3 Medicare Traps For The Unwary

When choosing between Original Medicare and Medicare Advantage (MA) Plans, you’ll want to be aware of three potential traps for uninformed retirees that can impact your health, longevity, and wallet. Understanding—and avoiding—these traps can help you make the best election for your health insurance coverage needs during Medicare’s upcoming Annual Enrollment Period that lasts from October 15 to December 7.

Trap #1: Don’t Just Compare The Total Monthly Premiums

When comparing Medicare Advantage Plans with Original Medicare (and the related premiums for prescription drug coverage and a Medicare Supplement Plan), don’t just add up and review your total monthly premiums. You also need to consider your potential out-of-pocket expenses such as deductibles and copayments.

Some MA Plans have high copayments and deductibles, particularly the so-called “zero-premium plans.” So, you’ll want to consider how much you’ll use the plan, now and in future years when you might be incurring more health care expenses. One good feature: All MA Plans are required to set a maximum amount that you’ll pay out of pocket each year ($9,350 in 2025).

If you elect Original Medicare, then you can buy a Medicare Supplement Plan that will cover for Medicare’s high deductibles and copayments. Unlike MA Plans, however, Original Medicare doesn’t have an out-of-pocket maximum, but some Medicare Supplement Plans (aka Medigap Plans) have an out-of-pocket maximum that limits the amount you pay during the year. Many don’t, however, so you’ll need to shop carefully.

Trap #2: Be Aware Of Pre-Existing Exclusions With Medicare Supplement Plans

In most cases, Medicare Supplement Plans can apply exclusions for pre-existing conditions after your Initial Enrollment Period. Here’s the potential trap: Perhaps when you first enroll, you decide to elect the Medicare Advantage Plan with the lowest premium. You might think you can always switch to Original Medicare later, when you start incurring health conditions that require specialists, and at that time, you don’t want to be limited to specialists in an MA network. While you can switch to Original Medicare in future enrollment periods, you might be excluded from buying a Medicare Supplement Plan due to potential exclusions for pre-existing conditions. If that’s the case, you might not be able to buy a Medicare Supplement Plan, and you’d be paying the full amount of Medicare’s high deductibles and copayments.

On the other hand, instead of switching to Original Medicare in the future, you can always switch from one MA plan to another during Medicare’s Annual Enrollment Period.

As a result of these considerations, you’ll want to make your initial Medicare selection while keeping in mind how you might use medical services throughout your life.

Trap #3: Don’t Get Complacent With Prescription Drug Plans

If you elect Original Medicare, then you’ll need to purchase a separate prescription drug plan under Part D of Medicare. Should you decide to elect coverage from an MA Plan, do your homework: While many MA Plans include prescription drug coverage in their package of benefits, a few don’t, so you’d also need to purchase a separate Prescription Drug Plan.

It turns out that the prescription drug plan that’s best for you is highly dependent on the specific drugs you take, particularly when it comes to whether you take generic drugs or brand name drugs. As a result, it pays to shop your plan at least every few years, since insurance plans often change their reimbursement schedule for different prescription drugs. It’s also important to revisit your coverage if you’ve added some prescription drugs during the year. If you find that another plan offers better coverage for your specific situation, you can switch from one prescription drug plan to another during Medicare’s Annual Enrollment Period.

Whatever you do, don’t get complacent and just stay on the same plan year after year without investigating your options. You can potentially save hundreds of dollars a year by shopping your Part D prescription drug plan.

One More Trap

There’s one more Medicare trap to consider that applies regardless of your election for Original Medicare or Medicare Advantage. Many people assume that Medicare pays for long-term care costs, but they’re wrong. Medicare might pay for a short period in a skilled nursing facility immediately following a hospital stay for a serious injury or illness. However, it does not pay for ongoing care for people who are frail. Paying for these expenses requires a separate strategy.

It pays to do your homework and be vigilant when it comes to your Medicare elections. If you need help with these decisions, find a Medicare consultant that you trust, one who doesn’t just try to sell you one of their insurance policies. It will be time and money well spent.