For millions of people, Medicare is one of the pillars of retirement. The program provides health insurance for most Americans from the age of 65 through the rest of their lives.
However, Medicare is not perfect. Some beneficiaries are surprised to learn of the program’s shortcomings.
Following are some of the disappointing realities of Medicare.
1. Your premiums might be higher than expected
The vast majority of people who qualify for Medicare Part B — which covers outpatient care such as physician services, outpatient hospital services and durable medical equipment — will pay a premium of $174.70 per month in 2024.
But not everybody. About 8% of folks pay more.
That is because their income exceeds certain levels — more than $103,000 for individuals and married people filing separately and more than $206,000 for married couples filing jointly.
These folks can pay anywhere from $244.60 to $594.00 in monthly premiums. Known as an income-related monthly adjustment amount, or IRMAA, this added cost can also apply to Medicare Part D, which covers prescription drugs. The monthly IRMAA there is $12.90 to $81.00.
2. Many things are not covered
You can count on Medicare to cover the vast majority of your health care needs in retirement.
But not everything.
As we report in “Medicare Will Not Cover These 10 Medical Costs,” the services not covered by Original Medicare, which is the type of Medicare offered directly by the federal government, include:
- Dental and routine vision care
- Care you receive outside the U.S.
- Long-term care
- Chiropractic care
However, if you sign up for the second type of Medicare — a Medicare Advantage plan through a private insurer — you may get some of these items as added benefits.
3. You might need to purchase a supplement plan
If you sign up for Original Medicare, don’t stop there. You might need to also purchase a Medicare supplement insurance plan, known as a Medigap plan. This type of plan can cover costs such as:
Private insurance companies sell Medigap policies, which are an additional cost beyond your standard Original Medicare premium.
If you sign up for Medicare Advantage coverage instead of Original Medicare, you will not need to purchase a Medigap policy.
4. You only get one shot at guaranteed Medigap coverage
When you first sign up for a Medigap plan, no insurer that sells this coverage can deny you a policy or charge you more due to your having a pre-existing condition.
However, the rules can change fast if you ever drop your Medigap coverage, such as you might do if you switch from Original Medicare to Medicare Advantage.
If you later decide to return to Original Medicare, you can still get a Medigap policy — but the protections you had when you first signed up for Medigap suddenly disappear. That can make a policy costly or even difficult to obtain.
We explain this in more detail in “4 Pitfalls for New Medicare Enrollees.”
5. Without a supplement plan, there is no limit on out-of-pocket costs
This likely will come as a big surprise to many people, but if you sign up for Original Medicare and do not purchase a supplement plan, there is no yearly limit on your out-of-pocket costs.
That means you could be on the hook for a lot of money if you encounter a serious and costly health issue.
If you sign up for Medicare Advantage instead, you will pay out-of-pocket costs up to the plan’s limit. Once you hit that limit, all costs will be covered at 100% for the rest of the calendar year.
6. You still have to pay for long-term care
Long-term care can be brutally expensive, but don’t expect Medicare to cover the cost. Most people who need this form of care will need to dig deeply into their wallets to pay for it.
Medicaid — another government health insurance program — does cover the cost of long-term care, but you need to have a low income and few assets to qualify for Medicaid coverage.
7. If you sign up late, you could be penalized — for life
If you are tardy in signing up for benefits, Uncle Sam is not very forgiving. In fact, he holds a grudge — forever.
Signing up late for Medicare Part B or Medicare Part D earns you a penalty that is added to your premium. This increased cost lasts for the rest of your life. There are no “do-overs.”
For more on these and other penalties, check out “4 Types of Medicare Penalties — and How To Avoid Them.”
8. Medicare Advantage plans typically limit your provider choices
Millions of Americans have signed up for Medicare Advantage, the private-insurance alternative to Original Medicare.
While both types of Medicare have their pros and cons, one big con of Medicare Advantage is that you might be limited to seeing doctors in your plan’s network. Many plans do this to keep costs down.
It’s important to note that not all Medicare Advantage plans have these limits. So it pays to shop around and find the coverage that is right for you.