Key Takeaways

• Overlooking critical Medicare deadlines can lead to costly late penalties and gaps in coverage.

• Failing to understand the differences between various Medicare parts and cost-sharing structures may result in unexpected out-of-pocket expenses.

The Costly Mistake of Missing Your Initial Enrollment Period

Medicare enrollment isn’t automatic for most people, and missing the Initial Enrollment Period (IEP) can lead to expensive penalties. The IEP lasts seven months—starting three months before your 65th birthday, includes your birth month, and continues for three months after. If you fail to sign up for Medicare Part B during this window and don’t have creditable coverage, you’ll face a 10% penalty for each 12-month period you were eligible but didn’t enroll. This penalty is permanent and added to your monthly premium.

Similarly, Medicare Part D (prescription drug coverage) also has a late enrollment penalty. If you go 63 consecutive days without creditable drug coverage after your IEP ends, you’ll pay a penalty that increases the longer you wait. This penalty is calculated as 1% of the national base beneficiary premium for each month you were uncovered.

Assuming Medicare Covers Everything

A major pitfall is believing that Medicare provides comprehensive coverage with no out-of-pocket expenses. While Medicare does cover a significant portion of medical costs, it doesn’t cover everything. Here’s what Medicare doesn’t cover:

• Long-term care (such as custodial care in a nursing home)

• Routine dental, vision, and hearing services

• Most prescription drugs (unless you have a Medicare Part D plan)

• Overseas medical care (Medicare generally doesn’t cover treatment outside the U.S.)

Without additional coverage, you may face high out-of-pocket costs for these services. If you need long-term care, for example, you could be paying out of pocket unless you have separate coverage.

Misunderstanding the Different Parts of Medicare

Medicare is divided into different parts, each covering specific healthcare services. If you don’t understand how these parts work, you might enroll in the wrong plan or overlook coverage you actually need.

• Medicare Part A: Covers hospital stays, skilled nursing facility care, hospice, and limited home health care. Most people don’t pay a premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years.

• Medicare Part B: Covers doctor visits, outpatient care, preventive services, and medical equipment. You pay a monthly premium for Part B.

• Medicare Part C (Medicare Advantage): A private plan option that includes Part A and Part B benefits, and often prescription drug coverage.

• Medicare Part D: Covers prescription drugs and requires a separate premium.

If you assume Medicare Part A and B cover everything, you may be surprised when you need prescription drugs or dental work and realize you don’t have coverage.

Ignoring the Out-of-Pocket Costs

Even with Medicare, you will still have out-of-pocket expenses. These include:

• Deductibles: The amount you pay before Medicare starts covering costs.

• Copayments: Fixed amounts for certain services.

• Coinsurance: A percentage of the cost of a covered service.

For 2025, the Medicare Part B premium is $185 per month, with a $257 annual deductible. After meeting the deductible, you’ll pay 20% of the Medicare-approved amount for most services.

Additionally, the Medicare Part A inpatient hospital deductible is $1,676 per benefit period. If your hospital stay extends beyond 60 days, you’ll also owe daily coinsurance charges.

Understanding these costs upfront helps you avoid financial surprises when medical care is needed.

Not Reviewing Coverage Options Annually

Medicare is not a set-it-and-forget-it program. Plan costs, covered services, and provider networks change every year. If you don’t review your options during Medicare’s Annual Enrollment Period (October 15 – December 7), you might be paying for coverage that no longer fits your needs or missing out on cost-saving opportunities.

Each year, Medicare enrollees receive an Annual Notice of Change (ANOC) from their plan provider, detailing any updates to premiums, deductibles, and covered services. Failing to review this notice could mean sticking with a plan that has increased costs or reduced benefits.

Overlooking How Medicare Works with Employer Coverage

If you’re still working at 65 or older, Medicare interacts differently with employer-sponsored insurance based on the size of your company:

• If your employer has fewer than 20 employees: Medicare is your primary coverage, meaning it pays first. You should enroll in Part A and Part B to avoid penalties and gaps in coverage.

• If your employer has 20 or more employees: Your employer’s plan is primary, and Medicare is secondary. You may delay Part B without penalty if you have creditable coverage.

Many people mistakenly delay enrollment, assuming their employer coverage is enough, only to find out later that it wasn’t creditable coverage, leading to penalties. Before making a decision, verify with your employer whether your plan meets Medicare’s standards.

Making Smart Decisions Now Can Prevent Costly Mistakes Later

Enrolling in Medicare isn’t just about signing up—it’s about making informed choices to ensure you have the right coverage at the right time. By avoiding these common pitfalls, you can minimize unexpected costs and maximize your benefits throughout retirement. If you’re unsure about your options, speaking with a licensed agent listed on this website can help you make the best decision for your healthcare needs.