Why Your Health is the Retirement Wild Card
Author: Lane Keating
If 60 is the new 40, will you have enough money for the long haul?
The dramatic increase in life expectancy in recent years means your retirement years may be much longer than you originally anticipated. People who live to be over 65 can reasonably expect to live well into their 80s and beyond.
As you get older – particularly over 80 and above – the cost of your healthcare could escalate sharply. Plus, you are more likely to require expensive in-home services to help you get through the day – and these services are not typically covered by Medicare.
Today, most seniors depend on Medicare for their health coverage: Part A (hospital insurance), Part B (medical insurance, covering doctor visits), Part C (Medicare Advantage), and Part D (prescription drugs), plus Medigap supplemental insurance to cover most of their healthcare-related costs. These benefits are neither all-inclusive nor completely free.
There is no monthly premium for Part A coverage if you or your spouse paid Medicare taxes while working. Typically, you or spouse needs to have earned 40 credits from about 10 years of work to qualify for free coverage.
If you didn’t work or pay enough in Medicare taxes and you are 65 or older and a US citizen or legal resident for at least 5 years, you can still buy Part A coverage. There is a sliding scale that depends on how many work credits you have. Contact www.Medicare.gov to determine the exact amount you will have to pay.
Unlike regular health insurance with family plans that cover all family members, Medicare offers individual coverage for each spouse, billed separately. Part A is usually free, but there are monthly charges for Parts B (currently $134/person/month) and D. Approximately 20% of expenses are not covered by Medicare: co-payments, co-insurance, and deductibles. That means it is advisable to purchase a Medigap policy to cover the rest.
There are currently 10 standard Medigap insurance plans named A through N. Insurance companies can sell you only a “standardized” policy identified in most states by letter. All policies – regardless of state or issuing company – offer the same basic benefits, but some offer additional benefits, so you can choose which one meets your needs.
Insurance companies don’t have to offer every Medigap plan, but they must offer plans A, C, and F if they offer any policies. Plan F offering the most comprehensive coverage is by far the most popular with more than 50% of Medigap policies. Average monthly premiums vary widely depending on your location, age, and sex. Different insurance companies may charge different premiums for the exact same coverage, so it pays to shop around.
To purchase Medigap coverage, you must have both Part A (free) and B (currently $134/month).
If you take several maintenance prescription drugs like blood pressure, diabetes, cholesterol, heart medication, etc., it is advisable to have a Part D drug plan as it will save you plenty.
Parts A & B do not cover most dental, eye examinations related to prescribing glasses, dentures, cosmetic surgery, acupuncture, hearing aids and the exams for fitting them, long-term care or custodial care in the home, community, assisted living or nursing home.
To make matters more confusing, there is another option: Medicare Advantage which takes the place of Original Medicare (A&B) and works like HMOs and PPOs. This is private insurance, offered by insurance companies. Medicare pays the company offering your Medicare Advantage plan a fixed amount each month to cover your care. The company must follow rules set by Medicare. The plans are required to provide all Medicare covered services.
To join a Medicare Advantage program, you must have Part A & Part B. You can’t be sold, and you can’t use a Medigap policy. If your Medicare Advantage Plan has a drug benefit, you cannot participate in the Medicare Part D drug coverage.
The cost of Medicare Advantage is usually covered by your Part B premium or $134/person/month. If your plan includes drugs, the coverage often costs a little more. So – if are in excellent health and don’t take many drugs, a Medicare Advantage Plan could be for you. If, on the other hand, you have chronic health conditions like heart disease or diabetes, or you have a family history of catastrophic illness, you will be better served by Original Medicare with a Supplemental Medigap policy and a Drug Plan.
It is enough to make your head spin. How do you decide what is best for you? Here are some things to consider:
Coverage – how well does the plan cover the services you are likely to need.
Existing Coverage – if you have employment related coverage, be sure to talk to your benefits administrator to see how that coverage meshes with Medicare.
Costs – premiums, deductibles, co-payments and other costs.
Doctors & hospitals – do your doctors accept the coverage you are considering? Do you have to select providers from a network? Do you need to get referrals for specialists?
Quality of care – Have Medicare and other people with Medicare rated your health and durg plan’s care and services?
Convenience – where are the in-network doctor offices? What are the hours? Which pharmacies can you use? Can you get prescriptions by mail?
Travel – will the plan you choose cover you if you travel to another state or outside the US?
To help you decide the best plans for you and your spouse, you can contact the National Council on Aging at www.MyMedicareMatters.com. Your State Health Insurance Program (SHIP) also provides free Medicare counseling. Call 1-800-677-1116 for local contact information. You can also shop for plans at www.Medicare.gov/find-a-plan. Or call 1-800-633-4277.
To figure out which plan or plans make sense for you, make a few simple lists. First, write down all the prescriptions you are taking along with fulfilling pharmacies. Then list your doctors and hospital networks. Include your GP, internist, OB-GYN, dentist, dermatologist, cardiologist, urologist, podiatrist, ophthalmologist – all specialists. Also, list any chronic conditions like heart disease and diabetes. Then you will be ready to review the various plans available in your state to see which plans cover the drugs and medical care you are likely to need.