The Biggest Medicare Mistakes That Can Cost Federal Retirees

Medicare is the most common healthcare coverage in the U.S. Nearly 70 million Americans rely on Medicare, with healthcare ranking among the biggest expenses that retirees face. Unfortunately, a majority of Americans, including federal retirees, wish they had a better understanding of Medicare.

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This misunderstanding has resulted in missed Medicare enrollment deadlines, delayed Medicare enrollment and the choice of the wrong type of Medicare coverage; namely, Original Medicare versus Medicare Advantage. These mistakes can result in federal retirees overpaying for Medicare.

This column presents a list of the most common mistakes that federal retirees make when it comes to Medicare and what they should do to avoid them.

1. Skipping enrollment during one’s Initial Enrollment Period (IEP)

Any individual who has received a monthly Social Security retirement benefit or a monthly Railroad Retirement Board retirement benefit for at least four months before turning 65 will be automatically enrolled in Medicare Part A and Medicare Part B. Everyone else who is Medicare-eligible has a seven-month initial enrollment period (IEP) that starts three months before an individual turns 65 and concludes three months after. If enrollment does not occur during the IEP, the individual’s Medicare start date gets pushed off and the individual may face a lifetime late-enrollment penalty. Federal retirees are advised to “set an alarm” for Medicare enrollment at the beginning of their IEP.

2. Not enrolling in Medicare Part B on time

The Medicare Part B late enrollment surcharge is 10 percent of the standard monthly premium for every 12 months an individual went without enrolling in Medicare Part B. The following is an example of the late enrollment surcharge for the year 2026, based on the current Medicare premiums:

• Standard premium (no delay): $202.90/month
• Delayed 24 months: 20% surcharge: $243.48/month
• Delayed 36 months: 30% surcharge: $263.77/month

Over a 25-year enrollment, a three-year delay adds up to a total of $18,246 in late enrollment surcharges. This is on top of the standard premium for coverage the individual would have had to pay annually.

3. Not understanding how the Federal Employees Health Benefits Program (FEHB) coordinates with Original Medicare

Federal retirees who are eligible and keep their Federal Employees Health Benefits Program (FEHB) coverage in retirement are fortunate for two reasons: (1) the federal government continues to pay an average of 72 to 75 percent of their FEHB premiums; and (2) when they enroll in Original Medicare (Medicare Part A and Medicare Part B), they do not have to shop around for a Medigap insurance policy. This is because their FEHB plan is considered a Medicare supplement policy and usually pays whatever health care expenses Original Medicare does not pay. As such, federal retirees enrolled in Original Medicare are not “overinsured.” Their FEHB insurance coordinates with Original Medicare, resulting in a federal retiree paying minimal out-of-pocket health care expenses.

4. Losing sight of Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges

There are two things that make IRMAA charges particularly painful for high-income federal retirees: (1) the income brackets (income tiers) are “cliffs,” so going one dollar over a threshold can mean hundreds of dollars in extra Medicare Part B and Medicare Part D premiums for the year; and (2) the “lookback” period is two years. A Medicare beneficiary’s 2026 monthly Part B and Part D premiums could be unusually high due to a one-time event during 2024 that elevated 2024 modified adjusted gross income (MAGI). This one-time event could have resulted from exercising stock options, a large Roth individual retirement arrangement (IRA) conversion, or a large required minimum distribution.

There are three ways to manage IRMAA:

• Plan around the “cliffs.” Coordinate any large income amount in order to not accidentally cross an income threshold.
• Submit Social Security Form SSA-44 if one’s income decreases due to a life-changing event such as retirement, divorce, or the death of a spouse.
• Coordinate Roth IRA or Roth Thrift Savings Plan (TSP) in-plan conversions in one’s early 60s (before age 63) in order to not have the additional income show up and affect Medicare monthly premiums starting at age 65.

5. Assuming Medicare coverage also covers a spouse

Unlike the FEHBP, Medicare enrollment applies only to one spouse: the spouse who enrolls. There is no “family coverage” associated with Medicare. If a Medicare beneficiary’s spouse is not eligible for Medicare, that spouse will have to obtain separate health insurance coverage. For a married federal retiree enrolled in Medicare and in the FEHBP, the retiree’s spouse can continue coverage on the FEHBP and, when first eligible for Medicare, will enroll in Medicare at that time.

6. Assuming Medicare covers long-term care (LTC)

Medicare covers limited skilled nursing stays, generally up to 100 days following a qualifying hospital admission. But Medicare does not cover the longer-term custodial care that most aging people need at some point in their lives. Custodial care includes “activities of daily living” (ADLs): bathing, dressing, eating, transferring, toileting and continence. LTC is expensive. Private nursing home care costs on average $116,000 (2026) per year, and the average stay in a private nursing home is three to six years. LTC insurance is one way to pay for LTC.

7. Failing to read the Medicare Annual Notice of Change (ANOC)

Every September, insurance companies mail an ANOC document to every Medicare beneficiary enrolled in a Medicare Advantage plan or a Medicare Part D (Prescription Drug coverage) plan. The ANOC details what is changing in a plan during the following year, including premiums, deductibles, copays, drug formularies, the provider network, preferred pharmacies and the out-of-pocket maximum. Medicare beneficiaries who want to change their Medicare Advantage plan and/or Medicare Part D plan for next year may do so during the annual Open Enrollment Period (OEP), which will be held this year from October 15 to December 7, 2026. New plans take effect January 1, 2027.

8. Not understanding Medicare “assignment rules”

Federal retirees enrolled in Original Medicare are advised to make sure that their health care providers and hospitals accept Medicare patients and therefore accept Medicare “assignment.” Accepting Medicare assignment means that a health care provider is willing to accept the Medicare fee schedule amount for the services they perform. Retirees who frequent nonparticipating providers may have to pay more out-of-pocket because nonparticipating providers can charge up to 15 percent more than Medicare’s approved rate.

Retirees enrolled in a Medicare Advantage plan are advised to use network providers. Some Medicare Advantage plans will not cover out-of-network care, and other plans will pay less if the beneficiary uses out-of-network hospitals, doctors and other medical providers.