Retirement is a time of transition and new beginnings. That\u2019s a nice way of saying it\u2019s when most people first tangle with the federal government on health care.<\/p>\n
Age 65 is generally when you become eligible for Medicare, the federal health insurance program. But the rules, options and ramifications of when and how you sign up for the program are complex.<\/p>\n
Following are a few pitfalls you might encounter if you fail to sign up correctly at the get-go. Read on to avoid big hassles and serious fees.<\/p>\n
Pitfall No. 1: You miss your initial enrollment period<\/p>\n
Generally, you become eligible for Medicare when you turn 65. But failing to enroll on time can trigger permanent financial penalties \u2014 we\u2019ll get to those shortly \u2014 or delay benefits.<\/p>\n
Medicare gives you a seven-month initial enrollment period, which includes the month you turn 65, the three months before and the three months after.<\/p>\n
If you miss that window, you typically must wait to apply during the annual general enrollment period that runs from Jan. 1 to March 31, and your coverage starts the first day of the month after you sign up. Plus, the official Medicare handbook<\/a> says:<\/p>\n \u201cYou may have to pay a higher Part A and\/or Part B premium for late enrollment.\u201d<\/p>\n If you are already collecting Social Security benefits when you turn 65, you\u2019ll get Medicare automatically, so you don\u2019t need to sign up.<\/p>\n If you are still working when you turn 65 and have medical insurance coverage through your employer, you may be able to keep your employer\u2019s medical plan. The Medicare program advises that such workers contact their employer to find out how their insurance coverage works with Medicare.<\/p>\n In any case, proceed carefully. Don\u2019t drop employer coverage before you understand the pros and cons.<\/p>\n Need help? Contact your State Health Insurance Assistance Program<\/a> (SHIP) for free one-on-one Medicare counseling.<\/p>\n Pitfall No. 2: You have to pay more for signing up late<\/p>\n If you miss your initial enrollment period and don\u2019t have other qualifying medical coverage, like employer insurance, you\u2019re looking at financial penalties.<\/p>\n How much? It depends on how long you waited and which part of Medicare we\u2019re talking about:<\/p>\n Part A (which primarily covers inpatient hospital stays):<\/p>\n Most people get Medicare Part A<\/a> without having to pay premiums. But if you aren\u2019t eligible for premium-free Part A and fail to buy this coverage when you first become eligible, your premiums could be 10% higher<\/a> for twice the number of years you didn\u2019t sign up. Signing up two years late, for example, means higher premiums for four years.<\/p>\n Part B (which covers doctors\u2019 services and other outpatient care):<\/p>\n Failing to sign up for Medicare Part B when you first become eligible generally triggers a permanent penalty. Your premiums could go up by 10% for each 12-month period you waited to enroll \u2014 with that premium hike applying for as long as you have Part B.<\/p>\n Part D (optional coverage for prescription drug costs):<\/p>\n You may want Medicare Part D if you choose Original Medicare rather than the other type of Medicare, a Medicare Advantage plan (more on that up next). But if your initial enrollment period passes and then you go without Part D, a Medicare Advantage plan or other prescription drug coverage for any period of 63 continuous days or more, you may owe a Part D late enrollment penalty<\/a>. The amount of that penalty depends on how long you went without drug coverage, but you most likely will have to pay it for as long as you have a Part D plan.<\/p>\n Pitfall No. 3: You confuse Original Medicare with Medicare Advantage<\/p>\n There are two main types of Medicare: Original Medicare and Medicare Advantage.<\/p>\n Original Medicare<\/a>: This is traditional Medicare, offered directly by the federal government. It generally includes Parts A and B. There are also two types of optional add-on coverage for people with Original Medicare:<\/p>\n With Original Medicare, you don\u2019t need to choose a primary care doctor and generally don\u2019t need a referral to see a specialist. One downside is that there are no yearly limits on what you\u2019ll pay out of pocket.<\/p>\n Medicare Advantage<\/a>: This is all-in-one coverage offered by private health insurance companies that are approved by the federal government program. Medicare Advantage plans include Parts A and B and usually drug coverage.<\/p>\n Medicare Advantage plans must follow rules set by the federal Medicare program and must cover all the same services as Original Medicare. But those rules can change annually, and Medicare Advantage plans are allowed to cover additional services.<\/p>\n As a result, coverage and costs can vary widely from one Medicare Advantage plan to the next.<\/p>\n You can switch from Original Medicare to a Medicare Advantage plan, or vice versa, but only during certain enrollment periods<\/a>.<\/p>\n Also, there are possible downsides to switching \u2014 such as losing access to a preferred doctor or becoming ineligible for a Medigap policy you had with Original Medicare (as we detail next). So tread carefully and do your research before switching.<\/p>\n Pitfall No. 4: You lose your Medigap policy<\/p>\n There\u2019s an important risk to think about if you use Original Medicare with a Medigap supplemental policy.<\/p>\n If you switch to a Medicare Advantage plan from Original Medicare,\u00a0you\u2019ll have to drop your supplemental insurance policy. But there are risks to doing that.<\/p>\n