Understanding Medicare and its operations can be a great way to avoid costly mistakes. If you don’t know when or how to sign up correctly, you run the risk of missing important enrollment periods, choosing the wrong plans for your needs, and more. Here is why it pays to learn about Medicare.
Technically, Medicare is optional. However, you will likely be charged penalties if you don’t enroll during a qualifying enrollment period. Medicare penalties are life-long and grow over time the longer you go without Medicare coverage.
For example, if you don’t enroll in Part B when you’re first eligible, and you don’t have other creditable coverage, you will begin to accrue a penalty. For every 12 months you go without Part B coverage when you could have, your Part B premium will increase by 10%. There are similar enrollment penalties for Part A and Part D as well.
To avoid penalties, you need to understand when you should enroll and how. The Medicare application can be found on the Social Security website.
Choosing The Right Plan
It’s also important to choose the right plan for your needs. If you enroll in plans without understanding them, you may regret it later. In general, you have two plan options when enrolling in Medicare: a Medigap plan or an Advantage plan. Both can be good options for people, but one may be better for you.
Medigap plans tend to have higher premiums but lower out-of-pocket costs. They also have no network restrictions, so you can see any health provider in the United States who accepts Medicare. These plans can provide comprehensive coverage if you run into health issues. However, these plans don’t include drug prescription coverage, so you will want to enroll in a separate Part D plan.
On the other hand, Advantage plans tend to have low or no premiums with more out-of-pocket costs. An Advantage plan could be a good option, but the out-of-pocket costs can add up quickly if you run into any major health issues. Local networks also restrict these plans, so they may not be a good fit if you travel a lot or prefer to have the freedom to choose your providers.
If you decide to enroll in an Advantage plan and later want to switch to a Medigap plan, you may need to answer health questions and pass underwriting. If you can’t pass underwriting, then you may have to stay with Advantage plans. So, you must choose your plan carefully when you first sign up for Medicare.
In 2022, the standard Part B premium is $170.10. However, you may pay more for your Part B premium if your income is above a certain level. This process is known as your Income-Related Adjustment Amount (IRMAA).
Each year Social Security will refer to your modified adjusted gross income (MAGI) from two years before to determine if you qualify for IRMAA or not. For example, they will refer to your 2020 tax return to determine if you pay a higher Part B premium in 2022. If you do qualify for IRMAA, Social Security will notify you.
However, you can apply to appeal your IRMAA determination. If you can do so successfully, Social Security may reconsider and lower your Part B premium, saving you money. If you don’t know about this process, you may be paying more than you should, so it’s important to know about this Medicare process.
The bottom line is you want to learn about Medicare before your time comes to sign up. Doing so will keep you from running into unexpected costs. You’ll also have a greater understanding of which plans are better for your lifestyle and budget.