PUBLISHED THU, JUL 2 20208:00 AM EDT Sarah O’Brien@SARAHTGOBRIEN
KEY
POINTS
·
For Medicare’s 62.4
million or so beneficiaries, the program generally covers about two-thirds
of health-care costs.
·
The amount you could
need to cover premiums and out-of-pocket prescription drug costs from age 65 on
could be $130,000 if you’re a man and $146,000 if you’re a woman, according to
one study.
Sometimes, it comes as a surprise to older folks
that Medicare is not free.
Employee Benefit Research Institute.
To cover premiums and out-of-pocket prescription
drug costs from age 65 on, you might need $130,000 if you’re a man, according
to the study. For a woman, it’s $146,000.
“Some are surprised that after working for
decades and paying Medicare taxes, they still have to shell out money,” said
Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent
broker and general agent for Medicare plans.
The report relies on the premium costs
associated with original Medicare (Part A hospital coverage and Part B
outpatient coverage) paired with a specific “Medigap” policy (Plan G, which
pays for many of Medicare’s cost-sharing, including co-pays, co-insurance and
some deductibles). The calculation also included premium costs for Part D
prescription drug coverage and its associated out-of-pocket spending.
While the numbers in the report are big, they
are lower than the institute’s 2019 estimates. And at this point, experts say,
it’s hard to know whether costs are heading lower or higher.
There’s been a drop in utilization and a drop in
spending that could have the effect of lowering Medicare spending for the year
unless patients, doctors and hospitals do more services and procedures in the
second half of the year than they normally do,” said Tricia Neuman, executive
director of the Medicare policy program at the Kaiser Family Foundation.
“Cost-sharing is based on spending,” Neuman
said. “So when spending goes up, premiums and cost-sharing go up. But mid-way
through the year, it’s hard to say.”
Generally speaking, Medicare only covers about
two-thirds of the cost of health-care services for the program’s 62.4 million
or so beneficiaries, the bulk of whom are age 65 or older. That’s the age when
you become eligible for Medicare.
As long as you have at least a 10-year work
history of paying into the program, you pay no premiums for Medicare Part A,
which, again, covers hospital stays — as well as skilled nursing, hospice and
some home health services.
However, Part A has a deductible of $1,408 per
benefit period, along with some caps on benefits.
Part B — which covers outpatient care and
medical equipment — has a standard monthly premium of $144.60 this year,
although higher earners pay more (see chart below). It also comes with a $198
deductible (for 2020). After it’s met, you typically pay 20% of covered
services.
Parts A and B generally don’t cover
prescriptions. That’s where a Part D drug plan comes in.
You can get a standalone plan to use alongside
original Medicare. Or, you can sign up for an Advantage Plan (Part C), which
are offered by private insurance companies and usually include prescription
drug coverage. If you go this route, your Parts A and B benefits will be
delivered via the insurer offering the plan (which may or may not have a
premium). Advantage Plans also have their own copays, deductibles and
out-of-pocket maximums.
Meanwhile, the average cost for Part D coverage
in 2020 is about $42 per month, although high earners pay extra for their
premiums (see chart below). The maximum deductible for Part D this year is
$435.
Many people decide to pair original Medicare
with a supplemental policy — aka Medigap — to help cover out-of-pocket costs
such as deductibles and coinsurance. You cannot, however, pair a Medigap policy
with an Advantage Plan.
Of people without any type of extra coverage
beyond basic Medicare — such as employer coverage or Medicaid — 28% have either
struggled to pay their medical bills or to get care due to the cost, according
to the Kaiser Family Foundation.
For starters, there is no cap on out-of-pocket
spending for basic Medicare.
“With a supplement or [Advantage Plan], a
beneficiary would know what their financial cap would be,” Gavino said.
Also, be sure to think about how you’ll pay for
the things Medicare excludes. For instance, it generally doesn’t cover dental
work and routine vision or hearing care. Same goes for long-term care, cosmetic
procedures and medical care overseas.
If you end up choosing an Advantage Plan,
there’s a good chance limited coverage for dental and vision will be included.
For long-term care coverage — which involves
help with daily living activities like dressing and bathing — some people
consider purchasing insurance specifically designed to cover those expenses.
Additionally, be aware Medicare’s enrollment
rules if you lose your job: You get eight
months to sign up. Otherwise, you could face life-lasting late-enrollment
penalties.
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