The 4 Medicare Mistakes That Cost People the Most Money

Bad information about Medicare gets passed around as true. These four myths cost real seniors real dollars every year — here's what the rules actually say.

SHORT ANSWER: Four of the most common Medicare misconceptions can cost you serious money if you get them wrong: (1) that you must enroll at 65 no matter what, (2) that any employer drug coverage protects you from the Part D penalty, (3) that HSA contributions automatically stop at 65, and (4) that COBRA counts as coverage that pushes back your Medicare deadlines. All four are wrong — sometimes dangerously so. Here's what the actual rules say.

Medicare is complicated, and bad information gets passed around freely. Some of it comes from well-meaning friends. Some of it comes from HR departments that don't specialize in Medicare. Some of it comes from people who did their own research and stopped one Google search too soon. Whatever the source, these four particular mistakes come across our desk over and over — and every one of them can lead to lifelong penalties, unnecessary premiums, or gaps in coverage. This guide walks through each one plainly, so you know what to actually do.

Mistake #1 - "I have to enroll in Medicare A and B at 65 or I'll be penalized forever."

Not always. Whether you actually need to enroll depends on two things: whether you (or a spouse) have qualifying employer health coverage tied to CURRENT employment, and how big that employer is.

LARGE EMPLOYERS (20 or more employees — or 100+ if you're Medicare-eligible due to disability). Your group health plan is primary and Medicare A and B are optional. You can safely delay both — no penalty — as long as your group coverage stays in place. When you eventually leave the job or lose coverage, you'll have an 8-month Special Enrollment Period to sign up without penalty. Many people in this situation enroll in premium-free Part A anyway, but watch out: enrolling in Part A ends your HSA eligibility (that's Mistake #3).

SMALL EMPLOYERS (fewer than 20 employees — or fewer than 100 if you're Medicare-eligible due to disability). In this case, Medicare A and B become your PRIMARY coverage, and the group plan becomes secondary. We always recommend enrolling in both when you're first eligible. Here's why: if you don't enroll, your group plan may NOT pay as primary — because in small-group situations, it isn't the primary payer. That leaves a potential coverage gap. Claims that Medicare would have paid as primary may end up being your responsibility instead, and the group plan may only pay its secondary share (or nothing at all) on those claims.

The exception is if your group plan carrier confirms in writing that Part B is not needed. This can happen in cases like association health plans that classify the employer as a large employer for coverage purposes. Get that confirmation in writing before you skip Part B.

The bigger question for small-employer employees. Once you've enrolled in Part A and B, the real decision is whether to stay on the group plan as secondary coverage or transition fully to Medicare with a Medicare Supplement (Medigap) and a Part D drug plan or pick a Medicare Advantage Prescription Drug (MAPD) Plan. Depending on the group plan's cost, network, and drug coverage, moving fully to Medicare is often the better financial and healthcare choice.

And if you don't have qualifying employer coverage at 65? You need to enroll during your 7-month Initial Enrollment Period — the three months before your birthday month, your birthday month, and the three months after — to avoid a lifelong Part B penalty.

Mistake #2 - "I have drug coverage through my employer, so I don't need to worry about Part D."

Only if your employer drug coverage is "creditable" — meaning it meets or exceeds Medicare's Part D minimum coverage standards. Many employer plans do. Some don't. And the difference matters a lot.

If your plan is creditable, you can delay enrolling in Part D as long as you have that coverage. No penalty. When you eventually need a Part D plan, you'll have 63 days to sign up without a penalty applying.

If your plan is non-creditable and you don't enroll in a Part D plan within 63 days of becoming eligible, a late enrollment penalty starts accumulating: roughly 1% of the national base Part D premium for every month you were eligible and uncovered. That penalty gets added to your Part D premium — and it lasts for the rest of your life.

How do you know which category you're in? Your employer's HR department is required to give you a written notice each year (called a Creditable Coverage Disclosure) telling you exactly whether your drug coverage is creditable. If you can't find it, ask them for a copy. Don't assume. This is one of the easiest ways to accidentally sign yourself up for a lifetime of higher premiums.

Mistake #3 - "I have to stop my HSA contributions the day I turn 65."

Not necessarily. The trigger is enrolling in Medicare — not your birthday. As long as you don't sign up for any part of Medicare (including premium-free Part A), you can keep contributing to your Health Savings Account up to the annual IRS limits.

This trips people up because most people DO enroll in Part A at 65 since it's premium-free. But if you're still working, still covered by a large-employer group health plan, and want to keep contributing to your HSA, holding off on Part A enrollment can be the right move. The moment you enroll in Part A — even retroactively — HSA contributions must stop.

One catch to know: if you delay Medicare enrollment past 65 and later apply for Social Security retirement benefits, Medicare Part A gets applied retroactively for up to 6 months. If you were still contributing to your HSA during those retroactive months, the IRS considers those contributions ineligible and you'll owe taxes and possibly a penalty on them. That's why timing matters — and why people planning to squeeze in another year or two of HSA contributions should stop contributing at least 6 months before they enroll in Social Security or Medicare.

The strategy of delaying Medicare to keep contributing to an HSA can be valuable — but only in specific situations. If you're weighing it, run the numbers first.

Mistake #4 - "I have COBRA now, so I can enroll in Medicare when it runs out."

This one is dangerous, and we see it burn people every year. COBRA does not count as coverage based on current employment. So it does NOT extend your Medicare enrollment window.

Here's how it actually works: when you leave a job after age 65 (i.e, you are past your 7-month Initial Enrollment Period), your 8-month Special Enrollment Period for Medicare Part B starts on the last day of your employment — not on the day your COBRA ends. If you elect COBRA and use the full 18 months of coverage, your Medicare SEP has already expired more than 10 months ago.

Miss the SEP and you have to wait for the General Enrollment Period (January 1 – March 31) to sign up, coverage doesn't start until the following month, and you'll owe a Part B late enrollment penalty — an extra 10% of the standard Part B premium for every full 12 months you were eligible and didn't enroll. That penalty lasts as long as you have Part B.

There's also a claims problem. Once you're 65 and on COBRA, Medicare is considered your primary coverage — even if you haven't enrolled. So your COBRA insurer may only pay as if Medicare covered its share, and you'll owe the rest out of pocket.

The rule of thumb: if you're 65 or older when your employment ends, don't rely on COBRA. Enroll in Medicare Part B right away and use it as your primary coverage.

Why These Mistakes Are So Common

Bad information comes from good sources.

None of these mistakes come from lazy thinking. They come from listening to trusted people who happen to be wrong on Medicare specifics.

HR departments know their group health plans inside and out — but Medicare rules are a different regulatory world. A well-meaning HR rep might tell you your drug coverage is fine, or that COBRA counts as employer coverage, without realizing Medicare treats those situations very differently.

Friends and family members share what worked for them, without knowing whether the situations are actually the same. What was right for a spouse's cousin at a 500-employee company may be exactly wrong for you at a 15-employee company.

Even Medicare's own website can be confusing because the rules have exceptions layered on exceptions. That's where a licensed independent Medicare broker comes in. Our job is to look at your specific employer situation, your current coverage, your timing, and your health circumstances — and give you the right answer for you. If you'd like a second opinion before you make any big Medicare decision, we're happy to help.

Have Questions? We're Here. Medicare rules are full of "it depends" situations, and one wrong assumption can mean lifelong penalties or gaps in coverage. If you're approaching 65, working past 65, weighing COBRA, or trying to figure out your HSA, give us a call. We're happy to look at your specific situation and give you a straight answer.

Jamon White · TX Lic. 1316404 Four Oaks Medicare Planning 📞 512-298-5404 ✉️ jwhite@gofouroaks.com 🌐 gofouroaks.com

Disclaimer

Four Oaks Medicare Planning is not connected with the Federal Medicare Program or the Social Security Administration.