The $10k Medicare Mistake: How to Avoid Costly Errors When Enrolling at 65 (Do THIS First)
One checkbox mistake on your Medicare enrollment cost Sarah $3,700 in penalties—and that was just the beginning.
Nearly 780,000 Medicare beneficiaries are paying a Part B Late Enrollment Penalty right now. These penalties increased their monthly premiums by around 27%. That’s an extra $50 or more every month for the rest of their lives.
Medicare enrollment at 65 seems simple. At 65, you sign up, and you’re covered. But small mistakes during enrollment can cost you thousands of dollars over your retirement years.
This guide shows you the most expensive Medicare mistakes people make and exactly how to avoid them. You’ll learn the current 2025 costs, penalty calculations, and step-by-step actions to take before turning 65.
The $10k Medicare Mistakes
These enrollment errors look small but cost a lot of money over time. From lifetime penalties to surprise bills, here are the Medicare mistakes that can wreck your retirement budget.
1. Missing Your Initial Enrollment Period
The biggest mistake costs the most money. Missing your Medicare enrollment deadline triggers a penalty that follows you for life.
Your Initial Enrollment Period lasts 7 months. It starts 3 months before your 65th birthday and ends 3 months after. Miss this window without qualifying coverage, and you pay extra forever.
Here’s how the math works. The Part B penalty is 10% for each full 12-month period you could have signed up but didn’t. Wait 2 years to enroll? You pay a 20% penalty on top of your regular premium.
In 2025, the standard Part B premium is $185 per month. A 2-year delay adds a $37 monthly penalty. Your total becomes $222 per month instead of $185.
That penalty never goes away. Over 20 years of retirement, you’ll pay an extra $8,880 just for being 2 years late. Wait longer, and the penalty gets worse.
The penalty hits even if you thought you were covered. Many people assume their employer’s insurance protects them from penalties. It doesn’t always work that way.
What to do: Mark your calendar 6 months before your 65th birthday. Set reminders for your enrollment period. Don’t assume you’re automatically enrolled unless you’re already getting Social Security benefits.
2. Misunderstanding Creditable Coverage Rules
Not all health insurance counts as “creditable coverage” for Medicare purposes. Get this wrong, and you’ll face penalties even if you had insurance the whole time.
Employer coverage with fewer than 20 employees doesn’t count as creditable for Medicare Part B. If you work for a small company, Medicare becomes your primary insurance at 65. Your employer plan becomes secondary.
COBRA coverage never counts as creditable for Part B delays. Neither does most retiree coverage. These plans might be great insurance, but they won’t protect you from Medicare penalties.
Bob learned this the hard way. He worked for a company with 15 employees and assumed his coverage let him delay Medicare. Wrong. When he finally enrolled at 67, he owed a 20% penalty for life.
For prescription drug coverage, you can’t go more than 63 days without creditable coverage. Even a short gap triggers the Part D penalty.
The Part D penalty is 1% of the national base premium for each month you go without coverage. In 2025, that’s about $0.37 per month of delay. It doesn’t sound like much, but it adds up over time and gets worse if drug prices rise.
What to do: Check with your HR department about your coverage. Ask specifically if it’s “creditable coverage for Medicare purposes.” Get this in writing. If you’re not sure, enroll in Medicare on time.
3. Getting Hit with IRMAA Surcharges
High earners pay extra for Medicare through Income-Related Monthly Adjustment Amounts (IRMAA). These surcharges can add hundreds to your monthly premiums.
IRMAA kicks in at $106,000 for single filers and $212,000 for married couples in 2025. These numbers are based on your income from 2 years ago. So your 2025 IRMAA uses your 2023 tax return.
The surcharges work like a cliff. Earn $106,001 as a single person, and you pay an extra $74.20 per month for Part B. That’s $890.40 per year. Over 20 years, it costs $17,808 extra.
The penalties get steeper as income rises. At the highest level, you could pay an extra $443.90 per month for Part B alone. Add Part D surcharges, and high earners can pay over $500 extra monthly.
Many people get surprised by IRMAA because they don’t plan for the 2-year delay. Sell a house, cash out investments, or have a good year in business? You might trigger IRMAA two years later.
What to do: Review your 2023 tax return to see if you’ll owe IRMAA in 2025. If you had a one-time income spike, you might be able to appeal. Plan future income moves carefully to avoid surprise surcharges.
4. Choosing Plans Based on Premium Alone
The cheapest monthly premium often costs the most money overall. Plans with low premiums usually have high deductibles, limited drug coverage, or narrow provider networks.
Medicare Advantage plans often advertise $0 premiums. But many of these plans added deductibles and higher cost-sharing for 2025. You might pay nothing per month, but thousands when you need care.
Drug coverage varies wildly between plans. The same medication might cost $10 in one plan and $300 in another. Plans also change their drug lists every year. Your medication might not be covered next year.
In 2025, Part D has a $2,000 out-of-pocket cap for prescription drugs. But how quickly you hit that cap depends on your plan’s design. Some plans reach the cap faster than others for the same medications.
Provider networks change, too. Your doctor might be in-network this year but out-of-network next year. Going out-of-network can double or triple your costs.
What to do: Use the Medicare Plan Finder at Medicare.gov. Enter your medications and preferred doctors. Compare total yearly costs, not just monthly premiums. Check if your doctors and hospitals are in the plan’s network.
5. Not Reviewing Drug Formularies Every Year
Medicare drug plans change their coverage every year. The medication that cost $20 last year might cost $200 this year if it moved to a different tier.
In 2025, there are 35% fewer standalone prescription drug plans available compared to 2024. That means fewer choices and more plan changes. Some plans disappeared completely, forcing people to choose new coverage.
Plans often move popular drugs to higher-cost tiers or add restrictions like prior authorization. They might require you to try cheaper alternatives first. Your pharmacy might not be preferred anymore, increasing your costs.
The average person in the Medicare coverage gap spent $1,216 on prescriptions in 2023. But starting in 2025, the new $2,000 cap should help reduce these costs—if you’re in the right plan.
Many people stick with the same plan year after year without checking if it still meets their needs. This loyalty can cost hundreds or thousands annually.
What to do: Review your plan every fall during open enrollment (October 15 to December 7). Check if your medications are still covered at the same cost. Use the Medicare Plan Finder to compare options with your current drug list.
6. Medicare Advantage vs. Original Medicare Confusion
Choosing the wrong Medicare path can lock you into higher costs and limited options. The decision between Medicare Advantage and Original Medicare affects your care and costs for years.
Medicare Advantage plans have annual out-of-pocket limits ($9,350 for in-network care in 2025). Original Medicare has no out-of-pocket limit unless you buy a supplement plan.
But Medicare Advantage limits you to specific doctors and hospitals. Go out-of-network, and you might pay full price. With Original Medicare, you can visit any doctor who takes Medicare, no matter where you are in the country.
You can’t buy a Medigap supplement plan while you’re in Medicare Advantage. If you want to switch to Original Medicare later, you might not qualify for Medigap due to health issues. This could leave you with unlimited out-of-pocket costs.
First-time Medicare Advantage members get a 12-month trial period. You can switch back to Original Medicare and buy certain Medigap plans without health questions. But this protection only lasts one year.
What to do: Decide if you want network restrictions in exchange for lower premiums and extra benefits. If you travel frequently or want to keep your current doctors, Original Medicare might work better. If you want predictable costs and don’t mind networks, Medicare Advantage could save money.
7. HSA Contribution Errors After Medicare
Enrolling in any part of Medicare ends your ability to contribute to a Health Savings Account. Even free Medicare Part A stops HSA contributions.
This catches many working people off guard. They enroll in Medicare Part A because it’s free, then get tax penalties for continuing HSA contributions.
HSA contributions offer triple tax benefits: deductible going in, tax-free growth, and tax-free withdrawals for medical expenses. Losing this benefit can cost thousands in tax savings annually.
Federal employees face a particular challenge. Their employer insurance often lets them delay Medicare Part B without penalties. But enrolling in Medicare Part A to cover hospital costs stops their HSA contributions.
The IRS considers excess HSA contributions a mistake that needs fixing. You’ll owe taxes and penalties if you don’t correct the error by your tax filing deadline.
What to do: If you want to keep contributing to your HSA, delay all parts of Medicare until you retire or lose your employer coverage. Keep track of your enrollment timeline to avoid contribution errors.
8. Employer Insurance Coordination Mistakes
Getting the coordination wrong between Medicare and employer insurance can leave you with unexpected bills and coverage gaps.
Many people think Medicare always pays first. It doesn’t. If you’re still working and have employer coverage from a company with 20+ employees, your employer plan pays first. Medicare pays second.
If you work for a small company (under 20 employees), Medicare pays first even if you’re still working. Your employer plan might not pay anything unless Medicare pays first.
Retiree coverage works differently from active employee coverage. Once you retire, Medicare becomes primary regardless of your employer plan.
COBRA coverage doesn’t count as active employment. If you’re on COBRA, Medicare pays first. Your COBRA plan becomes secondary.
Some people delay Medicare Part B while they have employer coverage, then forget to enroll when their employer coverage ends. You only have 8 months after your employer coverage ends to enroll in Part B without penalties.
What to do: Understand who pays first in your situation. Keep documentation of your employer coverage to prove you had creditable coverage. Set reminders to enroll in Medicare when your employer coverage ends.
How to Avoid Costly Errors When Enrolling at 65 (Do THIS First)
Smart planning before your 65th birthday prevents expensive mistakes. Here’s your step-by-step action plan to enroll in Medicare without penalties or surprises.
1. Create Your Medicare Timeline 6 Months Before Age 65
Start planning for Medicare at least 6 months before your 65th birthday. This gives you time to research options and avoid rushed decisions.
Your Initial Enrollment Period starts 3 months before your birth month and ends 3 months after. Mark these dates on your calendar. Set phone reminders for key deadlines.
If you’re still working, decide whether to delay Medicare Part B or enroll on time. This decision affects your costs and coverage for years.
Create a timeline that includes your current insurance end dates, Medicare enrollment deadlines, and when new coverage starts. This prevents gaps that could trigger penalties.
What to do now: Get a calendar and mark your Medicare enrollment period. Set reminders for 6 months, 3 months, and 1 month before your 65th birthday.
2. Verify Your Current Coverage Status
Find out if your current insurance protects you from Medicare penalties. This determines if you can delay enrollment without penalties.
Contact your HR department or benefits administrator. Ask specifically: “Is our prescription drug coverage creditable for Medicare Part D purposes?” Get the answer in writing.
Find out how many employees your company has. Companies with 20 or more employees usually provide creditable coverage for Part B delays. Smaller companies typically don’t.
If you have COBRA or retiree coverage, these don’t count as creditable for Part B delays. You’ll need to enroll in Medicare Part B on time to avoid penalties.
Get a creditable coverage letter from your current insurance company. This document proves you had qualifying coverage if Medicare questions your enrollment timing later.
What to do now: Call your benefits department this week. Ask about creditable coverage and company size. Request written confirmation and keep it with your important documents.
3. Calculate Your Income for IRMAA Planning
IRMAA surcharges are based on your income from 2 years ago. For 2025, Medicare looks at your 2023 tax return to determine surcharges.
Pull out your 2023 tax return and find your Modified Adjusted Gross Income (MAGI). For most people, this equals your Adjusted Gross Income with some deductions added back.
If your 2023 MAGI was over $106,000 (single) or $212,000 (married filing jointly), you’ll pay IRMAA surcharges in 2025. The surcharges range from $74 to $444 monthly for Part B.
If you had a one-time income spike in 2023 (sold a house, cashed out investments, etc.), you might be able to appeal your IRMAA determination. Life changes, like retirement, marriage, or divorce, can qualify for appeals.
Think ahead before making big income decisions. Large Roth conversions, investment sales, or business income can trigger IRMAA surcharges two years later.
What to do now: Find your 2023 tax return and calculate your MAGI. If you’re close to the IRMAA thresholds, consider working with a tax professional to plan future income moves.
4. Research and Compare Your Plan Options
Use Medicare’s official Plan Finder tool at Medicare.gov to compare your options. This tool shows costs and coverage for plans in your area.
Make a list of all your current medications, including dosages and how often you take them. Enter these into the Plan Finder to see which plans cover your drugs at the lowest cost.
List your current doctors, hospitals, and specialists. Check if they accept Medicare and which plans include them in-network.
Look at what you’ll pay for the whole year, not just the monthly price. Include deductibles, copays, and out-of-pocket maximums. A plan with a higher premium might cost less overall.
Consider whether you want the freedom of Original Medicare or the cost predictability of Medicare Advantage. Original Medicare lets you see any doctor who accepts Medicare. Medicare Advantage usually costs less but limits your provider choices.
What to do now: Visit Medicare.gov and create an account. Use the Plan Finder tool with your medications and preferred doctors. Compare at least 3 different options.
5. Prepare Required Documentation and Enrollment
Gather the documents you’ll need for Medicare enrollment. Having everything ready prevents delays and missed deadlines.
You’ll need your Social Security number, employment history, and current insurance information. If you’re not automatically enrolled, you’ll need to contact Social Security to enroll.
Keep records of all your creditable coverage periods. This includes start and end dates for employer insurance, COBRA, and any other qualifying coverage.
If you’re delaying Medicare Part B because of employer coverage, keep documentation proving you had creditable coverage. You’ll need this when you enroll later.
Set up your Medicare.gov account once you’re enrolled. This lets you manage your coverage, compare plans during open enrollment, and access important Medicare information.
Don’t wait until the last minute to enroll. Processing can take time, and you want your coverage to start when you need it.
What to do now: Gather your Social Security card, recent tax returns, and current insurance cards. If you’re not getting Social Security benefits, call 1-800-772-1213 to start your Medicare enrollment.
