Why Getting the Basics of Medicare Wrong Is the First Step to Costly Mistakes

Key Takeaways

• Misunderstanding the basics of Medicare in 2025 can lead to late enrollment penalties, gaps in coverage, and higher out-of-pocket expenses.

• Knowing when and how to enroll, what each part covers, and how Medicare coordinates with other insurance can protect you from costly missteps.

Medicare Is Not Automatic for Everyone

If you’re turning 65 this year, it’s critical to understand that Medicare enrollment is not automatic for everyone. Only those already receiving Social Security benefits before age 65 are auto-enrolled in Medicare Parts A and B. If you’re not drawing Social Security yet, you must enroll yourself during your Initial Enrollment Period (IEP).

The IEP spans 7 months: 3 months before your 65th birthday month, the month itself, and 3 months after. Missing this window can trigger a lifetime late enrollment penalty for Part B and potential gaps in coverage.

The Four Parts of Medicare Explained Clearly

Many people mistake Medicare for a single plan, but it is a system divided into four distinct parts, each with specific purposes:

Part A: Hospital Insurance

• Covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services.

• Most people do not pay a premium if they or their spouse worked at least 40 quarters (10 years).

• In 2025, the hospital deductible is $1,676 per benefit period.

Part B: Medical Insurance

• Covers doctor visits, outpatient care, preventive services, and durable medical equipment.

• Premiums are required. The standard monthly premium in 2025 is $185.

• Annual deductible is $257, after which you generally pay 20% of approved services.

Part C: Medicare Advantage

• An alternative to Original Medicare, offered by private insurers approved by Medicare.

• Bundles Part A, Part B, and often Part D.

• Plan rules, provider networks, and cost-sharing vary widely and change annually.

Part D: Prescription Drug Coverage

• Covers outpatient prescription drugs.

• Offered through stand-alone plans or Medicare Advantage plans.

• The maximum deductible in 2025 is $590.

• Out-of-pocket costs are capped at $2,000 annually due to 2025 reforms.

Timing Mistakes That Lead to Penalties

Understanding Medicare timelines is essential. Missing certain deadlines can mean permanent penalties or reduced coverage.

Late Enrollment Penalties

• Part B Penalty: If you delay enrolling in Part B without credible coverage, your monthly premium goes up by 10% for each 12-month period you delayed.

• Part D Penalty: If you go 63 consecutive days without drug coverage after your IEP, you may pay a penalty for as long as you have Part D.

General Enrollment Period

If you miss your IEP and don’t qualify for a Special Enrollment Period, you can only enroll in Medicare between January 1 and March 31 each year. Coverage begins July 1, leaving you potentially uninsured for several months.

Coordination with Employer or Retiree Coverage

If you or your spouse are still working past 65 and have group health insurance, Medicare enrollment decisions can be more complex. Here’s what to keep in mind:

• If your employer has 20 or more employees, you may delay Part B without penalty.

• If fewer than 20, Medicare becomes primary, and you must enroll in Part B to avoid gaps.

• Always confirm if your employer coverage qualifies as creditable for Part D.

When you retire, you typically have an 8-month Special Enrollment Period to sign up for Part B and 63 days for Part D.

Not Understanding What Medicare Doesn’t Cover

Medicare does not cover everything, and this surprises many enrollees. You are responsible for costs related to:

• Routine dental, vision, and hearing services

• Long-term custodial care

• Most care outside the U.S.

Medicare also has deductibles, copayments, and coinsurance, which can add up significantly. Supplemental coverage, like Medigap, can help fill these gaps if you’re enrolled in Original Medicare.

Medicare Advantage Isn’t Always the Simplest Choice

Medicare Advantage plans may look attractive due to added benefits, but the trade-offs can be significant:

• Limited provider networks can restrict access to doctors or hospitals.

• Prior authorizations may be required for many services.

• Benefits and drug formularies change yearly.

You must live in the plan’s service area and may need referrals for specialists. Review each plan’s Evidence of Coverage and Annual Notice of Change before enrolling.

Annual Enrollment Is Not Just for New Enrollees

Once you enroll in Medicare, your responsibilities don’t end. Each year from October 15 to December 7, you can:

• Switch from Original Medicare to Medicare Advantage or vice versa

• Change Medicare Advantage plans

• Join, switch, or drop a Part D plan

Failure to review your coverage each year could result in surprise costs or reduced benefits in the following year.

Choosing the Right Prescription Drug Coverage Takes Effort

Prescription drug needs vary greatly, so you should never pick a Part D plan without comparing options. Important tips include:

• Ensure your medications are on the plan’s formulary.

• Check for preferred pharmacies to reduce costs.

• Consider your total annual cost, not just premiums.

The Medicare Plan Finder tool is a useful resource, or you can speak to a licensed agent listed on this website for help.

Confusing Medigap With Medicare Advantage

One of the most common mistakes is assuming Medigap and Medicare Advantage work together. They do not. You must choose one path:

• Original Medicare + Medigap + Part D: Allows broader access to providers with fewer out-of-pocket surprises but higher monthly costs.

• Medicare Advantage (Part C): Lower premiums, extra benefits, but more restrictions.

Also note: If you want to switch from Medicare Advantage to Medigap later, you may be subject to medical underwriting unless you’re in your one-time Medigap open enrollment period.

Missing the One-Time Medigap Enrollment Window

Your Medigap Open Enrollment Period lasts 6 months from the first day you’re 65 or older and enrolled in Part B. During this window:

• You can enroll in any Medigap policy sold in your state.

• You cannot be denied coverage or charged more due to health conditions.

After that period, insurers can deny or charge higher premiums based on your health unless you qualify for a special guaranteed issue right.

Assuming Medicare Covers Long-Term Care

Medicare covers short-term skilled nursing care following a qualifying hospital stay but does not cover custodial care for long-term stays in a nursing home or assisted living. You’re expected to plan separately for long-term care needs, either through private insurance, personal savings, or Medicaid (if eligible).

Failing to account for this coverage gap can lead to financial hardship later.

Medicare Isn’t a One-and-Done Decision

Medicare decisions are not static. Your health, finances, and plan availability may change. Key times to reevaluate include:

• Each Annual Enrollment Period (Oct 15–Dec 7)

• After changes in your health

• When your medications change

• If you move to a new ZIP code or state

Being proactive about reassessing your plan each year can help you avoid coverage gaps or unexpected costs.

Medicare Fraud and Marketing Scams Are Real Risks

Another overlooked danger: misleading marketing and scams. Always be cautious of:

• Cold calls or unsolicited offers claiming new benefits

• High-pressure tactics to make you switch plans quickly

• Promises of extra services that sound too good to be true

Only work with trusted resources, like a licensed agent listed on this website or Medicare’s official site, to evaluate your choices.

How to Protect Yourself From Mistakes Moving Forward

Getting Medicare right starts with staying informed. Here’s what you can do:

• Mark important enrollment periods on your calendar

• Review your plan materials annually

• Ask if your current coverage still fits your health and financial situation

• Keep records of conversations, applications, and notices

If you’re uncertain, a licensed agent can walk you through your options and help you avoid common pitfalls.

Get the Facts Straight Before You Enroll or Make Changes

The most costly Medicare mistakes happen when you don’t understand the fundamentals. From enrollment timelines and penalties to coverage limitations and plan differences, every detail matters.

Before you choose or switch plans, be sure to:

• Confirm your eligibility and enrollment period

• Understand what’s covered and what’s not

• Know the trade-offs between plan types

• Review all plan documents carefully

For support, get in touch with a licensed agent listed on this website. They can help ensure your Medicare choices in 2025 match your healthcare needs, financial situation, and future plans.