Health Care and the Real Cost of Aging
To better plan for your retirement and future health care needs, you need to understand the real cost of aging for seniors. This will require you to take a look at current and future health care expenses, while taking into account your income, savings/assets, longevity, and end-of-life considerations. Currently, many Americans who retire at age 65 can easily live until at least age 85, meaning that you will need to have enough savings to last 20 years or more. You also need adequate Medicare coverage to address your health care needs over two decades.
Your estimated costs under Original Medicare
Costs for Original Medicare (Part A and Part B) are fairly similar for most beneficiaries. Medicare Part A (hospital insurance) is premium-free for most beneficiaries, but you need to meet a deductible of $1,364 in 2019 for each benefit period before you start receiving coverage. Medicare Part A covers hospital stays for the first 60 days in each benefit period, but after that initial period, you have to pay the following in coinsurance (in 2019):
- Days 61 to 90: Daily coinsurance cost of $341
- Days 91 and beyond: $682 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
- Beyond lifetime reserve days: All costs
For most new enrollees, Medicare Part B (Medical Insurance) requires a monthly premium. The standard premium amount is $135.50 in 2019. If your modified adjusted gross income from two years ago is above a certain amount, you may pay a higher premium.
Under Medicare Part B, many services require a 20% copayment after you’ve met the annual deductible of $185 in 2019.
Your estimated costs under Medicare Part C and Part D
If you need extra health benefits that aren’t covered by Original Medicare, like routine dental and vision, or general wellness benefits, you may be able to get coverage through a Medicare Advantage plan. Medicare Advantage plans are available through private insurers and are another way to get your Medicare coverage. Under Medicare Part C, you get your Medicare benefits through the private Medicare Advantage plan instead of directly through the government-run Original Medicare. Medicare Advantage plans must cover at least the same benefits as Original Medicare, Part A and Part B, and some plans also cover additional benefits. Since you will still have your Original Medicare, Part A and Part B, your Part B premium must still be paid in addition to the Medicare Advantage plan premium. Be aware that a Medicare Advantage plan is a private insurance plan, so its premiums will vary according to the plan you choose.
Your estimated Medigap costs
Since Original Medicare (Part A and Part B) probably won’t cover all of your health costs in full, you may want to purchase a Medicare Supplement (also known as Medigap) insurance plan. Medigap plans are available through private insurance companies, and they’re designed to fill the coverage gaps in Original Medicare. (Medigap plans don’t work and may not be used with Medicare Advantage plans, so you wouldn’t be able to buy both of these plan types.)
Medicare Supplement insurance plans may pay for out-of-pocket costs not covered by Original Medicare, including copayments, coinsurance, deductibles, and overseas health coverage. The specific covered benefits will depend on the Medigap plan, with most states offering up to 10 standardized plan types.
Your estimated prescription drug coverage costs
Medicare Part D is optional prescription drug coverage. This kind of coverage is included in most Medicare Advantage plans, also known as Medicare Advantage Prescription Drug plans. However, if you have Original Medicare — even if you add Medigap coverage — you still don’t have prescription drug coverage unless you enroll in a stand-alone Medicare Part D Prescription Drug Plan (PDP).
Some of your Medicare Part D costs may include plan premiums, deductibles, copayments, and coinsurance. The actual costs depend on which medications you take and how many, and what kind of plan you have. Medicare Advantage Prescription Drug plans and Medicare Part D Prescription Drug Plans typically place covered medications into “tiers,” with different costs for the medications on each tier. There are copayments and coinsurance for most medications and prescription costs will vary by plan.
The Affordable Care Act (ACA) has reduced the cost of prescription drugs for seniors who fall into the coverage gap, also known as the “donut hole.” Medicare beneficiaries will benefit from decreasing prescription drug costs each year until 2020, when the coverage gap will be closed thanks to legislation put in place by the ACA.
Your estimated long-term care costs
Like many Americans, you may need long-term care at some point after your retirement. As a senior, the cost of long-term care is perhaps the greatest expense you will have to face. The cost of long-term care depends on a variety of factors, including the type of care you need, the duration, your place of residence, and the provider you use. Most long-term care is personal care, or help with daily tasks like bathing, eating, and getting dressed. Medicare doesn’t cover this type of long-term care, although it does cover short-term, skilled nursing home care if you qualify.
If you suffer from a terminal illness, you may want to seek hospice care for help. Medicare Part A offers extensive coverage for hospice care, as long as you meet certain requirements.
This information is not a complete description of benefits. Contact the plan for more information.
Limitations, copayments, and restrictions may apply.
Benefits may change on January 1 of each year.