Dec 23, 2024
Medicare is notoriously complicated. In fact, even those who are eligible and enrolled in the program don’t fully understand it.
About 30% of Americans over the age of 65 say they do not fully understand their Medicare Advantage plans, while 23% of them say they do not fully understand their Medicare Supplement plans, according to MedicareGuide.
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However, financial guru Dave Ramsey believes most people should overcome this complexity and take the time to learn about the program because not doing so could have dire consequences.
In fact, Ramsey says there’s one mistake that could be the most costly: not enrolling at the right time.
“Seriously, understanding and getting enrollment right is super important because if you get it wrong, you could end up paying penalties the rest of your life,” he wrote on his website. “Yeah, the stakes are that high!”
Here’s why the first step to entering the Medicare program is so important.
Lifelong consequences
A quick refresher: Medicare is a federal health insurance program in the United States primarily for people aged 65 and older.
The program consists of different parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans), and Part D (prescription drug coverage), each addressing various healthcare needs.
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People looking to enroll in the program for the first time have three opportunities, according to Ramsey. The first is the Initial Enrollment Period (IEP) which starts three months before your 65th birthday and runs through three months after, for a total of seven months. Those receiving social security payments for at least four months before they turn 65 could be auto-enrolled.
Under special circumstances, such as living abroad or coming back to the country after the age of 65, you can apply during a Special Enrollment Period (SEP).
However, if you miss IEP and SEP, your only option is the General Enrollment Period (GEP) which runs from Jan. 1 to March 31. This option involves higher premiums for your health insurance which last the rest of your life.
“And keep in mind, the longer you wait, the bigger the penalties get,” Ramsey says.
To avoid this mistake, here’s what you can do if you’re planning to enroll in 2025 or the near-future.
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How to get it right
To avoid expensive and stressful mistakes with your health insurance, you should start learning about Medicare as early as possible. If you’re close to the age of 65, learn as much as you can to prepare for the inevitable enrollment process.
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If you’re relatively young, it helps to learn about the basics. Younger individuals with disabilities or specific conditions like end-stage renal disease could also be covered by the program, so understanding these rules could be useful.
Also, try to stay updated with changes to the Medicare program so that you’re not caught off-guard as you get closer to the age of eligibility.
Finally, if you find the system too complicated or are not sure what to do in unique circumstances, reach out to an expert to help you. An independent Medicare adviser could help you navigate the system.
You could also reach out to your financial adviser for assistance. According to a survey by Sage Growth, 33% of seniors work with a financial adviser, but only 2% of them have asked for their help in selecting the right medicare plan.
Whether you do it on your own or with the help of an adviser, understanding the Medicare system and getting enrolled properly is crucial.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
