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I just had my co-author, Phil Moeller, on my podcast, Economics Matters, to discuss his brand new, must-read, revised edition of Get What’s Yours for Medicare — Maximize Your Coverage and Minimize Your Costs.
Phil is one of our nation’s most distinquished personal finance journalist. Phil and I, together with PBS NewsHour’s consummate economics correspondent, Paul Solman, wrote the runaway and still fully up-to-date best seller, Get What’s Yours — the Secrets to Maxing Out Your Social Security.
My other recent book, co-authored with equally marvelous personal finance journalist, Terry Savage, is called Social Security Horror Stories — Protect Yourself from the System & Avoid Clawbacks.
The common thread in all three books is the critical need to protect ourselves from the two government institutions that supposedly provide the foundation for our old-age security — Social Security and Medicare. Truth be told, both agencies are repleat with horrific traps and gotchas that can undermine, if not destroy our retirements.
This being Medicare open enrollment season, I asked Phil to convey his list of Medicare’s ten worst traps and gotchas.
1. CONFUSION IN CHOOSING MEDICARE PLANS
Sheena Iyengar is a leading expert in how people make choices. One of her most famous experiments involved a food store where shoppers were asked to taste a new line of 30 jams on a display table and were told they would get a dollar off on any of the new jams they later chose to buy. A few days later, the store repeated the promotion, but instead of displaying 30 flavors of jam, only 6 were on the table. People tended only to look at jams when there were 30 on display but the level of actual jam sales was 10 times higher at the table where only 6 were offered. Too much choice, it seems, is a bad thing. People’s minds are overloaded, and they often respond by shutting down and doing nothing. So it is with Medicare or, more precisely, the various Medicare insurance products offered by private insurers. Thousands of private Medicare Advantage plans are offered in different markets across the country, with a typical consumer often having a choice of 20 or even 30 plans, especially in urban markets. Most of these plans included coverage for Part D. The choice among Part D drug plans is even more extensive, producing even more consumer confusion.
This confusion is the surely dominant reason why so many people do not venture beyond Original Medicare. It also is the reason why so many are so reluctant to switch Medicare coverage in later years. You need to learn enough to buy the right policies and then, of equal if not greater importance, how to best use them to get the best medical care you can at the lowest price.
Do not expect Medicare to help you find the best plan or your insurers to help you best use the plan you choose! It’s easy to end up with a plan with 3rd-rate care that doesn’t cover the critical, but exorbitantly expensive medications you need.
2. FEW PEOPLE KNOW ABOUT MEDICARE SUPPORT PROGRAMS
Medicare’ offers four low-income assistance programs, which defray premiums and insurance expenses. It also manages the Extra Help program to help pay for prescription drugs. The Inflation Reduction Act expanded access to Extra Help by allowing higher-income people to qualify. All programs have income and household resource eligibility limits. They are explained on the linked pages.
The State Health Insurance Assistance Program provides free help from trained counselors to help explain how to enroll and use these programs.
3. DON’T BE FOOLED IF DOCTORS ASK FOR MEDICARE PRE-PAYMENTS!
Medicare does not require people to pay in advance for their care!
Doctors who accept assignment from Medicare should not be billing patients in advance for the entire sequence of their services. Assignment means the health care provider agrees to accept Medicare-approved charges as payment in full for their services.
Most doctors who accept Medicare also accept assignment, but it’s possible for a doctor to accept Medicare patients without agreeing to assignment. Such “non-participating” doctors can bill you more than the Medicare-approved amount for their services, although Medicare rules do limit such overcharges. These doctors can also bill you the entire charge for their service.
Medicare rules permit doctors up to a year to file your Medicare claims; most do so sooner. If your claim has not been processed by Medicare, you can either ask your doctor to file it again, or if the year deadline is approaching, you can file the claim yourself using Form CMS-1490S.
These claim rules apply to Original Medicare. Private Medicare Advantage plans usually restrict coverage to care providers in their provider network, who provide services at costs approved by the plan.
4. ENROLLING IN PREMIUM-FREE MEDICARE PART A WHEN NOT REQUIRED WILL ELIMINATE YOUR ACCESS TO HSAs — THE BEST TAX BREAK GOING
Employed people with active health savings accounts who have filed for Part A may no longer make pre-tax contributions to their HSA; neither may their employer or anyone else. In this situation, it can make sense to reject Part A until you are no longer eligible for HSA contributions. Being able to make HSA contributions is highly value. Doing so lets you pay zero tax on the amount contributed into your HSA investment account and also pay nothing on funds withdrawn from the account to pay for your healthcare. In short, it represents a way to fully shield your labor income from taxation — now and in the future.
5. BEWARE OF COBRA BITES!
When people leave or lose their jobs, many decide to continue their health coverage under provisions of a law passed in the 1980s. It is called the Consolidated Omnibus Budget Reconciliation Act (COBRA). It can permit people to continue their group health plan for up to 18 to 36 months. Normally, doing so requires the former employee to pay all of their health premiums, although some employers provide part of these payments.
The “catch” with COBRA coverage is that it is not considered participation in an active employer group health insurance plan under Medicare rules. When a person on COBRA turns 65, it no longer has to be their primary payer of health insurance claims, but it may provide secondary coverage to help pay valid claims that Medicare does not fully pay.
Failure to anticipate this limitation can leave you with NO primary health insurance!
Rick – California: My wife is seven years older than me and of Medicare age. I was told that she didn’t need to sign up for Medicare until I retire. When I lost my coverage at the end of 2017, I was advised to sign up for COBRA to provide seamless coverage. Then they said we were required to sign my wife up with Medicare, too. We then found out she hadn’t worked enough hours to qualify for Part A. With COBRA, I was under the impression we were covered for everything!
In 2018 she was diagnosed with lung cancer and we went through all the tests and referrals up until she was admitted to the hospital for lung surgery. Never once throughout this ordeal has anyone even HINTED at the possibility we weren’t covered for hospitalization! How could they even admit her without mentioning this fact! Now they are billing us $43,000! I have been paying $1,400 per month for COBRA and also the Medicare B premium for the last 15 months.
6. BEWARE MEDICARE’S LATE-ENROLLMENT PENALTIES
The clock starts ticking on your Medicare enrollment process when you turn 65 and either have no employer group health coverage or are no longer eligible for insurance under the Affordable Care Act. You need to enroll in Parts B and D of Medicare or face late-enrollment penalties.
They will equal 10 percent of your monthly Part B premiums – about $18 for each year you are late, based on current Part B premiums – and 1 percent of the national average Part D premium (now about $35 a month) for each month you are late. These penalties last for the rest of your life!
Without the penalties, healthy people wouldn’t get Medicare when they turned 65 but would simply wait until they needed care to enroll. And if only sick people had Medicare, the rates for them would be much, much higher.
7. DON’T DISABLE YOUR MEDICARE!
Here’s an email from Steve in Massachusetts that illustrates the issues and decisions that people with disabilities may face if they return to work.
“I am 44 years old, blind, and have had Medicare for about 10 years because of my disability. I did go back to work full-time a few years ago but have continued to pay for Medicare (Parts A and B). It is my only insurance right now, but the out-of-pocket costs are getting expensive.
As a result, I have recently gotten health insurance from my employer and I had planned to stop Medicare. I saw my doctor last week and told him the situation. He recommended that I not stop my Medicare because he said that it could be very hard to get it back, given that I am more than 20 years away from retiring.”
8. MEDICARE’S HIGH-INCOME PREMIUM SURCHARGES
Louise – South Carolina: My Medicare premium payment went up this year due to the fact that, calculated into my income taxes, was a one-time lump sum retirement payment. Our next tax return will report a much smaller income. Can I get our Medicare premiums adjusted back to what they were before?
Phil Moeller: Medicare’s Income Related Monthly Adjustment Amount (IRMAA) usually is based on two-year-old tax returns for people who file taxes in April (it can be three years for those who file later). Here’s the appeal form to use to seek IRMAA relief because of changed economic circumstances. They include loss of employment income and other life-changing events.
9. DO NOT RUN AFOUL OF MEDIGAP PURCHASING RULES!
Pam – Mississippi: I am a healthy 65-year-old. I take no drugs, have never been in the hospital and never had surgery. But I have signed up for basic Medicare A and B plus Part D to cover drugs, simply to avoid paying any penalties at a later date. Should I add a Medigap policy during this enrollment period? Are there also penalties involved if you do not sign up for Medigap insurance right away but potentially add it in five years or so if you have health issues? What kind of plan would be best for me?
Phil Moeller: Medigap insurers must provide you policies and their lowest rates during the six-month period after you enroll in Part B. After that, insurers in most states can charge you higher rates for preexisting conditions and even decline to sell you a policy. This doesn’t always happen, but it can. The Kaiser Family Foundation has done a state-by-state review of these rules.
10. DON’T MISTAKENLY ENROLL IN MEDICARE!
Richard – Indiana: I’m a low-income veteran and receive free care at a VA hospital, including prescription drugs. I was put on Medicare Part B without my knowledge and they are deducting those premiums from my Social Security. I did not ask for it and do not want it. They (Social Security) told me they sent me a letter to tell me how to not be auto-enrolled. I was homeless at the time, so of course did not receive the letter! They say it was my fault for not responding to the letter, and so they enrolled me. Can they put me into Medicare part B without my permission and then take money from my Social Security just because I didn’t respond to a letter I never received?
Phil Moeller: Unwanted Medicare enrollments like yours happen all the time. It’s a particularly despicable way to treat a veteran. It’s also a national shame that you have been homeless after serving your country. You should be able to drop Part B and have your prior payments returned to you — whether or not they sent you a letter. U.S. Senators and Representatives have a lot of clout with Social Security. Call these legislators for help if you continue to get stone walled.
Related: Medicare Open Enrollment: Phil Moeller on "Get What's Yours"