5 Medicare Mistakes That Could Cost You Thousands (and How to Avoid Them)

Medicare is one of the most important financial decisions you will make as you approach retirement — and the consequences of getting it wrong can follow you for the rest of your life. From permanent late enrollment penalties to choosing a plan that does not fit your health needs, the wrong move can cost you thousands of dollars in unnecessary expenses every single year. Here are the five most common Medicare mistakes we see North Carolina residents make, and exactly how to avoid each one.

Why Medicare Mistakes Are So Costly

Unlike most insurance decisions, Medicare enrollment errors often come with penalties that never go away. A late enrollment penalty is added to your monthly premium permanently. Choosing the wrong plan type can leave you with surprise medical bills in the tens of thousands. And once certain enrollment windows close, you may not get another opportunity to change your coverage for an entire year — or in some cases, ever again without medical underwriting.

The complexity of Medicare is part of the problem. With four parts (A, B, C, and D), multiple enrollment periods, income-related surcharges, and dozens of plan options in North Carolina alone, it is easy to see how well-intentioned people end up making costly errors. The good news is that every one of these mistakes is entirely preventable with the right information and planning.

Mistake #1: Not Enrolling in Medicare on Time

This is the single most expensive Medicare mistake, and it is more common than you might think. Many people assume Medicare enrollment is automatic, or that they can sign up whenever they want. In reality, Medicare has strict enrollment windows, and missing them triggers penalties that last for the rest of your life.

How the Part B Late Enrollment Penalty Works

If you do not sign up for Medicare Part B during your Initial Enrollment Period (the 7-month window around your 65th birthday) and you do not have qualifying employer coverage, you will pay a 10% penalty on your Part B premium for every full 12-month period you were eligible but not enrolled.

This penalty is permanent. It never goes away. Here is what that looks like in real dollars:

A person who delays Part B enrollment by just two years will pay nearly $10,000 extra over a typical 20-year retirement — and that amount grows as the base premium increases each year.

The Part D Late Enrollment Penalty

Part D (prescription drug coverage) has its own late enrollment penalty: 1% of the national base beneficiary premium for every full month you went without creditable drug coverage. In 2026, the national base beneficiary premium is approximately $34.70, so each month without coverage adds about $0.35 to your monthly premium — permanently.

While that may sound small, 24 months without coverage adds roughly $8.40 per month, or over $100 per year, for life. And you cannot enroll in Part D at any time — you must wait until the Annual Enrollment Period (October 15 – December 7) or qualify for a Special Enrollment Period.

How to Avoid This Mistake

• Mark your calendar for your Initial Enrollment Period, which starts 3 months before the month you turn 65
• If you have employer coverage, confirm in writing that it is considered creditable coverage for both medical and prescription drug benefits
• Set a reminder to enroll within 8 months of leaving employer coverage
• When in doubt, enroll — it is far better to have overlapping coverage briefly than to face permanent penalties

Mistake #2: Choosing the Wrong Plan Type

The second most costly mistake is choosing a plan type that does not match your health needs, budget, and lifestyle. The two main paths are Medicare Advantage (Part C) and Original Medicare with a Medigap supplement. Both are legitimate options, but they work very differently, and choosing the wrong one can lead to financial hardship or inadequate coverage.

When Medicare Advantage May Be the Wrong Choice

Medicare Advantage plans can be attractive because they bundle coverage into a single plan and may include additional benefits. However, they come with significant trade-offs that catch people off guard:

• Network restrictions: You must use in-network providers for most services. If your preferred specialist is out of network, you may pay full price or be unable to see them at all.
• Prior authorization requirements: Many services require pre-approval from the insurance company, which can delay care.
• High out-of-pocket maximums: While MA plans cap your annual costs, that cap can be as high as $8,300 for in-network care in 2026. A serious illness could still cost you thousands.
• Travel limitations: Most HMO plans provide no coverage outside your service area except for emergencies. If you travel frequently or split time between states, this can be a major problem.

When Medigap May Be the Wrong Choice

On the other hand, Medigap plans offer comprehensive coverage with few restrictions but come with their own considerations:

• Higher monthly premiums: Medigap Plan G in North Carolina typically costs $120 to $250+ per month, on top of your Part B premium.
• No extra benefits: Medigap does not cover dental, vision, or hearing. You need separate plans for those services.
• Separate Part D plan needed: You must purchase a standalone prescription drug plan in addition to your Medigap policy.

How to Avoid This Mistake

• Make a list of all your current doctors and medications before choosing a plan
• Check that your doctors are in-network if considering Medicare Advantage
• Consider your health trajectory — if you have chronic conditions or anticipate needing significant care, a Medigap plan may save you money despite higher premiums
• Factor in travel plans — snowbirds and frequent travelers often fare better with Original Medicare and Medigap
• Read our detailed comparison: Medicare Advantage vs. Original Medicare with Medigap

Mistake #3: Not Reviewing Your Plan Every Year

Medicare plans change every year. Premiums go up, formularies change, provider networks shift, and new plans enter the market. Yet a surprising number of Medicare beneficiaries never review their coverage after their initial enrollment. According to a Kaiser Family Foundation analysis, fewer than 10% of Medicare Advantage enrollees and Part D enrollees switch plans during the Annual Enrollment Period each year — even when better options are available.

What Changes Year to Year

Here are the most common changes that can affect your costs and coverage:

• Formulary changes: Your plan can add, remove, or change the tier of your medications. A drug that was Tier 2 (preferred brand) this year could move to Tier 3 (non-preferred) or be removed entirely next year.
• Premium increases: Both Medicare Advantage and Part D premiums can change. A plan that was $0 this year could charge $30 or more next year.
• Provider network changes: Doctors and hospitals can leave or join networks. Your primary care doctor who is in-network today may not be next year.
• Copay and coinsurance changes: The amount you pay for office visits, specialist visits, and procedures can increase.
• Benefit changes: Extra benefits like dental coverage amounts, gym memberships, or over-the-counter allowances can be reduced or eliminated.

The Cost of Complacency

Consider this real-world scenario: A beneficiary in North Carolina takes a brand-name medication that costs $45 per month on their current Part D plan. The plan moves the drug to a higher tier the following year, increasing the copay to $95 per month. Meanwhile, a competing plan covers the same drug at $30 per month. By not switching, this person pays an extra $780 per year unnecessarily.

Multiply that across multiple medications, and the savings from an annual plan review can easily exceed $1,000 or more per year.

How to Avoid This Mistake

• Review your plan’s Annual Notice of Change (ANOC) document, which arrives every September
• During the Annual Enrollment Period (October 15 – December 7), use Medicare.gov’s Plan Finder to compare plans based on your specific medications and doctors
• Or simply call a licensed independent agent who can run a comparison for you at no cost
• Pay special attention to formulary changes, premium changes, and network changes

Mistake #4: Missing Special Enrollment Periods

Special Enrollment Periods (SEPs) are limited windows that allow you to make changes to your Medicare coverage outside the regular enrollment periods. They are triggered by specific life events, and if you miss them, you may have to wait months — or even a full year — before you can make the change you need.

Key Special Enrollment Periods

Common SEP Mistakes

The most frequent SEP-related errors we see include:

• Not knowing a SEP exists: Many people who lose employer coverage at retirement do not realize they have an 8-month Special Enrollment Period to sign up for Part B without penalty. They wait until the General Enrollment Period (January – March) and face a gap in coverage.
• Confusing COBRA with creditable coverage: COBRA continuation coverage does not count as employer coverage for Medicare purposes. If you elect COBRA at 65 instead of enrolling in Medicare, the clock on your late enrollment penalty starts ticking.
• Missing the deadline: SEPs have strict time limits. Missing them even by a few days can mean waiting until the next Annual Enrollment Period to make changes.

How to Avoid This Mistake

• Know the full list of qualifying events that trigger a SEP
• Act quickly when a qualifying event occurs — do not wait until the last minute
• Document everything: keep records of your employer coverage end date, move date, or other qualifying event
• Contact a licensed Medicare agent immediately when you experience a life change that could affect your coverage

Mistake #5: Ignoring IRMAA’s Impact on Your Premiums

The Income-Related Monthly Adjustment Amount (IRMAA) is a surcharge that higher-income Medicare beneficiaries pay on top of their standard Part B and Part D premiums. Many people are surprised by IRMAA because it is based on income from two years ago — meaning your 2024 tax return determines your 2026 IRMAA.

2026 IRMAA Brackets

At the highest IRMAA tier, you could pay $689.90 per month for Part B alone — more than three times the standard premium. Over a year, that is an additional $5,844 compared to the standard rate. Combine Part B and Part D surcharges, and high-income beneficiaries can pay over $9,000 more per year in Medicare premiums.

Common IRMAA Pitfalls

• Retirement income spikes: The year you retire, you may have a large income from selling stock, cashing in a pension, or receiving a severance package. That spike in income two years later triggers IRMAA surcharges, even though your current income may be much lower.
• Roth conversions: Converting a traditional IRA to a Roth IRA creates taxable income that counts toward your MAGI. A large Roth conversion can push you into a higher IRMAA bracket.
• Capital gains: Selling a home, business, or investment portfolio can create a temporary income spike that affects your IRMAA for years.
• Not knowing about the appeals process: If your income has dropped due to a qualifying life-changing event (retirement, death of a spouse, divorce, loss of pension), you can file Form SSA-44 to request that Social Security use your current income instead of your income from two years ago.

How to Avoid This Mistake

• Work with a financial advisor to plan the timing of retirement income, Roth conversions, and asset sales to minimize IRMAA impact
• Be aware of the IRMAA brackets and how close you are to each threshold
• If you have experienced a qualifying life-changing event, file Form SSA-44 promptly to reduce your premiums
• Consider spreading large income events across multiple tax years when possible

How to Protect Yourself from Medicare Mistakes

The common thread across all five mistakes is a lack of information at the right time. Here is your action plan to avoid all of these pitfalls:

1. Start early. Begin researching Medicare at least 12 months before you turn 65. Understand your enrollment timeline and options well before any deadlines. Our Turning 65 in North Carolina guide walks you through a complete timeline.
2. Get professional help. A licensed, independent Medicare agent can guide you through enrollment, compare plans, and help you avoid penalties — all at no cost to you. The agent’s commission is paid by the insurance carrier.
3. Review annually. Set a calendar reminder for October to review your plan and compare alternatives during the Annual Enrollment Period.
4. Keep records. Document your employer coverage dates, qualifying events, and enrollment decisions. This paperwork protects you if questions arise about penalties or eligibility.
5. Plan for IRMAA. Work with a financial advisor and your Medicare agent to coordinate retirement income planning with Medicare premium management.

Medicare may be complex, but it does not have to be overwhelming. By understanding these five critical mistakes and taking proactive steps to avoid them, you can save thousands of dollars and ensure you have the right coverage when you need it most. For a complete overview of enrollment windows and deadlines, see our Complete Guide to Every Medicare Enrollment Period.

Frequently Asked Questions