Taking your time to ensure all the “boxes are checked” is very important when it comes to Medicare. Therefore, one of the most important steps is taking time with an advisor to answer a series of questions. You might think your situation is typical (and it very well could be), but an experienced advisor will ask you things you might not have considered.
- Who lives in your household?
- Do you have plans to move within the next five years?
- Do you anticipate a major change in income within the next few years?
- Are there any surgeries or procedures you have planned in the future?
- Do you exercise or take any supplements?
- Do you have plans to travel overseas?
- What type of drug coverage do you currently have?
These are just a sample of questions that an agent will ask to find out important information that will help you avoid penalties and pitfalls. For example, if you plan on moving out of state in the few years, that could make a difference in your plan selection.
Let’s look at the top two Medicare penalties and the top two Medicare pitfalls.
#1: The Part B and Part D Late Enrollment Penalties
One of the most common penalties is the late enrollment penalty (LEP) for Part B. This usually isn’t an issue for folks turning 65, but it is a major issue for those who enroll past the age of 65 due to employer-sponsored coverage. That’s because many people assume they can stay on COBRA. However, Medicare does not consider COBRA as “creditable coverage.”
Additionally, some people delay enrollment in Part D (prescription drug plan) because they are covered under their employer’s plan. However, some drug plans are not considered creditable, and Medicare will assess a penalty based on the number of months you didn’t have the proper coverage
Keep in mind, both the Part B and Part D penalties are permanent, so the extra premium can really add up.
#2 IRMAA – Not Knowing What it is and How to Appeal It
IRMAA stands for Income Related Monthly Adjustment Amount. Your Part B premium is based on your household income from two years prior. It’s easy to be blindsided by this “tax.” It can affect your decision as to whether or not to continue with an employer-sponsored plan (if available) or to enroll in Medicare at the first opportunity.
Many people have successfully appealed their Income Related Monthly Adjustment Amount for Part B and Part D. Every situation is different, but most people just assume they have to pay the extra premium and don’t consider an appeal. This can be a costly mistake.
# 3: Locked Into Your Plan
The Annual Election Period from October 15 to December 7 is the time you can change your Medicare Advantage plan – or change from a Medigap plan to an Advantage plan – on a guaranteed-issue basis. You can also change your Part D (drug plan) during this time.
Most people who sign up for a Medigap policy think they can change plans every year (if desired) during the Annual Election Period. The reality is you can change your Medigap plan ANY time of year, but you will need to be approved based on your health. This even applies if you change from one plan to another within the same company.
Many people falsely assume that they can change to any plan without medical underwriting. You can do this if you’re under age 65 and enrolling in a Marketplace plan, but not with Medicare. So, it makes choosing the right company and plan at the outset very important.
#4: Not Re-Evaluating Plans on an Annual Basis
Many people think that once they select their plans during their initial enrollment period that they can just let put things on auto-pilot. However, it is important to reevaluate plans on a regular basis.
If you select a Medicare Advantage plan, then it is critical to look at your options during the annual election period in the fall. If you have a Medicare Supplement plan, then you should check into other options every two to three years.
If you have a Medicare Supplement plan, that means you should also have a Part D (drug) plan. Your agent should volunteer to prepare you a Part D comparison report so you know if there is a better, more cost-effective plan based on your medications.
Typically, the people who don’t reevaluate their plans originally purchased their Medicare plans through a call agency or a lazy agent. Medicare agents should reach out to their clients frequently to alert them of the importance of these annual “check-ups”. Not doing so could cost you a lot of money in unnecessary out-of-pocket costs and premiums.
The more an agent knows about your situation, the more you can avoid penalties and pitfalls. That’s why I use a questionnaire that is designed to help advise you properly and strategically.
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