What Will Medicare Cost You?

Preparing for retirement is one of those things that are all too easy to put off. However, it’s never too soon to get started when you consider the potential costs of Medicare and healthcare in your retirement years.

Many individuals go through life expecting that Medicare will not cost them a penny. This is because we pay taxes during our younger years while we are working for employers, but we don’t really understand what those premiums go to pay. Your FICA taxes only go to pay for your hospital coverage in the future. All beneficiaries still must pay for outpatient coverage and drug coverage.

There are many people out there who are completely caught off guard once they learn that Medicare Part B has premiums in excess of $135/month that will be paid monthly for as long as you are on Medicare. Individuals with higher wages can pay significantly more than that.

When you use your Medicare benefits, you will also incur cost-sharing for services as you go along. To prepare for all these costs, let’s take a peek at what types of expenses you can expect to incur. This will help you in your retirement planning to make sure that when you get ready to retire, you will have enough set aside to cover these expenses.

Medicare Has Deductibles for Each Part

Most people don’t plan to spend time in a hospital very often. However, as we age, we sometimes develop health conditions, and occasionally hospital stays may happen. Your Medicare Part A benefits will pay for your first 60 days in an inpatient hospital. However, you must first pay the Part A deductible, which is currently over $1300.

It’s important to also understand that when you leave the hospital, your benefit period ends 60 days after your last day in the hospital. If you re-enter the hospital, a new benefit period begins, and you pay the deductible again. So, this deductible is per benefit period, not annual.

Your outpatient medical services will be covered by Part B. Fortunately, Part B has a deductible which only occurs once per year. Next year that deductible will be $185, after which point Part B will cover the majority of your outpatient services such as physical therapy, doctor appointments, durable medical equipment, etc.   

Since 2006, Medicare has also had a new program called Part D. This is optional insurance that you can buy so that your prescriptions are largely covered by an insurance company while you only pay a copay or coinsurance. Each insurance plan sets their own deductible for Part D, but it can’t be any higher than Medicare’s allowed maximum, which will be $415 in 2019.

After you have paid the deductible, you will then be able to fill your medications at just a copay based on what tier that drug falls in. Generics costs less than brand-name drugs.

What You Pay as You Go

While your Part A, B and D deductibles can be expensive, they are not the only expenses that you will have. Just like your health insurance coverage in the past, you will have copays and coinsurance that you pay to your providers as you use your benefits.

Under Medicare Part A, you will only incur copays if you have a hospital stay of more than 60 days. In 2019, you begin paying a $335 daily hospital copay on the 61st day. This copay doubles after 90 days and after 150 days your benefits run out and you incur all costs. We hope you never experience a long stay like that, but it’s good to have coverage that can help you with these costs when needed.

Under Part B, you can expect Medicare to pay for 80% of the costs of your covered services. You, however, are responsible for the other 20%.  This includes ordinary things like lab testing but also more expensive things like chemotherapy. There is no cap on how much spend each year.

Due to these kinds of costs, most individuals buy comprehensive Medicare supplement plans to assist them in covering these costs.

Sometimes referred to as Medicare supplements, these individual supplemental health insurance policies will pay after Medicare first picks up its share. The federal government has standardized the options into 10 plans that you can choose from depending on how much coverage will give you peace of mind.

Finally, you can also expect to pay copays for your medications when you pick them up. Some specialty drugs may even require you to pay up to 33% of the cost of the drug even when you have Part D coverage. It’s important to evaluate your current prescription drugs and be prepared for what you may spend on drug copays when you retire.