Medicare is a complex program, and understanding it can be challenging. As a licensed health insurance agent who specializes in Medicare Insurance plans, I’ve encountered many soon-to-be Medicare-eligible individuals who are misinformed and confused about how Medicare works. That is why I want to help educate my clients in advance of making these decisions. I have compiled a list for you to know so you can make a better financial plan for your retirement healthcare needs.

1. Medicare is not free. There is a widespread misconception that Medicare is completely free. While Part A has $0 premium for most people there are premiums associated with Part B and prescription drug plans. The cost for Part B is determined by income calculated from their AGI two years before applying for Medicare. This is a big surprise for most people, especially those who sold a business, some stock, or a home, which resulted in a one-time large infusion of income and are now faced with a larger premium. They can file an appeal, but it is a process that perhaps could have been avoided.
2. Prescription drug costs may be different. In some instances, the cost of medications can be much higher on Medicare than on an employer plan. In addition, costs can vary by Insurance carrier, which is another reason to have a licensed agent to assist them with determining those costs.
3. Original Medicare does not cover everything. Some people believe Medicare covers all medical expenses, which is not the case. For instance, it does not cover certain types of care like long-term care. There are also cost-sharing expenses like deductibles and co-pays with no out-of-pocket maximum. Original Medicare also does not include prescription drug coverage.
4. Beware of penalties. There are rules associated with the time frames for enrolling in Part B and a prescription drug plan and this is one of the biggest mistakes I see, particularly with drug plans. Some don’t enroll because they are healthy and not taking any medications and then face penalties when they try to enroll later. These penalties are forever and can increase over time.
5. HSA contributions and Medicare. Once enrolled in any part of Medicare, they are no longer eligible to make HSA contributions and to avoid tax penalties, they must stop contributing at least 6 months before enrolling in Medicare. This includes Medicare Part A or B. Many people turning 65 who continue to work and remain on an employer plan, may consider enrolling in Part A since it is premium-free. (If they are receiving Social Security, Part A is mandatory.)However, they must be aware that in doing so, they can no longer contribute to their HSA, but they can withdraw funds tax-free for qualified medical expenses. They can even use their HSA to pay for some Medicare expenses including Medicare Part B, Part D and Medicare Advantage plan premiums, deductibles, copays, and coinsurance.
6. Part B can be delayed. If they are turning 65 and still working and are on an employer plan with 20 or more employees, this is considered credible coverage and they can delay enrollment in Part B. Note that if they are retiring and coming off an employer plan and elect to enroll in COBRA, this not considered credible coverage and can lead to penalties for Part B.
7. Selecting a Primary Care Physician. Due to the shortage of doctors in Santa Cruz County, it can be a challenge to find a doctor who will accept new Medicare patients. That’s why I always recommend my clients get established with a doctor before they enroll in Medicare. If they have not been to a doctor in more than 3 years, chances are the doctor has put their file in storage and no longer considers them an active patient.

You can help avoid these mistakes by incorporating healthcare planning into your conversations with your financial advisor and contact me for more information.

“We do not offer every plan available in your area. Currently, we represent 7 organizations that offer 65 products in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on your options.”