Medicare Basics: 5 Critical Things No One Tells You About Signing Up and What It Could Cost You

Key Takeaways

• Medicare may not be as “free” as you think—you should plan for premiums, deductibles, and out-of-pocket costs that vary based on the coverage you choose.

• Missing enrollment deadlines can lead to costly penalties that stick with you for life, so it’s crucial to understand when and how to sign up.

Medicare Isn’t Automatic for Everyone

You might assume that Medicare will automatically enroll you when you turn 65, but that’s not always the case. Automatic enrollment only applies if you’re already receiving Social Security benefits. Otherwise, you must actively sign up during your Initial Enrollment Period (IEP), which starts three months before your 65th birthday and lasts for seven months.

If you miss this window, you could face delays and penalties, especially when signing up for Medicare Part B or a Medicare drug plan (Part D). Late enrollment penalties can be permanent, increasing your costs for as long as you have Medicare coverage.

When to Enroll If You’re Still Working

If you’re still working at 65 and have employer health coverage, you might be able to delay Medicare without penalties. However, this depends on the size of your employer:

• 20 or more employees: You can delay Part B without penalty as long as you have employer coverage.

• Fewer than 20 employees: You may need to sign up for Medicare as your primary insurance.

To avoid gaps in coverage, make sure to enroll within eight months of losing employer coverage.

Medicare Costs More Than You Expect

Medicare isn’t entirely free, and different parts come with their own expenses. Here’s a breakdown of what you can expect to pay in 2025:

• Medicare Part A (Hospital Insurance): Most people qualify for premium-free Part A, but if you don’t, premiums can be over $500 per month. The hospital deductible is $1,676 per benefit period, and extended hospital stays come with daily coinsurance charges.

• Medicare Part B (Medical Insurance): The standard premium is $185 per month in 2025, with a deductible of $257 per year. You’ll also pay 20% of the cost for most outpatient services after meeting your deductible.

• Medicare Part D (Prescription Drug Coverage): Costs vary by plan, but you’ll pay a deductible up to $590 in 2025, along with copayments or coinsurance for prescriptions.

The True Cost of Medicare Over Time

One major misconception is that Medicare costs remain stable throughout retirement. However, as you age, medical expenses can increase due to more frequent doctor visits, higher prescription drug needs, and unexpected health issues. Medicare premiums and deductibles also tend to rise each year, so failing to plan ahead could leave you paying significantly more than expected.

Many retirees spend thousands of dollars annually on healthcare, making it one of the biggest expenses in retirement. Factoring Medicare costs into your long-term financial planning can help prevent unexpected financial strain.

Not Everything Is Covered

One of the biggest shocks for new enrollees is that Medicare doesn’t cover everything. Certain essential services require separate coverage or out-of-pocket spending, including:

• Dental, Vision, and Hearing Care – Routine dental exams, eyeglasses, and hearing aids aren’t covered under Original Medicare.

• Long-Term Care – Nursing home care or assistance with daily activities isn’t included in Medicare benefits.

• Overseas Medical Care – Medicare generally doesn’t cover healthcare outside the U.S.

How to Fill in Coverage Gaps

If you need coverage beyond what Medicare offers, you might need additional insurance. Planning for these expenses in advance ensures you’re not left with unexpected medical bills. Some retirees choose savings accounts dedicated to healthcare costs, while others look for alternative options that suit their needs.

Missing Enrollment Deadlines Can Be Costly

Medicare penalties aren’t one-time fees—they last for life and can significantly increase your monthly costs. The two most common penalties apply to Part B and Part D:

• Part B Late Enrollment Penalty – If you don’t sign up during your Initial Enrollment Period and don’t qualify for a special enrollment period, your monthly premium increases by 10% for each 12-month period you delay enrollment.

• Part D Late Enrollment Penalty – If you go without prescription drug coverage for 63 days or more, you’ll pay an extra 1% of the national base premium for each month you delay.

Understanding Special Enrollment Periods

Certain situations allow you to enroll in Medicare outside of the standard enrollment periods without penalties. These include losing employer coverage, moving to a new area, or qualifying for Medicaid. Knowing whether you qualify for a special enrollment period can save you from unnecessary penalties.

The Annual Enrollment Period (AEP) Can Save You Money

Once you enroll in Medicare, you’re not stuck with the same coverage forever. Each year, you have a chance to review and change your plan during the Annual Enrollment Period (AEP), which runs from October 15 to December 7.

This is the time to:

• Compare plans to see if you can save money on premiums, deductibles, and copayments.

• Check for new benefits, as plans may add or remove coverage.

• Ensure your doctors and prescriptions are still covered under your plan.

Failing to compare plans yearly could mean missing out on potential savings and better coverage options.

Medicare’s Prescription Drug Costs Are Changing in 2025

A major update in 2025 is the introduction of a $2,000 cap on out-of-pocket drug costs for Medicare Part D. This means once your prescription costs reach this limit, Medicare will cover 100% of additional costs for the rest of the year.

What This Change Means for You

If you rely on expensive medications, this new rule provides significant financial relief. Previously, enrollees in Part D plans faced large out-of-pocket expenses even after reaching coverage limits. Now, with a fixed cap, managing prescription costs becomes more predictable and affordable.

Planning Ahead Makes a Big Difference

Signing up for Medicare is a critical decision that impacts your health and finances for years to come. Understanding your options, avoiding penalties, and reviewing your coverage annually can help you save money and ensure you get the care you need.

Steps to Take Before You Enroll

1. Calculate your estimated costs – Review premium, deductible, and out-of-pocket expenses.

2. Check enrollment deadlines – Avoid penalties by signing up at the right time.

3. Consider your future needs – Look ahead to potential health expenses and coverage gaps.

4. Compare available plans – Make sure you choose coverage that fits your situation.

5. Consult an expert – Speaking with a professional can help you navigate your options.

If you’re unsure about your choices or need personalized guidance, reach out to a licensed agent listed on this website to discuss your options and get expert advice.