Key Takeaways:
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Failing to enroll in Medicare on time can lead to permanent penalties and higher out-of-pocket costs.
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Understanding the right Medicare plan for your needs is crucial to avoiding coverage gaps and unexpected expenses.
The Costly Pitfalls of Medicare Enrollment You Should Avoid
Enrolling in Medicare might seem straightforward, but it’s easy to make mistakes that could end up costing you thousands of dollars in penalties, coverage gaps, and unexpected medical expenses. Whether you’re a federal retiree or nearing retirement, knowing what to watch out for can help you navigate Medicare confidently. Many enrollees assume that just signing up is enough, but understanding deadlines, plan options, and out-of-pocket costs can prevent long-term financial consequences.
1. Missing Your Medicare Enrollment Window
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Understanding Your Initial Enrollment Period (IEP)
Your Initial Enrollment Period (IEP) lasts for seven months: it begins three months before you turn 65, includes your birth month, and extends three months afterward. If you don’t sign up for Medicare Part B during this time, you may face a 10% late penalty for each full 12-month period you go without coverage. This penalty applies for life and is added to your monthly Part B premium. The longer you wait, the higher the penalty grows.
Delaying Enrollment? Be Careful!
Some federal employees delay enrolling in Medicare Part B because they have FEHB coverage, but this can lead to costly gaps in coverage. If you retire and lose FEHB as your primary coverage, you only have an eight-month Special Enrollment Period to sign up for Medicare without penalties. Missing this window means waiting until the General Enrollment Period (GEP) (January 1 to March 31), with coverage starting July 1—and penalties stacking up in the meantime.
Additionally, if you continue working past 65 but delay enrollment in Part B due to FEHB coverage, ensure your plan qualifies as creditable coverage to avoid penalties. If your employer has fewer than 20 employees, Medicare becomes the primary payer, and not enrolling in Part B could leave you with unpaid medical bills.
2. Enrolling in the Wrong Medicare Plan for Your Needs
Not all Medicare plans are the same, and choosing the wrong coverage can result in higher medical costs or lack of essential benefits. Understanding your options is critical.
Medicare Part A and Part B: The Foundation
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Part A (Hospital Insurance): Covers inpatient hospital stays, hospice care, and some home health services.
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Part B (Medical Insurance): Covers doctor visits, outpatient care, preventive services, and durable medical equipment.
When FEHB and Medicare Overlap
Many federal retirees keep FEHB coverage in retirement. If you enroll in Medicare, some FEHB plans will reduce out-of-pocket costs for services covered by both. However, not all FEHB plans offer the same level of coordination. You need to check how your specific FEHB plan interacts with Medicare. Some plans waive deductibles and copayments if you have Medicare, but others do not. Enrolling in the wrong combination could mean duplicating coverage or missing out on cost savings.
Prescription Drug Coverage: Should You Enroll in Part D?
Medicare Part D provides prescription drug coverage, but many federal retirees already have FEHB plans that include drug benefits. If your FEHB plan provides creditable prescription coverage (as good as or better than Part D), you can skip Part D without facing penalties. However, if your FEHB coverage isn’t considered creditable and you delay Part D enrollment, you’ll face a 1% penalty per month for every month you go without coverage. That penalty never goes away, making it essential to verify your drug coverage before opting out of Part D.
Another consideration is how Medicare Advantage (Part C) plans interact with FEHB. Some Medicare Advantage plans may provide additional benefits, but enrolling in one may affect your FEHB coverage. Federal retirees need to carefully compare costs and benefits before making any decisions.
3. Not Understanding Out-of-Pocket Costs and Coverage Limits
Many retirees assume Medicare covers everything, only to be surprised by out-of-pocket costs. Even with Medicare and FEHB, you may still have deductibles, copayments, and coinsurance.
Medicare Out-of-Pocket Costs in 2025
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Part A Deductible: $1,676 per benefit period
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Part B Monthly Premium: $185
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Part B Deductible: $257
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Part D Out-of-Pocket Cap: $2,000
Avoiding Unexpected Medical Expenses
Understanding what Medicare does not cover is just as important. For example:
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Routine dental, vision, and hearing care are not covered under Original Medicare.
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Long-term care (such as assisted living or nursing homes) is not covered.
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Certain medical procedures may require prior authorization.
Many federal retirees keep FEHB to cover these additional costs, but not all plans offer the same level of protection. Before making changes, compare your Medicare and FEHB benefits carefully.
Another significant factor to consider is the annual out-of-pocket maximum for Medicare Advantage plans, which may provide an added layer of financial security compared to Original Medicare. However, out-of-network services and coverage limitations may still result in additional costs.
Avoid These Mistakes for a Smoother Retirement Transition
Taking the time to understand your Medicare options now can save you thousands of dollars down the line. Whether it’s enrolling on time, choosing the right plan, or budgeting for out-of-pocket costs, each step plays a crucial role in securing your healthcare in retirement. Don’t leave your coverage to chance—review your options carefully and ensure you’re making informed decisions.
For personalized guidance, get in touch with a licensed agent listed on this website. A professional can help you navigate your Medicare choices and ensure you avoid costly mistakes.
