Turning 65 is a major milestone- and for many people, it is also the point when Medicare becomes part of the financial planning conversation.
A client called me a few weeks back, pretty pleased with herself. She'd just turned 65, still had good coverage through her employer, and figured she'd let Medicare wait until she actually retired.
Made sense to her. Why pay for something she wasn't using yet?
Turns out, she hadn't thought to ask a few important questions.
And that's Medicare in a nutshell.
Medicare isn't necessarily difficult to understand once somebody walks you through it. But it's surprisingly easy to get sideways on a detail that can cost you money- or limit your options- for years to come.
I grew up around folks who'd tell you, "Read the fine print before you sign anything." Medicare is about as fine-print-heavy as it gets.
So let's walk through 10 common Medicare mistakes I see, in plain language- the way I'd explain them across the kitchen table.
1. Waiting Too Long to Enroll in Medicare Part B
This is the mistake that tripped up my client above.
If you're still covered by a group health plan through active employment- either your own or a spouse's- you can generally delay Medicare Part B without a late-enrollment penalty.
But the type of coverage matters.
Retiree coverage and COBRA generally don't give you the same protection as coverage based on current employment. If you don't have qualifying coverage, you may need to enroll during your Initial Enrollment Period around your 65th birthday.
Miss your enrollment window when you're required to enroll, and you could face a Part B late-enrollment penalty. The standard penalty is generally 10% of the Part B premium for each full 12-month period you could have had Part B but didn't enroll.
And this isn't a one-time slap on the wrist. The penalty generally continues as long as you have Part B.
The takeaway: Before deciding to delay Medicare at 65, find out whether your current employer coverage actually allows you to do so.
2. Missing Your Medigap Open Enrollment Window
If you plan to use Original Medicare with a Medigap policy, timing matters.
Your Medigap Open Enrollment Period begins when you're both 65 or older and enrolled in Medicare Part B. You generally have a six-month window during which you can buy a Medigap policy without medical underwriting.
After that window closes, you may still be able to apply for Medigap, but insurers in many circumstances can use medical underwriting, which can affect your ability to obtain coverage or the price you pay.
That makes the Medigap enrollment window a "pay attention now" item- not something to put off indefinitely.
The takeaway: If Medigap is part of your Medicare strategy, understand exactly when your six-month window begins and ends.
3. Assuming COBRA Replaces Medicare
I hear this one a lot:
"I'll just stay on COBRA until I figure out Medicare."
That's potentially dangerous.
Once you're eligible for Medicare, COBRA generally does not function as a free pass on the requirement to ENROLL by the deadline. Medicare and COBRA coordination rules can create significant coverage gaps if you don't enroll at the right time.
In particular, if you're entitled to Medicare but fail to enroll, COBRA generally isn't a safety net that simply fills the gap.
The takeaway: Don't assume COBRA buys you extra time to make a Medicare enrollment decision. Check how the two coverages coordinate before making a choice.
4. Continuing HSA Contributions After Medicare Begins
If you're contributing to a Health Savings Account (HSA), Medicare enrollment deserves special attention.
Once you're enrolled in Medicare, you generally can no longer contribute to an HSA.
There's another wrinkle that catches people off guard: if you begin receiving Social Security after age 65, your Medicare Part A coverage can be retroactive in certain circumstances- potentially up to six months.
That can create an HSA contribution problem if you've continued making contributions during a period for which you're retroactively enrolled in Medicare.
The takeaway: If you're approaching Medicare while contributing to an HSA, coordinate the timing of your Medicare and Social Security decisions with your tax professional or financial planner.
5. Forgetting That IRMAA Can Raise Your Medicare Premiums
A large income event today can affect your Medicare premiums later.
The Income-Related Monthly Adjustment Amount (IRMAA) can increase Medicare Part B and Part D premiums for higher-income beneficiaries. Medicare generally uses your tax return from two years earlier to determine whether IRMAA applies.
That means a large capital gain, business transaction, Roth conversion, or other income event could potentially affect your Medicare premiums two years down the road.
But there's an important exception.
If your income has fallen because of certain qualifying life-changing events- such as retirement or a work stoppage- you may be able to ask Social Security to reconsider your IRMAA determination.
The takeaway: Don't assume an IRMAA surcharge is permanent or unavoidable. If your circumstances have changed, investigate whether you qualify for a reconsideration.
6. Assuming Your Employer Health Plan Is Automatically the Better Choice
If you're still working at 65, your employer's health plan may be a great option.
But "my employer plan has always worked for me" isn't necessarily enough analysis.
Compare the two options based on:
- Monthly premiums
- Deductibles
- Copays and coinsurance
- Prescription drug coverage
- Provider networks
- Out-of-pocket exposure
- Coverage for your spouse or dependents
- Your expected healthcare needs
Depending on your circumstances, staying on the employer plan could make sense. In other situations, Medicare could be more attractive.
The takeaway: Compare the actual numbers and coverage- not just the monthly premium.
7. Forgetting About Your Spouse's Health Insurance
Here's a Medicare transition issue that's easy to overlook:
What happens to your spouse when you leave the employer plan?
If your spouse is covered under your employer-sponsored health insurance, your decision to retire and move to Medicare could affect their coverage.
Depending on their age, employment status, and circumstances, they may need to consider:
- Their own employer-sponsored coverage
- Medicare
- COBRA
- An Affordable Care Act marketplace plan
COBRA can allow someone to continue the same employer coverage for a limited period, but the cost can be significantly higher because you're generally responsible for the full premium plus an administrative fee.
Marketplace coverage may offer subsidies for eligible households, but provider networks and covered benefits can differ from your existing plan.
The takeaway: Don't plan your Medicare transition in isolation. Make sure your spouse's health insurance is part of the conversation.
8. Looking Only at the Premium for Medicare Advantage
A low monthly premium can make Medicare Advantage look very attractive.
But the premium is only one piece of the puzzle.
When comparing Medicare Advantage with Original Medicare plus Medigap, look at the entire potential cost of care—including deductibles, copayments, coinsurance, the plan's annual out-of-pocket maximum, and provider-network rules.
Network restrictions can also matter, particularly if you regularly see specialists or want flexibility in choosing healthcare providers.
Original Medicare with Medigap generally provides a different cost and provider-access structure than Medicare Advantage.
Neither approach is automatically right for everyone.
The takeaway: Don't choose a Medicare plan based on premium alone. Look at how the plan works when you actually need medical care.
9. Choosing a Prescription Drug Plan Based Only on Its Premium
Medicare Part D plans aren't one-size-fits-all.
The plan with the lowest monthly premium isn't necessarily the plan that will cost you the least over the year.
Your prescription drug costs can depend on:
- Which medications you take
- Whether those medications are on the plan's formulary
- Which tier each medication falls into
- Which pharmacies are in the plan's network
- Whether a preferred pharmacy is available
- Your plan's deductibles and cost-sharing requirements
The best plan for your neighbor may be a poor choice for you.
The takeaway: Compare Medicare drug plans using your actual medications—not someone else's list and not just the monthly premium.
10. Assuming Medicare Pays for Long-Term Care
This is one of the most expensive Medicare misconceptions.
Medicare does not generally pay for long-term custodial care.
Medicare can cover certain skilled nursing and healthcare services under specific circumstances, but that is very different from paying for ongoing custodial long-term care.
If long-term care is a concern for your family, it deserves its own planning conversation.
Think about where care might be provided, who might provide it, what it could cost, and what resources would be available to pay for it.
The takeaway: Don't build a retirement or estate plan around the assumption that Medicare will pay for long-term care.
The Bottom Line: Medicare Rewards Planning Ahead
Medicare tends to reward people who plan ahead- and can be unforgiving when people simply assume everything will work itself out.
If you're within a couple of years of 65, or you're helping a parent navigate Medicare, start building your timeline before the deadlines arrive.
Think through your:
- Medicare enrollment dates
- Employer health coverage
- HSA contributions
- Social Security timing
- Medigap options
- Prescription drug coverage
- IRMAA exposure
- Spouse's health insurance
- Long-term care plan
I'd rather spend an hour with you now mapping out the transition than help you untangle a Medicare problem later. Contact Rich today to connect.
This article is for educational purposes only and does not constitute individualized financial, tax, insurance, Medicare, or legal advice. Medicare rules are complex and subject to change. Consult Medicare, Social Security, a qualified insurance professional, tax professional, or financial professional regarding your specific circumstances before making decisions about Medicare enrollment, Medigap, Medicare Advantage, HSA contributions, IRMAA appeals, or related matters.
Frequently Asked Questions About Medicare
Do I have to enroll in Medicare the month I turn 65?
Not necessarily. If you have qualifying health coverage through current active employment, you may be able to delay Medicare Part B without a late-enrollment penalty. If you don't have qualifying coverage, you generally need to enroll during your Initial Enrollment Period. Your specific employment and coverage situation matters, so verify your enrollment requirements before delaying Medicare.
Can I get a Medigap policy anytime I want?
You can generally apply for Medigap outside your initial open enrollment period, but you may not have the same federal protections. Your six-month Medigap Open Enrollment Period begins when you're 65 or older and enrolled in Medicare Part B. During that period, you generally have important protections against medical underwriting. Afterward, an insurer may be able to consider your health history, subject to applicable federal and state rules and guaranteed-issue situations.
Will Medicare cover a nursing home stay?
Medicare does not generally cover long-term custodial nursing-home care. It can cover certain skilled nursing facility services when specific requirements are met, but that is different from paying for long-term custodial care. If you're planning for possible long-term care expenses, Medicare should not be assumed to be the primary funding source.