Health Care in Retirement

Will you be able to pay for healthcare in retirement? If you become physically or mentally disabled, how will you pay the bills to keep you alive?

Not being able to pay for health care in retirement is a major existential threat for millions of Americans coming to terms with their pending retirement.

If you want your retirement to be worry free and financially secure, you need to understand that your future health care comes with a price tag. And it’s one that millions of us are grossly unprepared to pay.

Health issues in retirement are a given for those of us who remain alive. Whether they end up costing us a fortune depends to some extent on how prepared we are before they happen. Despite the appeal of retirement, few of us are ready to accept that health care costs could send us into bankruptcy.

Medicare is essentially a substitute for the health insurance plans that have covered us before we transition to retirement. After you turn 65, it’s another story. Beyond the ever increasing chances of everyday medical care, you need to know this: someone turning age 65 today has an almost 70% chance of needing some type of Long Term Care services (LTC). Medicare was never intended to pay bills associated with Long Term Care.

It may not mean a nursing home, but it does mean you no longer have the ability to perform what are known as Activities of Daily Living, or ADLs. Unless you plan to die right away, chances are someone is going to have to help care for you. If that person is not a family member, someone else has to be paid to make it happen. Who will be responsible for those bills?

So, yes, the cost of health care as you get older has the potential to cause your retirement plans to come completely unglued. To keep that from happening, you start with Medicare, and then maybe add what is known as a ‘medicare supplement’, or ‘medigap’ insurance policy.

Both my wife and I are covered by Medicare and each of us has a ‘medigap’ policy, designed to cover most of what Medicare does not cover. But make no mistake,  Medicare Part B premiums, the premiums for a ‘medigap’ contract, and then Medicare Part D, which covers prescription drugs, still represents a significant monthly outlay.

As an alternative, you can opt for Medicare Part C coverage, or a Medicare Advantage Plan. I have a bias against them since they typically include dental and vision, things I’d rather pay for independently. But that’s a personal preference.

The real benefit to me from what we’ve chosen to pay for, is that when we decide we need to speak to one of our many physicians, the out-of-pocket expense is not a deterrent. Having a good understanding about paying for medical care as your life plays out is critical if you want to live worry free.

I’m often asked about Medicare and when to start the process. My suggestion is to get yourself into the system as early as 3 months before your 65th birthday. You can delay participation if you have other coverage, but getting into the system at 65 avoids problems later on if the wheels come off your alternative plans.

Here’s an overview of Medicare:

Who is Eligible?

Seniors aged 65 or older are eligible for Medicare in the United States, as long as they’re legal citizens. Non-citizen seniors can gain eligibility if they’ve legally entered the U.S., have gained permanent residency or have lived in the country for more than five years. People who are under age 65 may be eligible for Medicare if they have been disabled for two years or more.

Types of Medicare

Medicare coverage is available in several different types. Each type covers different health care expenses and may overlap in some cases.

Medicare Part A: Covers inpatient stays, hospice care, short-term nursing home stays (limited basis) and some types of home care.

Medicare Part B: Covers doctor’s fees, outpatient service fees, some types of home care and some types of physical and/or occupational therapy.

Medicare Part C (Medicare Advantage): Enables private health insurers to offer all standard benefits of Medicare Part A and B within a managed care plan like PPO or HMO. These plans typically include extras like prescription drug insurance and vision insurance.

Medicare Part D: Covers prescription drug insurance benefits. This plan is usually offered through private insurers to provide prescription drug insurance for those who pay monthly premiums.

Many eligible people consider and compare the original Medicare to Medicare Advantage. The ‘original’ Medicare typically includes Medicare Part A and Part B, along with the option of selecting Part D and Medigap coverage. Medicare Advantage, on the other hand, includes Part A and Part B coverage with the option of selecting Part D coverage if needed. Advantage plans generally don’t need additional Medigap coverage.

What are the Pros of Medicare?

Medicare, also known as Original Medicare, provides many health insurance benefits to eligible seniors. It also allows them to freely choose any health care professional that accepts the program. Here are some of the best known pros of Medicare.

  1. Medicare allows policyholders to select any health care provider they like. The catch is their health care provider must accept Medicare and/or work in a facility approved by Medicare. But it’s a good catch for those who regularly rely on Medicare for health insurance coverage.
  2. Original Medicare plans typically have one monthly premium. Medicare Part A (hospital) usually doesn’t have a monthly premium, particularly if a policyholder or their spouse paid Medicare taxes while employed. Medicare Part B (doctor and outpatient care) requires a monthly premium, which can vary based on your insurance provider and state. Going by that, most people only have to pay for Part B coverage.
  3. Medicare policyholders have the ability to select health care providers in and out of their network, including specialist referrals. Many are not restricted to only one plan network.

Because Medicare is accepted at a wide variety of health care providers, it allows policyholders to see medical professionals at virtually any medical facility of their choosing. Policyholders also don’t need to get a referral to see certain health care specialists, especially if they need urgent medical care from that particular specialist.

What are the Cons of Medicare?

While Original Medicare provides a significant amount of benefits to policyholders, not everyone benefits 100% of the time. Let’s look at what is not covered.

  1. Original Medicare policyholders are typically responsible for at least 20% of their doctor and outpatient care expenses, which isn’t annually capped. In addition, policyholders can be responsible for some co-payments and/or deductibles if sick or hospitalized. Total annual costs, especially if you add Part D and a Medigap plan, can potentially cost more than a Medicare Advantage plan.
  2. There is no coverage, including emergency coverage, for policyholders if they travel outside the United States. If traveling beyond our borders, you should look into purchasing a separate policy for that purpose.
  3. Medicare does not cover any type of Long Term Care, whether in nursing homes, assisted living facilities or people’s own homes. Of course, it covers medical services in these settings, but not the cost of staying in any LTC facility, or the cost of any “custodial” care — that is, help with the everyday tasks of life, such as dressing, feeding, going to the bathroom — except for very limited circumstances when a person receives home health services through a Medicare-approved agency.

Medicare does provide some coverage for short-term stays in skilled nursing facilities — which are, very often, nursing homes. You would go to a skilled nursing facility (SNF) for specialized nursing care and rehabilitation work after spending time in the hospital. But, if you’re enrolled in the original Medicare program, to get coverage for an SNF you must have spent at least three days in the hospital as a formally admitted inpatient.

If you qualify for short-term Medicare coverage in a skilled nursing facility, Medicare pays 100 percent of the cost (room, meals, nursing care) for the first 20 days. After that, you’re more or less on your own dime.

In Closing

Obviously, Medicare is at the heart of financial assistance for health care costs once you reach age 65. It is my belief that the web site and the people on the other end of the phone are excellent. Don’t ever hesitate to register yourself on the site and start looking for relevant information.

Lastly, know there are approved sites that allow you to compare costs for various coverages. Each year you have an opportunity to potentially make a change without causing any break in coverage or financial hardship. But it’s up to you to figure it out. I encourage to take advantage when possible.

by Tony Kendzior \   18 MAR 2019