American workers planning for retirement face the challenge of figuring out how to handle the often complicated task of choosing from a number of Medicare options for their health care coverage.
Personal finance author and radio host Dave Ramsey acknowledges that the dates, rules and options regarding Medicare coverage involve some intricate details — and he has a warning about a potential financial danger that people need to know how to avoid.
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The Centers for Medicare and Medicaid Services (CMS), a federal agency in the U.S Department of Health and Human Services, explains the individual elements of Medicare services.
In Original Medicare, Part A covers hospital insurance, including inpatient care, skilled nursing facility care, hospice care and home health care.
Insurance in Medicare Part B covers doctor visits, outpatient care and preventive services such as screenings, shots or vaccines and yearly checkups.Â
Medicare Advantage, also known as Part C, involves an approved plan from a private insurance company that bundles Part A, Part B and Part D (prescription drug coverage). It often covers extra services not covered by Original Medicare, often including vision, dental and hearing costs.
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Medicare Advantage is increasing in popularity. The number of people enrolled has increased from 11.1 million in 2010 to about 32.8 million in 2024, now comprising more than half of Medicare recipients.
Ramsey emphasizes the point that, when enrolling in Medicare, it’s vital to have a solid understanding of the federal program because there are mistakes that can be made that will result in a person paying financial penalties for the rest of their life.
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Dave Ramsey explains how to avoid paying Medicare penalties for life
Ramsey clarifies that one of the biggest mistakes people can make is missing enrollment deadlines.
“There are a lot of dates to keep track of. But the really important one is your IEP (Initial Enrollment Period),” Ramsey wrote. “If you miss it and don’t qualify for an SEP (Special Enrollment Period), you’ll have to pay higher premiums for the rest of your life. And keep in mind, the longer you wait, the bigger the penalties get.”
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A person’s first opportunity to sign up for Medicare is during the Initial Enrollment Period. This begins three months before one turns 65 years old and continues through the three months after.
If this period is missed because of a circumstance such as residing overseas, a person can qualify for a Special Enrollment Period.
Other situations that can prompt an SEP are leaving a job and losing employer-sponsored health insurance, losing comparable drug coverage, and moving to a new area where a plan one is using is not available (this only applies to Medicare Advantage recipients).Â
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Dave Ramsey warns Americans about Medicare’s General Enrollment Period
People who miss their IEP or SEP can still enroll in Medicare, but Ramsey recommends avoiding the process necessary to make up for this mistake.
Another chance to get Medicare coverage comes during the General Enrollment Period (GEP), which takes place every Jan. 1 to March 31.Â
Ramsey again offers a warning about the big financial setback — and the longevity of it — that those procrastinating this long will confront. He explains that people should “pretty much never” take this approach.
“Using the GEP to enroll usually comes with a penalty in the form of higher premiums — and they last for the rest of your life,” Ramsey wrote.
There is also an Open Enrollment Period (OEP) that runs from Oct. 15 to Dec. 7. But Ramsey explains that this is not the time to enroll in Medicare for the first time.
The OEP exists for people who are already enrolled in Medicare to switch plans or to make some changes to an existing plan.
There is also a Medicare Advantage Open Enrollment Period that happens Jan. 1 to March 31. People can use this to change Advantage plans, drop Advantage to use Original Medicare, and to make changes to their prescription drug coverage.
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