What you don’t know about Medicare could cost you

The top Medicare missteps
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Turning 65 is a milestone in many respects, one of which is qualifying for Medicare, the federally sponsored health-insurance program. Yet for many, the Medicare process can be daunting, from how to enroll to which of the various options to select.

"It is complicated and there are some surprises for people as they age into Medicare, " said Fred Riccardi, director of client services at the Medicare Rights Center, a national consumer group.

To reduce some of the confusion, here's a look at the most common questions about how and when to enroll and what it will cost. If you don't follow the rules, you will get hit with penalties and permanently higher premiums.

— By CNBC's Jessica Dickler
Posted 1 June 2016

What do I have to do?
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Your initial enrollment period starts three months before the month you turn 65 and extends for three months after that month. If you're not working, then you need to sign up at this point, ideally closer to the start of that seven-month window so coverage can begin the month you turn 65.

Provided that you've paid your dues in the workforce for at least 10 years, you'll qualify for Part A at no cost, which covers hospital stays, skilled nursing facilities and hospice care. If you (or your spouse) haven't logged enough working hours over the years to qualify for free coverage outright, you still need to sign up, but you'll have to cover the premium — up to $411 a month — out of pocket.

You should also enroll in Part B, which covers doctor visits and outpatient care, but requires a monthly premium. Most people pay the standard Part B premium of $121.80 (but it could be higher depending on your income). If you can't afford the premiums or have limited income, there are programs available through your local department of social services to cover that expense.

What can I opt to do?
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You may also choose to enroll in Medicare Part C, or Medicare Advantage. These are plans from private insurers that can add more coverage such as vision, dental or prescription benefits. The federal government estimates that the average Medicare Advantage monthly premium will cost about $32.60 in 2016.

If you have Medicare Parts A and B, you can alternatively apply for a supplemental insurance policy, called Medigap, to help cover health costs like copayments, coinsurance and deductibles.

If you only want prescription coverage, you can opt for Medicare Part D instead of C. The average premium for Part D is about $32.50 a month.

You don't have to sign up if you don't need prescription drugs or you have other drug coverage that is better than Medicare's. However, enrolling in the Part D plan ensures that you have coverage if or when you suddenly need it.

To weigh what's best, your State Health Insurance Assistance Program, or SHIP, has free counseling to help find the right plan.

What if I miss the enrollment window?
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The good news is that if you are already receiving Social Security, then the SSA will automatically sign you up for Medicare Parts A and B and the monthly premium will be automatically deducted from your Social Security checks. But if you deferred receiving Social Security benefits, then it's up to you to enroll within the specific seven-month time frame around your 65th birthday.

If you miss that window, not only will you face a pricey penalty in the form of surcharges added to your premiums for future years, but also a potentially more problematic gap in coverage. The next opportunity to enroll won't be until the General Enrollment Period, which runs from Jan. 1 to March 31, which would delay your coverage until July 1.

What about my spouse?
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There's no family coverage in Medicare so your spouse is on his or her own. Once you qualify for Medicare, then a younger spouse must find alternate coverage, either through an employer, through COBRA or through the insurance exchange.

If, alternatively, you are already covered by a younger spouse's employer plan, then you can delay enrolling in Medicare at 65 (with certain contingencies).

What if I work past 65?
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These days about a third of those ages 65 to 69 still work, according to AARP. And as long as you're actively working and covered by your current employer's health plan (coverage from COBRA or a former employer doesn't count), you can delay Medicare enrollment without penalty until your employment ends. At that point, there is an eight-month Special Enrollment Period, during which time you can enroll in Medicare without a penalty.

However, for small businesses, it's a different story. Employers with fewer than 20 employees can still require you to enroll in Medicare at age 65 regardless of whether there is health insurance at work. In that case, you must sign up for Medicare as you would if you were retired.

In every case, it's best to check as your 65th birthday approaches, advises Patricia Barry, senior editor of the AARP Bulletin and author of "Medicare for Dummies. "

To ask about or enroll in Medicare, you can call your local Social Security office or go online at www.socialsecurity.gov.