Sorry,
seniors -- you may be underestimating your out-of-pocket healthcare spending.
Maurie
Backman (TMFBookNerd) Jan 28, 2020 at 8:01AM Author Bio
Medicare provides health coverage to millions of
seniors 65 and over. But that coverage comes at a cost -- one that tends to
catch seniors off-guard for the following reasons.
1. Premiums can rise
from year to year
Though Medicare Part A, which covers hospital
care, is generally free for enrollees, Part B, which covers outpatient care,
charges a premium. The same holds true for Part D, which covers prescriptions.
The cost of Part D will vary based on the plan you choose, but since there's
only a single Part B option (not various plans like Part D), you'll generally
pay a standard premium unless you're a higher earner (more on that in a
minute). That premium, however, can increase from year to year. In 2019, for
example, it was $135.50 per month, and this year, it's gone up to $144.60. And who knows what it
will look like in 2021?
2. If you're a higher
earner, you get hit with a premium surcharge
If you have a higher-than-average income during
retirement, whether because you're still working part-time, have a generous
pension, or saved well in a 401(k) or IRA, Medicare will cost you
more. Income-related monthly adjustment amounts, or
IRMAAs, kick in once your annual exceeds $87,000 as a single tax filer, or more
than $174,000 as a couple filing a joint return. IRMAAs apply to premiums for
both Parts B and D, and they're incremental so that the higher your income is
beyond the aforementioned thresholds, the more Medicare costs you.
3. You'll probably
need supplemental insurance
Your out-of-pocket costs under Medicare can be
unpredictable when you account for copayments, deductibles, and coinsurance. As
such, it's often advisable for seniors on Medicare to purchase supplemental
insurance, or Medigap. Medigap can cover some of these
costs, but it will also cost you. The amount you'll pay for Medigap will vary
based on the plan you choose, but there are other factors, like your age and
where you live, that will influence your costs as well.
4. You may need to
cover certain expenses completely out of pocket
Many seniors are shocked to learn that Medicare
won't pay for common services like dental care, vision exams, and hearing aids.
And unfortunately, Medigap won't pay for these services either. The result? You
may be looking at hefty bills when you go to get your teeth cleaned, have your
eyes checked, get new eyeglasses, or undergo hearing exams.
Know your costs
Underestimating your costs under Medicare could
wreak serious havoc on your retirement budget. Rather than let that
happen, do some research to see what sort of expenses you're looking at under
Medicare. At the same time, be prepared to shop around for your Medigap and
Part D drug plans to secure the best coverage at the most affordable cost.
Another option? Look into getting a Medicare Advantage plan. Advantage is an
alternative to original Medicare that often offers more comprehensive coverage
at lower premium costs. There are drawbacks to Advantage, like being limited to
a specific provider network, that you need to be aware of, but it's an option
worth exploring nonetheless, especially if money is tight.
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