As you working years wind down, planning for your healthcare coverage and costs in your retirement years needs to be top priority. If you’re planning to take advantage of Medicare benefits when you turn 65, there are important things to consider. Medicare provides essential coverage, but your out-of-pocket costs can add up quickly. Fortunately, there are ways to lower Medicare expenses, get the healthcare coverage you need, and still stay within your budget.
Let’s look at four key strategies that can help you maximize Medicare cost savings as a retiree.
Enroll on Time to Avoid Late Penalties
One of the simplest ways to save money on Medicare is to enroll at the right time. If you are eligible for Medicare and do not have other acceptable coverage but fail to enroll for Medicare coverage within the appropriate enrollment periods, you could be facing a late enrollment premium penalty for the life of your Medicare coverage.
Here’s the Medicare enrollment periods you need to know and how late enrollment penalties are assessed based on the “part” of Medicare coverage:
Initial Enrollment Period (IEP)
This seven-month window begins three months before you turn 65 and extends three months after your birthday month. Enrolling during this period prevents penalties and ensures coverage begins on time.
Medicare Part A Late Enrollment Penalty
Most people don’t pay a premium for Medicare Part A, which covers hospital services, because they’ve worked and paid into Medicare taxes for at least 10 years. In that case, there is no late enrollment penalty.
However, if you don’t qualify for premium-free Part A and miss your Initial Enrollment Period, you may face a 10% penalty on your monthly premium. This penalty lasts for twice the number of years you delayed enrollment. For example, if you were eligible for Part A for a year but failed to enroll, you’ll pay the penalty on your premium for two years. The Part A late enrollment penalty is the only one not assessed for the life of your coverage.
Medicare Part B Late Enrollment Penalty
If you don’t sign up for Part B medical coverage when first eligible and don’t have other creditable coverage, your premium increases by 10% for each 12-month period you delay enrollment. For example, if you were eligible for Part B for two years but failed to enroll, you’ll pay a 20% late enrollment penalty for the life of your coverage.
Medicare Part D Late Enrollment Penalty
Missing the initial deadline for Part D prescription drug coverage can result in a permanent surcharge added to your Part D premium. If you don’t enroll when you are initially eligible and go without a Part D plan or other creditable prescription drug coverage for 63 days or more in a row, you’ll pay a monthly Part D late enrollment penalty assessed at 1% of the monthly “national base beneficiary premium” times the number of full months you didn’t have Part D or creditable coverage.
Special Enrollment Periods (SEP)
You can avoid these late enrollment penalties with a Special Enrollment Period (SEP). If you do not enroll during your IEP because you have other healthcare coverage past age 65 (e.g. you’re still covered by your employer’s healthcare plan or you’re on your spouse’s plan), you should be eligible to enroll for Medicare penalty-free during a Special Enrollment Period, which typically lasts eight months from the time that other coverage ends.
Understand Medicare Advantage Prior Authorization
If you go with a Medicare Advantage Plan over Original Medicare, be sure you understand any prior authorization policies. This can help you avoid unexpected out-of-pocket expenses and ensure timely coverage for necessary medical care.
Prior Authorization and Why it Matters
Medicare Advantage Plans (or Medicare Part C) are offered and managed by private insurance companies approved by Medicare. These private insurers often require their approval before covering certain services and treatments, including specialist visits, surgical procedures, and diagnostic imaging and tests. Failing to obtain prior authorization can lead to denied claims and unexpected medical bills.
How to Secure Prior Authorization
Be sure you know your plan’s prior authorization rules and stay informed of any changes to these rules or the services covered by always reviewing plan update communications and the Annual Notice of Change document, as Medicare Advantage Plans update their coverage policies yearly. If you’re unsure if a specific test or treatment requires prior authorization, contact your plan. Then, work with your healthcare provider to submit authorization requests in advance.
By proactively securing prior authorization approval, you can ensure coverage and timely scheduling of care, preventing claim denials and added healthcare costs.
Watch for Billing Errors to Avoid Overpaying
Medical billing errors should not happen, but, unfortunately, they are more common than you think. Mistakes such as duplicate charges, incorrect billing codes, and charges for services you never received can inflate medical expenses. As a Medicare recipient, you’ll want to stay vigilant to avoid overpaying.
How to Detect and Correct Billing Errors:
- Review Medicare Summary Notices (MSNs) or Explanation of Benefits (EOBs) from your Medicare Advantage Plan: These statements detail services billed to Medicare. Checking these can help you identify billing discrepancies or billing for services you did not receive.
- Compare Bills with Provider Statements: Cross-check these statements against any provider bills you receive to ensure accuracy.
- Dispute Errors Promptly: If you spot an error, contact your healthcare provider and Medicare/Medicare Advantage Plan to request a correction. Taking swift action can prevent unnecessary charges.
- Use Medicare’s Free Counseling Services: State Health Insurance Assistance Programs (SHIPs) offer free guidance to help beneficiaries understand and resolve billing issues.
By monitoring bills and addressing errors quickly, you can ensure you only pay for the services you receive and maximize your Medicare cost savings.
Explore Cost-Saving Programs and Assistance Options
Many retirees qualify for Medicare assistance programs that help reduce out-of-pocket costs. Understanding and applying for these cost-saving programs ensures you’re taking full advantage of the financial assistance available to you, so you can save on healthcare costs.
Medicare Savings Programs (MSPs)
These state-run programs assist with Medicare premiums, deductibles, and coinsurance for low-income seniors. You can apply for Medicare Savings Programs through your state, which then determines which of the four programs you qualify for, based on your income and other determining factors:
- Qualified Medicare Beneficiary (QMB) Program: Covers Part A and Part B premiums, deductibles, and copayments.
- Specified Low-Income Medicare Beneficiary (SLMB) Program: Helps pay for Part B premiums.
- Qualifying Individual (QI) Program: Assists with Part B premium costs, subject to available funding.
- Qualified Disabled and Working Individuals (QDWI) Program: Covers Part A premiums for certain disabled individuals.
Extra Help for Prescription Drugs
The Extra Help program reduces prescription drug costs for Medicare beneficiaries with limited income. Anyone who has already qualified for Medicaid, a Medicare Savings Program, or Supplemental Security Income benefits automatically qualifies for the Extra Help program. You can also apply and qualify based on income limitations. If you qualify, Extra Help can cover premiums, deductibles, and copayments, reducing your out-of-pocket expenses.
Medigap Plans
If you choose Original Medicare for your coverage, consider a Medicare Supplement Plan (or Medigap) that can help you save on out-of-pocket costs not covered by Medicare, like deductibles, coinsurance, and copayments. Compare the different Medigap plans and policies offered in your area to find affordable coverage that fits your needs.
Plan Your Medicare Savings Strategy with Wandacare
Saving on Medicare requires careful planning and proactive cost management. But with the right strategies, you can spend less on healthcare, leaving a bigger budget for your retirement dreams and goals.
Thankfully, you don’t have to do all this strategy planning by yourself! Wandacare is here to guide you every step of the way. With over a decade of experience, our licensed Medicare advisors can show you the steps for maximizing your Medicare savings, so you can avoid unnecessary expenses.
