Op-Ed: Don't make these Medicare mistakes

More than 55 million older and disabled people depend on Medicare for their health needs. Many if not most of them will tell you, if asked, that Medicare should be an easy and affordable program but that it often is not. In doing the reporting for my new book, "Get What's Yours for Medicare: Maximize Your Coverage, Minimize Your Costs," I kept coming across recurring Medicare problems.

First up is the fact that even signing up for Medicare at the right time can be very complicated. It used to be that most people retired at age 65 and began both Medicare and Social Security when they did. But this no longer is the case. Roughly a third of people in their late 60s are still in the work force. And Social Security's full retirement age long ago moved from 65 to 66, and already is scheduled to move to 67 beginning in several years.

As it turns out, people do not need to sign up for Medicare when they turn 65 so long as they are enrolled in an active employer group health insurance plan, either because they're still working or their spouse is. In one of the many asterisks that dot the Medicare landscape, this is NOT true for workplaces having fewer than 20 employees. These small group plans automatically become what's called the secondary payer of health claims when a person turns 65, meaning that Medicare becomes the primary payer of claims, and is thus required.

So, if you mistakenly sign up for Medicare when you don't need it, you can be out thousands of dollars a year in unnecessary premiums.

On the flip side, if it turns out that you do need Medicare and you fail to sign up for it on a timely basis, you can wind up paying late-enrollment penalties for Part B of Medicare, which covers doctors and other outpatient expenses, and also Part D of Medicare, which covers prescription drugs.

These penalties can add considerable dollars to your premiums and, what's worse, they literally never go away! You will be on the hook for them for the rest of your life. What's worse, such a late enrollment might even leave you with no Medicare and thus no primary health insurance for many months.

In their desire to be fair and comprehensive, Medicare regulators have created multiple enrollment periods. Of course, they are different! Understanding these differences can be crucial to obtaining insurance coverage at the right time and avoiding lifetime penalties.

If it turns out that you do need Medicare when you turn 65, your enrollment will be governed by what's called an initial enrollment period. This is a seven-month period that begins three months before you turn 65, and includes your birthday month and the three succeeding months. If your current health coverage is set to expire when you turn 65, you should enroll before you turn 65 and make sure you avoid a coverage gap.

If, on the other hand, you don't need Medicare right away when you turn 65, you can get it when you actually lose access to your employer health coverage. In this case, you would have a special enrollment period. It lasts for eight months, and the clock starts ticking on this period on either the day your employment ends or your employer health coverage ends – whichever comes first. Again, it's usually not a good idea to wait until the end of this period because you might be without primary health insurance for many months.

If you miss either of these periods, you may be hit with late enrollment penalties, but at least you can sign up for Medicare during a general enrollment period that runs from Jan. 1 through March 31 each year.

A person's circumstances can change, of course. If you are downsized, for example, and unexpectedly lose employer health insurance, you would be eligible for a special circumstances enrollment period, which, of course, is also called a special enrollment period, or SEP for short (Medicare loves acronyms).

There are lots of other triggering circumstances. Keeping them all straight is tough even for period who do this for a living. What's worse, Medicare notes, "Rules about when you can make changes and the type of changes you can make are different for each SEP." There are free Medicare counseling services that can help you, including the State Health Insurance Assistance Program (SHIP) and the Medicare Rights Center.

These enrollment periods don't cover all types of Medicare, either, but just original Medicare, which consists of Part A for hospital expenses and Part B for doctor and outpatient costs. Once you have these parts, you are eligible to sign up for private Medicare insurance plans. There are three types: Part D drug plans, Medicare Advantage plans (formally known as Part C of Medicare) and Medigap or Medicare supplement plans.

Original Medicare by itself does not pay all your health expenses. In particular, Part B pays only 80 percent of covered expenses, leaving you to pay the other 20 percent, with no cap on your maximum out-of-pocket spending. Medicare Advantage and Medigap plans each plug holes in original Medicare. You can buy either a Medicare Advantage plan or a Medigap plan, but not both of them.

Each of these private insurance plans has their own enrollment periods, usually beginning after you have signed up for Part B. Here are the enrollment rules for Part C and D plans. There also is a six-month enrollment period for Medigap, during which you have guaranteed rights to coverage on favorable terms. You don't want to miss this period, because private insurers may not even have to sell you a Medigap policy if you do.

And I haven't even mentioned the most important Medicare enrollment period of all! This is the open enrollment period that runs each year from Oct. 15 through Dec. 7. It provides existing Medicare beneficiaries with broad "do over" rights to change their policies and, without penalties, to get new ones on more favorable terms.

Commentary by Philip Moeller, a journalist and author of "Get What's Yours for Medicare: Maximize Your Coverage, Minimize Your Costs" and co-author of the New York Times bestseller, "Get What's Yours: The Secrets to Maxing Out Your Social Security." Follow him on Twitter @PhilMoeller.

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