TRAILER

Welcome to episode 80 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This episode is part 2 of a 2 part series on Medicare, which is the Federal health insurance program that helps pay for the health care costs of retirees. In episode 79, which was part 1 of this series, I shared what one needs to understand about Medicare and in this episode I’ll share the most common Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding choosing between Medicare Advantage and Medicare Supplement Insurance.

In this episode...

Medicare Isn't Cheap [2:23]
Late Medicare Enrollment [4:47]
Skipping Part D [5:46]
Enrollment isn't One-time [6:48]
Ignoring Pre-existing Conditions [7:50]

MAIN

In Episode 79 of the One for the Money podcast, I shared how expensive healthcare can be in retirement, even with Medicare covering a lot of the expenses. According to a survey released by the investment company Fidelity in August of 2024, most individuals expect healthcare costs in retirement to be~ $75,000 per person or $150,000 per couple but the actual expenses are $165,000 per person or $330k per couple. That is more than double what people estimate they will have to shell out.

Medicare will play a major role with regard to their health care in retirement. However, the Medicare system itself can be challenging to fully comprehend given the various coverage options, expenses, and deadlines involved.

Due to these misunderstandings far too many American’s make critical mistakes regarding their Medicare coverage. Here are five of the most common mistakes

First, many Americans might assume (given that they've paid into the Medicare system through payroll taxes throughout their careers) that Medicare coverage is completely free. Whereas, in reality, several parts of Medicare (e.g., Part B medical coverage (doctor visits) Part C, and Part D (which provides prescription drug coverage) require you to pay premiums. Further, even if one understands that they will have to pay premiums, they might not be familiar with Income-Related Monthly Adjustment Amount (IRMAA) surcharges (aka IRMAA), which apply to retirees with higher incomes in retirement which can increase their costs further. And so the Mistake people make is thinking Medicare is inexpensive or free but Medicare does not cover 100% of your healthcare  costs.

Medicare part A covers inpatient hospital care, skilled nursing facility stays, hospice care, and some home health care,

Part A Deductible and Coinsurance Amounts for Calendar Years 2024 and 2025

by Type of Cost Sharing

2024

2025

Inpatient hospital deductible

$1,632

$1,676

Daily hospital coinsurance for 61st-90th day

$408

$419

Daily hospital coinsurance for lifetime reserve days

$816

$838

Skilled nursing facility daily coinsurance (days 21-100)

$204.00

$209.50

Medicare Part B (Medical Insurance):.
Part B is optional and available to anyone who qualifies for Part A. It requires a monthly premium, regardless of work history.
Part B covers doctor visits, outpatient care, medical services like lab tests, and most preventive services.
Premiums for part B in 2025 as low as 185/mo or as high as 628.90/month based on your income from the previous years. Those higher premiums are a result of the IRMAA charges I mentioned previously.
Medicare parts C and D also have premiums. In 2025, the average monthly premium for Medicare Advantage (Part C) is projected to be $17, but it can vary from $0 to over $200
The average projected premium for 2025 for all Part D plans is $47/month
Healthcare in retirement is much less expensive with Medicare but it certainly it isn’t close to being free.

The second Mistake people make with Medicare is  Enrolling in Medicare late

Speaking of costs, one mistake that can increase your monthly costs is Enrolling late in Medicare incurs penalties that result in higher premiums — for life. The later you enroll, the heavier the penalties.

There are different enrollment periods, depending on your  situation.  For example are you working past age 65 and will you be covered by an employer healthcare plan?

It is  important that you know which period applies to you, so  you  don’t  enroll late.

Late penalties apply mostly to Parts B and D of Medicare.

The important enrollment deadlines (e.g., the 7-month-long initial enrollment period, which includes the 3 months before they turn 65, the month they turn 65, and the 3 months after they turn 65), which, if missed can lead to penalties on premiums for the rest of their life.

A third mistake people make with Medicare is assuming they don't need to sign up for a Part D prescription plan because they currently don't take many prescription drugs.

 Not signing up for a prescription drug plan

You may think, “Why should I pay for a prescription drug plan if I don’t take prescription  drugs?” Things change, unfortunately, and you might need to take them in the future.

Without prescription drug insurance, you could be paying a great deal for medicine.

If you wait to sign up until you need coverage, you must wait until  the next open enrollment period  and  pay late penalties for life.

All Rx drug plans have a catastrophic coverage provision, an out-of-pocket threshold above which you have no copays or coinsurance. Even an inexpensive drug plan is better than none.

Mistake #3A: Enrolling in the same prescription drug plan as your  spouse just because your spouse is enrolled in that plan.  Given that you will likely have different prescription needs, each might benefit from different types of plans (e.g., how different drugs are covered).

The fourth mistake Americans make with medicare is assuming that Medicare enrollment is a one-time task and that they will remain on the same coverage for the rest of their lives; however, the annual open enrollment period offers the opportunity to make a range of changes to coverages (given that premiums, deductibles, and/or coverages for certain plans can change each year).

Don’t do  that! Unless the plan adequately addresses your own health needs, too.

Mistake #4A: failing to review your Medicare Advantage also known as Medicare part C coverage annually .

When you enroll in a Medicare Advantage plan, you will receive an Annual Notice of Change (ANOC) every September. It is critical to review this document each year to be aware of any changes to your plan.

Mistake 4B is not understanding the difference between Medicare Advantage or Medicare Supplement. One is not required to enroll in Medicare advantage instead one can enroll in a Medicare Supplement Plan which are also referred to Medigap plans. I go more into the differences at the end of this episode.

The 5th mistake people make with Medicare because of their misunderstandings is assuming pre-existing conditions don’t matter.

Pre-existing conditions  don’t  matter when you  first  enroll in Medicare.

When you first enroll in Medicare Part B, you have  six months  to enroll in a  Medigap plan, or switch plans, with “no questions asked”.

This initial six-month period is called the  Guaranteed Issue (GI) period .

It occurs only once for most people; it is  not annual!

There are a few exceptions where your guarantee issue period can be renewed but those tend to be rare.

What I have just shared are 5 of the more common misunderstandings that lead to mistakes regarding Medicare. Now, if all of this information regarding Medicare, has you confused, It’s completely understandable. Most every9one thinks you retire and you get free health care provided by the government. But when you start getting into all of the details it can get incredibly overwhelming. For example there's Medicare parts A part B part C part D there's Medigap and then there's Medicare supplement and then there's Medicare advantage it can make your head swim.

And while healthcare in retirement can be expensive even with Medicare (165K per person or $330k per couple) and can be even more expensive than that if you don’t plan well when selecting your Medicare options.

I strongly recommend my clients and others to engage with the specialized Medicare experts that understand this information. There are companies out there that provide this such as boomer benefits, or health pilot. I'm not endorsing these necessarily but wanted to give you an idea of what you can use to help you make some of the most important decisions you will make in retirement.

TIPS, TRICKS AND STRATEGIES

Welcome to tips, tricks and strategies portion of the podcast where I will share a tip regarding choosing between Medicare Advantage and Medigap also known as Medical Supplemental Insurance.

Medigap vs Medicare Advant...