3 Misunderstood Medicare Rules Every Retiree Needs to Know

There are millions of older Americans today who get healthcare coverage through Medicare. And while many seniors have some basic familiarity with the program, there are certain Medicare rules that tend to be misunderstood. Here are three such rules every retiree should know back and forth.

1. Part A will cost you -- even if you don't have to pay premiums

A lot of retirees know that Medicare Part B, which covers outpatient care, charges a monthly premium. Among Social Security recipients, those premiums are typically paid directly out of their monthly benefits.

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Medicare Part A, which covers hospital care, doesn't charge most enrollees a monthly premium. But that doesn't mean Part A coverage is free. There are different costs you may be looking at, from inpatient hospital deductibles to daily coinsurance for an extended hospital stay.

It's important to know what costs to anticipate under Part A. Better yet, it's a good idea to buy Medigap (supplemental insurance) as soon as you're eligible. Medigap could help pick up the tab for some of your out-of-pocket Part A costs so they don't completely upend your budget.

2. Long-term care isn't covered

You might assume that Medicare will pay for long-term care needs, like assisted living or nursing homes. But that's not the case at all.

Medicare only covers care that's medical in nature. Long-term care tends to fall into the category of custodial care, or care that relates to daily living.

The cost of long-term care could be huge, so it's important to have a plan for it that doesn't involve Medicare. A good bet for some people is to purchase long-term care insurance, though you'll need to weigh the cost of coverage against the potential benefits. If you're going to apply for long-term care insurance, though, a good time to start shopping for a policy is your early to mid-50s.

3. Enrolling late could lead to huge penalties

Your initial Medicare enrollment window lasts seven months. It starts three months before the month of your 65th birthday and ends three months after that month.

If you don't enroll in Medicare on time, you'll face a 10% surcharge on your Part B premiums for each 12-month period you could've had coverage but didn't. And that surcharge is one you'll generally face for life.

If you're still working during your initial Medicare enrollment window and are enrolled in a qualifying group health plan (usually defined as having 20 employees or more), that'll typically make you eligible for a special enrollment period from Medicare. In other words, in this situation, signing up beyond your initial seven-month window may not result in financial penalties. But otherwise, do be careful.

It's important to know the ins and outs of Medicare to avoid surprise expenses in retirement. Keep these three rules in mind, especially since many seniors tend to get them wrong.

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