion' with a 'B') in medical debt currently on the books, the second largest population segment carrying that medical debt is Medicare beneficiaries. That debt represents co-pays and coinsurance for medical services rendered but which have not been paid because the Medicare beneficiary could not afford their financial obligation for the care they received. Many of these Medicare beneficiaries enrolled in Part A and Part B only with no additional insurance.

You have two choices for additional insurance: Add a Medicare Supplement (aka, MediGap plan) to plug the gaps in Original Medicare, or replace your Original Medicare coverage altogether by joining a Medicare Advantage plan. I can explain the pros and cons of each so you know exactly what type of additional insurance is best for your personal medical and financial circumstances. More on this in the next section.

Not understanding the difference between supplement plans and advantage plans

When you enroll in Medicare, you have two options for additional coverage:

  1. Keeping Original Medicare and adding a Medicare Supplement (aka, Medigap plan) and prescription drug plan (PDP)

  2. Replacing Original Medicare with a Medicare Advantage plan administered by a private carrier (Aetna, UnitedHealthcare, Humana, many others)

The ONLY thing these two paths to additional insurance have in common is that you must be enrolled in BOTH Part A and Part B to gain access to one or the other. And you can choose ONLY one or the other path to additional insurance. The basic differences are summarized below, but this subject bears additional discussion, so don't hesitate to contact me.

Medicare Supplement vs Medicare Advantage

Many Medicare agents won't even tell you about your option to remain on Original Medicare because we get paid much more money up front for Medicare Advantage plan enrollments compared to the commissions on Medicare Supplement plans. Here in South Florida, Medicare Supplement plan premiums are not cheap but are still in reach for many. It's not up to an agent to decide that staying on Original Medicare with a separate Supplement and PDP is something you don't need to know about. You need to know all your options and then make a decision that is right for you depending on your medical and financial situation. This is the most important decision you will make when deciding on additional coverage once you're enrolled in Medicare. It's a decision that will make all the difference in how you experience Medicare. My approach is to educate my clients on all options including the pros and cons of Original Medicare versus Medicare Advantage and then help you make the best decision for you.

Looking at monthly premiums alone

When making the decision between staying on Original Medicare and adding a Medicare Supplement versus choosing a Medicare Advantage plan, monthly premiums is often the deciding factor. Your Part B premium is a wash; you have to pay that to Medicare no matter what additional insurance path you choose. After that, you can join most Medicare Advantage plans for NO additional monthly premium, whereas, the Supplement policy will cost you an additional premium each month. In South Florida, that premium will run from around $160 to $250 depending on the Supplement plan you choose and other factors. But when you compare what you will pay out of pocket in co-pays and coinsurance on Medicare Advantage plans if you become ill and need care, you'd be surprised to see that the Medicare Supplement often does a better job of protecting you financially. In good health years of course, the Medicare Advantage plan looks like a bargain, but you never know what kind of a health year you're going to have, do you?

Even when choosing between Medicare Supplement carriers, we have to look at more than just the current premium for the plan you're looking at. More important than current premium when you enroll, we look at the rate stability of the most competitive carriers in your area and recommend only carriers that are known to be rate-stable long term and financially stable.

Not enrolling in a Part D prescription drug plan

Medicare Part D is a voluntary outpatient prescription drug benefit for people with Medicare provided through private plans from carriers that contract with the federal government. "Outpatient prescription drug" simply means the prescriptions you pick up at the pharmacy. If you're on Original Medicare with a Supplement, then you should have a separate prescription drug plan (PDP) with its own member ID card and monthly premium. But some figure, hey, I'm not taking any prescription drugs, so why should I pay for a drug plan? Or, maybe they are taking some generic medications and are able to get them inexpensively using a GoodRx coupon; so, again, why should I pay for a drug plan?

The answer is simple: we buy insurance not for what's happening right now, but to protect us financially for what may happen in the future. If you are ever prescribed an expensive medication, you will pay a fraction of the actual cost of the medication if you have a prescription drug plan. No GoodRx coupon will save you in that event. And if you skip Part D coverage after age 65 but later decide you need to be on a Part D drug plan, you will pay a Part D late enrollment penalty that will follow you for the rest of your life on Medicare.

So, for most people, not enrolling in a Part D PDP is an important mistake to avoid. The exceptions? Anyone who has drug coverage through the VA (Veterans Adminstration), Tricare for Life, or the Federal Employees Health Benefits Program (FEHB, retired civil service). These folks do not need to be enrolled in a Part D PDP because the coverage they have is considered "creditable" by Medicare, meaning it's at least as good or better than a Part D PDP.

Concluding Thoughts

The best way to avoid common Medicare mistakes? Talk to a licensed, local, independent agent, like me! Contact me here to discuss your Medicare questions. I look forward to hearing from you.

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