Table of Contents:

  1. Medicare Mistake #1 – Overpaying Out of Pocket to Save on Premiums
  2. Medicare Mistake #2 – Overpaying for Prescriptions
  3. Medicare Mistake #3 – Selecting a Plan That Does Not Cover Your Preferred Providers

Each fall, Medicare’s Annual Enrollment Period (AEP) provides beneficiaries with the opportunity to make changes to their Medicare coverage. If you would like to switch plans, transition from Original Medicare to a plan that covers more services, or drop a form of coverage, the AEP is your chance to find the plans that best meet your needs.

Because the AEP only lasts from October 15th to December 7th, it is important to stay informed and ahead of schedule. Being informed consists of determining what services you would like  covered, understanding the various costs you may incur over the course of the year, and avoiding common mistakes throughout the enrollment process. Keeping these things in mind may save you quite a bit of money in the long run.

Here are three mistakes to avoid during the AEP (and strategies to avoid making them yourself):

Medicare Mistake #1 – Overpaying Out of Pocket to Save on Premiums

While shopping for a plan, the first cost you are likely to notice is the monthly premium. It is important to understand that the monthly premium is just one of the many expenses associated with a healthcare policy. It could be a mistake to choose a plan because it has the lowest monthly premium without investigating additional costs or comparing overall costs to similar plans with higher premiums. Along with the monthly premium, you should consider a plan’s deductible, copayments, out-of-pocket limit, and covered services. In many cases, the rates for these other expenses are lower when they are part of a higher-premium plan.

There is no perfect formula for saving the most money over the course of a year, as the money you spend will depend partially on your healthcare coverage needs, which are impossible to predict. You can, however, look at your routine expenses, such as prescriptions, primary care visits per year, visits to specialists, and so on, and compare potential out-of-pocket costs between multiple plans. Once you’ve made a comparison, you can determine which plan is the most likely to save you the most money over the course of the year.

Notably, some Medicare Advantage plans cover vision and/or dental care, while Original Medicare does not. In many cases, the money saved on these two services alone will cover the cost difference between the premiums for Original Medicare and Medicare Advantage.

Medicare Mistake #2 – Overpaying for Prescriptions

Medicare Part D exists specifically to cover prescription drug costs. In a few special cases, Original Medicare will cover these costs. For the vast majority of cases, however, you will be liable for your own drug costs if Original Medicare is your only form of coverage. Part D coverage is projected to cost $41/month in 2021, which is compared to the average premium for 2020.

According to a recent Georgetown University study, Americans aged 65 – 79 pay 56% of their total drug expenditures out-of-pocket. For Americans over 80, that number increases to 67%. If you find yourself struggling to pay money out-of-pocket for your prescriptions, it may be a no-brainer to pay a $41 premium up front to save on other prescription drug costs in the long run.

Whether a Part D plan is right for you depends on your prescription drug needs and the costs associated with them. For instance, if you are one of the 14.3 million American seniors with diabetes, a Part D plan could save you as much as $175/month on insulin costs alone. Beginning in 2021, there will be over 1,600 Part D plans that place a $35/month price cap on out-of-pocket costs for insulin.

Medicare Mistake #3 – Selecting a Plan That Does Not Cover Your Preferred Providers

When researching plans, make sure to note the service area and provider network. The service area of a plan determines the geographical radius where you can receive your care. Your provider network determines the doctors and healthcare providers you can see. If you have a preferred healthcare provider, make sure that your plan is accepted by that provider.

 

Information adapted from the Centers for Medicare and Medicaid Services and Medicare.gov

Additional data and cost information adapted from Georgetown University’s Health Policy Institute, the American Diabetes Association, and BBC

Prescription Drugs, 2020. Health Policy Institute

Statistics About Diabetes, 2020. American Diabetes Association

The Human Cost of Insulin in America, 2019. BBC