Alongside Social Security, Medicare is often hailed as a lifeline for retirees. Most employees pay into Medicare throughout their working years and, in return, receive government-subsidized health insurance in retirement. Where some people struggle, however, is understanding what’s covered under Medicare (and, more importantly, what’s not covered) and the other nuances of signing up for or changing plans.
At TFS Advisors, we know how complex your Medicare options can be and the role they play in your overall financial picture. That’s why we help our clients navigate Medicare plans and options as part of our comprehensive financial planning services.
Below, we explore three of the most common Medicare pitfalls we’ve seen people experience and what you can do to avoid them.
The Basics of Medicare
Medicare is a public health insurance program for those 65 and older—though some younger individuals with qualifying disabilities may be eligible sooner. Medicare coverage is broken into parts (Parts A, B, C, and D), and you must decide which coverage type fits your needs best.
Similar to health insurance you’ve had from employers or the marketplace, you’ll be allowed to make changes once a year during the open enrollment period. Typically, this occurs between mid-October and early December. Your selections during this time will go into effect for the following year. For example, if you change your Medicare policies on November 1, 2025, you won’t see the new changes occur until January 1, 2026.
What tends to confuse people most about Medicare is that they have two primary options for coverage—Original Medicare (Parts A, B, and D) or Medicare Advantage (Part C). Let’s take a look at both:
Original Medicare
Original Medicare includes Parts A and B, though participants have the option to add on Part D if they choose:1
- Part A (Hospital Insurance): Participants can receive inpatient hospital care, hospice care, home health care, and skilled nursing facility care.
- Part B (Medical Insurance): This covers your day-to-day medical costs, such as doctor appointments, preventative screenings and vaccines, medical equipment (wheelchairs, hospital beds, etc.), outpatient care, and home health care.
- Part D (Drug coverage): Part D is optional but helps cover the cost of a participant’s prescription drugs.
If you’re on an Original Medical plan, you can visit any healthcare provider who accepts Medicare anywhere in the country, and you don’t need a referral to see a specialist. In addition, you can purchase Medigap insurance policies, which offer supplemental coverage to help pay for out-of-pocket costs.
You’ll be responsible for paying a monthly premium for Medicare Part B and Part D (if you opt for the drug plan). Once you meet your annual deductible, you’ll usually be required to pay a 20% coinsurance on additional qualifying costs. There is no annual out-of-pocket limit for Medicare.
Medicare Advantage (Part C)
Medicare Advantage plans are offered by private insurers but approved by Medicare. The primary benefit of obtaining a Medicare Advantage plan is that all of your coverage is “bundled” together (as opposed to having separate parts and policies).
If you opt for a Medicare Advantage plan, you cannot add a supplemental policy (as you can with Original Medicare). In addition, you may be limited to seeing healthcare providers who are in-network with your plan, and a referral may be required for specialists.
Medicare Advantage plans may cover more than Original Medicare, depending on which plan you select. Premiums and out-of-pocket costs will vary as well. Remember that you will have to pay both the Medicare Part B premium and the Medicare Advantage plan premium—though some plans set their premiums to $0 (so you aren’t paying double premiums).
Of course, Medicare Advantage plans aren’t a great fit for everyone, so be sure to explore all of your options to find the best fit for you and your needs.
3 Common Pitfalls of Medicare
Let’s examine three of the most common pitfalls we’ve seen retirees face when switching to Medicare (or managing their existing Medicare plan).
Pitfall #1: Not Enrolling on Time
If you opt to begin receiving Social Security benefits at least four months before turning 65, you will automatically be enrolled in Medicare Part A and Part B once you turn 65. However, you can still decide about your enrollment, such as opting for Medicare Advantage or adding drug coverage and Medigap policies to your plan.
If you don’t plan on collecting Social Security benefits until after age 65, you will need to enroll in Medicare manually. You have a seven-month initial enrollment waiting period, which begins three months before the month you turn 65 and ends three months after. Suppose you neglect to enroll during this period. In that case, you will have to wait to sign up during the open or special enrollment period (if you qualify for one).
Please note: If you are still working and have a company-sponsored plan and don’t enroll in Social Security retirement payments, enrolling in Medicare at age 65 makes it your primary hospital insurance. However, it can also disqualify your ability to contribute to HSA accounts.
There are penalties for missing the initial enrollment period and the financial risk of not having health insurance (if another plan doesn’t cover you).
For example, you may be subject to an additional 10% per year penalty on your Part B premiums for late enrollment (and these will last for as long as you have a Part B plan). For example, if you waited two years to sign up for Medicare (and didn’t qualify for a special enrollment period), you could be subject to a 20% late enrollment penalty on top of your standard Part B monthly premiums.2
Pitfall #2: Choosing the Wrong Plan (and Failing to Update it)
You have quite a few options between Original Medicare, Medicare Advantage, and Medigap policies. Don’t rush this decision, as you can only make changes once a year. Instead, weighing the coverage versus costs to balance keeping premiums affordable and creating enough coverage to address your current or potential healthcare concerns is essential.
And this shouldn’t be a once-and-done process. You’ll want to review your options annually. Were you happy with your coverage over the last 12 months, or do you wish you could make a change? Are there better plans out there to fit your unique coverage needs? Your health and legislation changes can impact the effectiveness of your existing plan—consider both carefully during the next open enrollment period.
Pitfall #3: Not Understanding Coverage Limits
Perhaps the most common mistake we see people make with their Medicare is not understanding what is and isn’t covered.
Here are some medical expenses that are not covered under traditional Medicare plan options:
- Routine eye exams and vision care (though some eye-related costs, like cataract surgery, may be covered)
- Long-term care
- Dental
Talk to your financial advisor about covering those expenses that may not be covered (including those listed above). Additional policies, such as long-term care or dental insurance, may be required. You may also need to create an additional emergency fund for dedicated medical expenses.
Preparing to Enroll in Medicare? We Can Help
Medicare can be an excellent resource for those in retirement, especially as healthcare costs continue to rise. It’s essential, however, to do your homework and speak to a professional about incorporating a Medicare plan into your greater financial picture.
Interested in speaking to a financial advisor about retirement? Don’t hesitate to reach out to our team today.
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