10 Surprising Facts You Still Don’t Know About Medicare

There is no shortage of simplistic myths about Medicare, from the belief that it’s completely free to the rumor that it covers next to nothing.

However, the truth about Medicare is a lot more complicated. While Medicare covers many things, you should prepare yourself financially for the reality that you will still have out-of-pocket health care costs during retirement.

Many people share other misconceptions about Medicare. Knowing the following key facts about Medicare can help you get the most out of your Medicare plan.

Most people become eligible for Medicare once they turn 65. Typically, you need to sign up for Medicare Part B during your initial enrollment period (IEP). It starts three months before your birthday and lasts until three months after the month you turn 65.

If you fail to sign up during your initial enrollment period, you could be hit with a financial penalty. For example, you will pay an extra 10% for each year you could have signed up for Medicare Part B — which is medical insurance coverage — but failed to do so.

This isn’t a one-and-done penalty either: You’ll pay the extra 10% (or more) on top of your regular Medicare premium for the rest of your life. This is one penalty you want to avoid if you want to stretch your retirement savings.

Medicare Part D is the portion of Medicare that helps pay for prescription drugs. If you don’t sign up for a Part D plan during your initial enrollment period, you will pay an extra 1% for every month you go without coverage.

That means you could end up paying an additional 12% if you go a year without coverage. Like the penalty for late enrollment in Medicare Part B, the Medicare Part D penalty sticks with you forever.

If you're still working full-time at age 65 with employer-sponsored health insurance, you might not need to enroll in Medicare during your initial enrollment period.

However, check with your employer: Your company can still require you to enroll in Medicare once you turn 65.

One of the most prevalent myths about Medicare is that it doesn’t cost anything. But like most other insurance programs, Medicare comes with a monthly premium.

Specifically, you will pay a premium for Medicare Part B, which helps you pay for doctor’s visits, labs, home health equipment, and other traditional medical expenses.

With Medicare Part B, you will pay a typical copay for doctor’s office visits and other medical services. Medicare has a deductible you have to meet before the insurance starts covering more costs.

Medicare Part D also comes with a premium.

Medicare Part A, which pays for inpatient hospital stays, doesn’t have a premium for most workers. However, it might be a mistake to call it “free” since it is financed by the Medicare taxes you paid while working.

Depending on your income, you could pay an additional amount in addition to the typical premium for Medicare Part B and Part D.

For most seniors, the federal government pays for 75% of the Medicare Part B premium and leaves the individual to pay the other 25%. However, you could end up paying anywhere from 35% to 85% of the premium based on your income during retirement.

Retirees with higher incomes also might pay more for Medicare Part D coverage.

Medicare covers quite a bit, but it doesn’t cover everything. For instance, traditional Medicare doesn’t help pay for:

• Eye exams
• Contact lenses and glasses
• Hearing aids
• Dental care

Medicare also does not cover the cost of long-term care. You should not count on Medicare covering the expense of stays in assisted-living facilities, nursing homes, or memory care facilities.

Whether you're hoping to age in place or planning on eventually relocating to a nursing home, bear in mind that you could end up fronting a lot of the costs. So, make sure to budget for these expenses early on in your retirement.

If your income is low enough to qualify for Medicaid, enrolling in the program might help to cover some of the costs associated with Medicare.

In addition, if your income is low, Medicaid might help pay for stays in long-term care facilities.

Planning to travel outside of the country once you retire? With just a few exceptions, Medicare only works within the U.S.

There may be exceptions if you live near the border and the nearest hospital is in an adjoining country. In that case, Medicare helps you pay for hospital care at the closest Mexican or Canadian hospital.

However, if you plan to travel overseas, make sure you have health care coverage lined up before you go.

Are you unhappy with the Medicare coverage you chose? Each year, you can review your current coverage and make changes during the open enrollment period.

This period spans Oct. 15 through Dec. 7. You can use this time to find coverage that makes more sense for your needs, or that is cheaper and helps you maximize your Social Security income and savings.

Medicare can be confusing, but it’s not impossible to navigate. Just make sure you sign up on time, plan ahead for medical costs, and understand what Medicare covers and doesn’t cover.

The more you know about how Medicare works, the better you can prepare to make Medicare work for you so that you get the best care and get ahead financially in your golden years.