Enrolling in Medicare is a critical milestone, but making the wrong choices—or missing deadlines—can lead to costly penalties and coverage gaps. Many people unknowingly make errors when enrolling in Medicare, whether by misunderstanding late penalties, failing to enroll in a drug plan, or assuming COBRA provides credible coverage. Let’s explore the most common Medicare enrollment mistakes and how to avoid them.
Understanding the Late Enrollment Penalty
One of the biggest mistakes is delaying Medicare enrollment without understanding the potential penalties. Medicare has strict deadlines, and missing them can result in increased premiums for life.
- Part B Late Enrollment Penalty: If you don’t sign up for Medicare Part B when first eligible and don’t have credible work coverage, you may face a penalty that increases your premium for as long as you have Part B.
- Part D Late Enrollment Penalty: If you don’t enroll in a prescription drug plan (Part D) when first eligible and don’t have other credible drug coverage, you could face a penalty that grows with time.
Enrolling in a Drug Plan on Time
Many people assume they don’t need a Medicare prescription drug plan if they aren’t taking medications. However, failing to enroll in Medicare Part D when eligible can lead to a late enrollment penalty that adds up over the years.
Even if you don’t take prescriptions now, enrolling in a low-cost plan can help avoid penalties and ensure you have coverage when you need it.
Understanding Credible Work Coverage & COBRA
If you’re still working at age 65, you may assume your employer’s health plan is enough. However, not all employer-sponsored health plans qualify as credible coverage under Medicare rules.
- Verify with Your Employer: Check with your HR department to confirm whether your employer’s coverage is considered credible coverage for Medicare.
- COBRA Is Not Always Credible Coverage: If you leave your job and continue your employer’s coverage through COBRA, be aware that COBRA is not always considered credible coverage for Medicare. Enrolling late after COBRA ends could lead to penalties and coverage gaps.
The Hidden Risks of Enrolling in Medicare Part A Too Soon
Many people enroll in Medicare Part A because it’s free for most, assuming there’s no downside. However, if you participate in a Health Savings Account (HSA) through your employer, enrolling in Part A can create tax complications:
- If you have Part A, you cannot contribute to an HSA.
- If you enrolled in Part A and continued making HSA contributions, you may owe taxes on those contributions.
- Once enrolled in premium-free Part A, you cannot disenroll.
How to Avoid Enrollment Mistakes
- Check Your Employer Coverage: Confirm whether your work plan is credible for Medicare.
- Don’t Delay Enrollment Without a Plan: If you’re not working and don’t have credible coverage, enroll in Medicare on time.
- Consider Your Drug Plan Options: Even if you’re healthy now, enrolling in a Part D plan early can save you from penalties later.
- Plan Ahead for HSA Contributions: If you have an HSA, consult your employer or financial advisor before enrolling in Part A.
Final Thoughts
Medicare enrollment rules can be confusing, but making informed decisions is crucial to avoid costly mistakes. Before enrolling, consult with your employer, a Medicare expert, or consult reliable sources to get official information tailored to your situation.
Don’t let common Medicare mistakes cost you—take the time to understand your options and enroll correctly from the start.
