Medicare is notoriously complicated. In fact, even those who are eligible and enrolled in the program don’t fully understand it.
About 30% of Americans over the age of 65 say they do not fully understand their Medicare Advantage plans, while 23% of them say they do not fully understand their Medicare Supplement plans, according to MedicareGuide.
However, financial guru Dave Ramsey believes most people should overcome this complexity and take the time to learn about the program because not doing so could have dire consequences.
In fact, Ramsey says there’s one mistake that could be the most costly: not enrolling at the right time.
“Seriously, understanding and getting enrollment right is super important because if you get it wrong, you could end up paying penalties the rest of your life,” he wrote on his website. “Yeah, the stakes are that high!”
Here’s why the first step to entering the Medicare program is so important.
A quick refresher: Medicare is a federal health insurance program in the United States primarily for people aged 65 and older.
The program consists of different parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage plans), and Part D (prescription drug coverage), each addressing various healthcare needs.
People looking to enroll in the program for the first time have three opportunities, according to Ramsey. The first is the Initial Enrollment Period (IEP) which starts three months before your 65th birthday and runs through three months after, for a total of seven months. Those receiving social security payments for at least four months before they turn 65 could be auto-enrolled.
Under special circumstances, such as living abroad or coming back to the country after the age of 65, you can apply during a Special Enrollment Period (SEP).
However, if you miss IEP and SEP, your only option is the General Enrollment Period (GEP) which runs from Jan. 1 to March 31. This option involves higher premiums for your health insurance which last the rest of your life.
“And keep in mind, the longer you wait, the bigger the penalties get,” Ramsey says.
