Out-of-control medical expenses are one of the greatest fears of retirees and pre-retirees. Many people are concerned that high medical expenses could deplete their nest eggs . But most people can put a lid on how much they spend out of pocket on retirement medical expenses, and there are a couple of tools that can help them.
Medicare is the primary medical insurance for retirees in the U.S. But Medicare doesn’t cover all medical expenses.
Various studies estimated that Medicare pays around half of the typical beneficiary’s annual medical expenses. Other studies estimate that a beneficiary spends on average about $6,000 to $8,000 annually out of pocket for retirement medical care. Those numbers are averages, and there are a wide range of numbers that make up the averages.
Medicare doesn’t cover some types treatments, such as vision and dental care and hearing aids. In addition, for most medical care that is covered there is a 20% deductible that has no ceiling. You pay 20% of the cost of the care, no matter how much it costs. Original Medicare also doesn’t cover many prescription drug costs.
Most retirees can drive down their out of pocket medical spending by taking a few steps.
If you choose to enroll in original Medicare, you can plug many of the gaps in coverage with some additional insurance. A Medicare supplement, or Medigap, policy will pay Medicare’s deductibles and copayments plus some other items not covered by Medicare. You also can purchase a Part D Prescription Drug policy to help pay for your prescription drug costs during the year.
Or you can enroll in a Medicare Advantage plan instead of original Medicare. An Advantage plan bundles the benefits of original Medicare and Medicare supplement and Part D insurance policies. An Advantage plan also might offer additional benefits, such as vision and dental coverage.
MORE FOR YOU
Yet, wading through the many plans that are available to find the best choices for you can be difficult. There are many factors to consider and a lot of plans to compare and consider. Many beneficiaries find to their regret that choosing the plan with the lowest premium often isn’t the best decision. Some financial advisors estimate that about 90% of Medicare beneficiaries pay more in out-of-pocket medical expenses than they need to, because they didn’t sign up for the best coverage for them.
Fortunately, there are two free sources that can make it easier for your to evaluate and compare the different options.
One resource is on Medicare’s web site, the Medicare Plan Finder. The program’s been improved over the years. It has an easier-to-use design and guides you through the factors to consider and decisions to make when choosing among the options. It links to Medicare’s database of the details of the plans available, so it can compare the specific details of the plans that are open to you.
In addition to being available through a computer, the Medicare Plan Finder is mobile friendly. It can be used on any phone, tablet, or other mobile device.
The Medicare Plan Finder is even better when you create a My Medicare account on the Medicare web site. After doing that, you’ll be able to store more of your personal information in the Plan Finder. That’s especially important when comparing prescription drug plans, and also makes it easier to compare all types of plans in your area.
The second resource to consider is SHIP, the State Health Insurance Assistance Program. Each state has its own SHIP, though some states give it different names.
SHIP is free and open to anyone, regardless of income or net worth. SHIP offers local, personalized, one-on-one counseling and assistance when navigating Medicare. The programs generally are staffed by trained volunteers. While SHIP offers help and information with most aspects of Medicare, a valuable part of the service is helping Medicare beneficiaries and their families evaluate their medical insurance needs and compare the different choices available to them.
You can find the SHIP available to you through the SHIP National Network.
We’re in the midst of Medicare Open Enrollment, which runs through December 7. If you, or a family member, is a Medicare beneficiary, be sure to compare all the plans available using these two free resources.