This article will ... Explain the penalties associated with late enrollment in Medicare. Describe the key considerations regarding Original Medicare vs. Medicare Advantage, prescription drug coverage, and Medigap supplemental insurance. Lay out key expenses Medicare doesn’t cover that you may need to plan for.

Medicare is an essential part of your retirement plan. The money you’ve paid into the system through payroll taxes during your working years is supposed to largely fund your health care from age 65 on.

However, because a certain amount of choice exists within Medicare, you can make a number of mistakes. The wrong choices could have significant impacts on your finances and your health care. Learn what they are now, and you’ll thank yourself later.

Missing your initial or special Medicare enrollment windows

Each component of Medicare has a different enrollment period or periods. Failing to keep track of them can be expensive.

“The single most costly mistake is missing your initial enrollment window for Part B or Part D if you don’t have creditable coverage elsewhere,”

● Medicare Part B covers doctor visits and other outpatient services.

● Part D covers prescription drugs.

Creditable prescription drug coverage must be similar in value to Part D. The Part B equivalent of creditable coverage is group health insurance through a company that you (or your spouse) currently work for.

These are Medicare’s permanent late enrollment penalties:

● Part B: 10 percent of the base premium for every 12-month delay.

● Part D: 12 percent of the base premium for every 12-month delay.

Part B penalty example:

● The 2025 base premium for Part B was $185.

● A one-year delay in Part B enrollment would have cost you an extra $18.50 per month, or $222 for the year, and you will pay the penalty each year going forward.

● A five-year delay would have cost you an extra $1,110 in 2025.

Part D penalty example:

● The 2025 base premium for Part D was $36.78.

● A one-year delay in Part D enrollment would have cost you an extra $4.41 per month, or $52.92 for the year, and you will pay the penalty each year going forward.

● A five-year delay would have cost you an extra $264.60 in 2025.

If you’re receiving Social Security benefits at least four months before your 65th birthday and you live in the United States, you’ll be automatically enrolled in Medicare Parts A and B.

If you’re not eligible for auto-enrollment, you’ll need to sign up during your initial enrollment period. This seven-month period usually starts three months before the month you turn 65 and ends three months after.

One exception: If your birthday falls on the first of the month. In that case, initial enrollment starts four months before the month you turn 65 and ends two months after.

Part A, which provides coverage when you’re in the hospital, is free for people who have earned at least 10 years of work credits. If you didn’t earn enough work credits and have to pay for Part A, make sure that you sign up on time to avoid Part A late enrollment penalties (which aren’t permanent, unlike Part B and D penalties).

If you miss your initial enrollment period for Parts A, B, and D, you risk going uninsured — a potentially costly gamble. If you don’t qualify for a special enrollment period, you may have to wait until the next general enrollment period, which runs from January 1 through March 31 each year.

Medigap is optional supplemental insurance that helps you pay for out-of-pocket costs not covered by Parts A and B, such as deductibles, copays, and coinsurance. You must enroll within six months of enrolling in Part B to avoid being denied or paying higher premiums for preexisting conditions. Coverage varies by plan, and plan availability varies by state.

Skipping prescription drug coverage

Medicare prescription drug coverage is also optional. If you don’t take any medications regularly, or if the ones you do take are inexpensive, you might not feel compelled to sign up.

However, if your health changes, you could find yourself needing a pricey prescription medication to maintain your quality of life. To give just one example from a list of costly drugs selected for Medicare price negotiations in January 2025, the list price for a 28-day regimen of the breast cancer drug Ibrance was $16,461.86 as of July 1, 2025, according to manufacturer Pfizer’s website.

Even with Original Medicare Part D, the price you pay for any given prescription can vary considerably depending on the plan’s formulary and which pharmacy you go to.

“There are vast differences in coverage,” said Paula Brancato, a financial professional with Barnum Financial Group in Long Island City, New York. “It’s critical you work with a Medicare specialist in your state who can guide you during the process.”

With Part D coverage, once you meet the annual out-of-pocket maximum ($2,000 in 2025), you don’t pay anything for covered drugs for the rest of the year (except for your Part D premiums).

Choosing the wrong Medicare plan for your current and future needs

Skipping prescription drug coverage isn’t the only Medicare mistake people make in an attempt to save money or in an overestimation of how healthy they are and will continue to be.

“Some people are attracted to Medicare Advantage because the monthly premiums can be lower and the plans often advertise extras like dental, vision, or gym memberships,” Schulz said. “But the trade-off is narrower provider networks and more prior authorizations.”

Medicare Advantage, also called Medicare Part C, bundles Part A, Part B, and usually Part D into a single plan. In 2025, half of enrollees chose Medicare Advantage, according to the Centers for Medicare & Medicaid Services.

Some Advantage plans are HMOs, and coverage can be limited outside the plan’s service area. Also, should you need a specialty tier drug, your coinsurance will likely be higher through Medicare Advantage, according to Medicare Part D research published in 2025 by KFF, a health policy research organization. However, the average monthly premium for prescription drug coverage through an Advantage plan was $7 in 2025, compared to $39 for stand-alone coverage.

Brancato prefers the flexibility provided by Original Medicare with a prescription drug plan and Medigap.

“Medicare provides such good benefits, and there’s very little deductible and almost no preauthorization,” Brancato said.

Be aware, too, that Medicare Advantage plans can axe extra perks like healthy grocery allowances, gym programs, and fitness trackers at any time. Perks like dental and hearing benefits may not be as robust as you’d like. And while top-of-the-line hearing aids can be thousands of dollars, at least one study has shown that Medicare Advantage beneficiaries are hardly more likely to be fitted for hearing aids than those with traditional Medicare.

Schulz also said that he would “add a Medigap policy to protect against the unlimited 20 percent coinsurance that Part B leaves on the table.”

“For someone enrolling for the first time, Original Medicare plus Medigap provides the most predictable, portable coverage nationwide — you can see almost any doctor who accepts Medicare,” Schulz said.

Even with Medigap, you still won’t have coverage for long-term care, dental, vision, or hearing aids.

Assuming Medicare pays for long-term care

If you end up needing help with activities of daily living — things like eating, bathing, and getting out of bed — your coverage through Medicare will be limited. Medicare does not cover long-term care; it only provides short-term care in a skilled nursing facility.

“It covers a modest percentage of the first 100 days if you have a three-day hospital stay,” Brancato said.

The definition of a three-day hospital stay has several caveats, and you’ll also have to pay your Part A deductible of $1,676 (in 2025) for each new benefit period. You could potentially have several benefit periods in one year, each with its own deductible and up to 100 days of skilled nursing facility coverage. (Some Medigap policies cover Part A deductibles and coinsurance.)

If you don’t have a qualifying hospital stay, or if you need care beyond 100 days in the same benefit period, you may have to rely on your savings or your family — unless you have long-term care insurance or have so few assets that you qualify for Medicaid.

Brancato said she thinks everyone should have some long-term care coverage because it helps you plan.

“When something happens to someone, it’s a mess, and you can end up paying out of pocket, and it’s not cheap,”

“If you have a policy, it starts paying pretty much right away. It prevents your family from losing their jobs, income, and health trying to take care of you,” Brancato noted. “It alleviates the immediate, acute financial impact and gives your family time to make a plan.” (Learn more: Is paying for long-term care part of your retirement plan?)

Ignoring annual change of coverage notices

As a Medicare enrollee, you should receive a Plan Annual Notice of Change each fall to help you prepare for open enrollment. Don’t let it sit at the bottom of your unread mail heap.

From year to year, the availability and pricing of drugs, providers, and extra benefits can change in ways that help or hurt you. For example, if you have a Medicare Advantage plan, you might see an increase or decrease in your hospital coinsurance, out-of-pocket maximum, or premiums. Your plan could also be eliminated.

Drug plans, whether stand-alone or included with Medicare Advantage, can raise or lower deductibles. They might also start charging a percentage of a prescription’s cost instead of a flat copay.

“Someone could take over the company tomorrow and change everything,” Brancato said.

Health changes and life changes also make it important to decide whether your existing coverage is still the best option.

Reevaluating your choices each year can help you maintain access to your preferred providers and medications and avoid overpaying. Take advantage of your annual open enrollment opportunity, which runs from October 15 through December 7, to review alternatives and possibly switch plans.

For free help selecting a plan, you can:

● Use Medicare.gov’s plan finder to identify all your options.

● Work with an insurance broker specializing in Medicare. (Be aware that brokers may earn higher commissions for selling you the plans the insurance companies want you to buy, and you may have other plan options that would be better for your situation.)

Avoiding Medicare mistakes and enjoying a comfortable retirement

From enrollment penalties to coverage gaps to plan changes, there are many ways you could end up with less-than-ideal Medicare coverage in retirement. However, if you educate yourself, revisit your choices annually, and tap free resources, you may be able to carry the best coverage for your situation at a reasonable cost.

Further, a MassMutual financial professional can help you with strategies for retirement income, tax planning, and long-term care planning. By showing you ways to control the things you can while preparing to handle uncertainty, they can help you feel more confident and enjoy your retirement.

Discover more from MassMutual…

How much will I really need for health care in retirement?

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What are the pros and cons of aging in place?

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