What Retirement Co$ts: Medical

mostly by Ron, with a few additions from Sara

While every situation is different, there are some costs that come to the greatest number of people. 

Medicare Part A is free, but Part B (doctor visits, medical tests) costs $106 per month in 2014.   So that’s about $1270 per year for sure, whether you use medical services or not.  If you use Part B, the deductible is around $150.  There are a variety of copays also. 

Many people buy Medicare Supplement insurance for those deductibles and copays.  Mine costs $98 a month, as of 2014.  Sara's is just a bit more, since she dropped the extra cost of having full coverage outside the provider network.

Part D is pharmacy and it is very individual.   You must select from a provider approved for your state.  Luckily, by now online calculation sites make this fairly easy to do, and there are free advice services available many to most places. Here in Topeka, HealthWise 55's Medicare D Enrollment Assistance is one such (see https://www.stormontvail.org/HealthWise55), which Sara found reassuring the first time she had to pick a Part D plan.

Mine costs about $23 a month; Sara’s is about $35.  Those are just premiums.  Most Part D plans have a deductible around $300; some do not but charge higher premiums.  From there costs depend on how much medication you need;  and whether it is generic or not.  Once you spend around $2700 in Total Drug Costs (what you pay and your Part D insurer pays together) you enter the so-called donut hole, until your personal out of pocket costs pass the low $4000 level.  So after you've spent - say - $500, you may be notified that together with insurance-provided spending, you've reached that $2700+ number. This can be quite a shock if you are not prepared.

In the donut hole there are discounts on some drugs but you’ll pay a number of thousands before you get out, and on each January 1 this starts all over.  As of 2014, because of one expensive miracle medicine, every year Sara hits the donut hole in mid- to late summer and never reaches the almost-fully-paid emergency level before the year ends. Say says she's actually very grateful both for that miracle medicine and the fact that we can afford our donut payouts each year. But she's also really, really crabby about the evil nature of the whole donut setup, mitigated a bit by the fact that the Affordable Care Act is slowly closing the donut hole, 10% a year, with the hole finally fully closed in 2020.

Medicare does not pay for dental.  Sara and I each pay around $35 a month for a good dental plan from a private insurer. 

So my costs just for Medicare and supplements are around $260 a month, not including out of pocket Part D medications.   That’s over $3000 a year.  Sara takes more/more expensive medications so her costs are a good deal higher.   Especially if you take brand name drugs and/or expensive drugs taking you into the donut hole, your out of pocket Part D drug costs could be quite large in a year. 

Medicare does not pay for long term (skilled care) nursing (what some still call a nursing home, although that term is not much in use any more).   On average in Kansas that will cost around $200 a day, about $6000 a month.   Medicare will not pay for assisted living and those costs where we live run around $3000 and up per month.

Fidelity Investments  estimates that an average couple  of 65 in reasonably good health and living to an average life span will pay about $225,000 out of pocket for all these various medical expenses.

If you are taking Social Security, that Part B charge of $106 a month will be taken out of that check.  If not on Social Security yet, they will bill you quarterly.

One must sign up for Medicare at 65 or shortly after.  If not, there is a penalty unless one is covered by a health plan that is substantially equal to or better than Medicare, such as from an employer.   Failure to meet these conditions, if one later wants/needs to go on Medicare, results in a rather large penalty increase in monthly amounts, which they assess forever. 

They say to apply for Medicare about 3 months before you need it. Based on our experience and that of friends, that’s a really good idea. Most medical insurance insists that Medicare-eligible people have Medicare as what is called a first payer. If you were to a) be eligible for Medicare without an approved exemption and b) buy another insurance plan, that plan could/would say for any claim "first Medicare pays, then we pay some additional amount." As far as we can tell, this would mean such an additional plan could wait forever, never having to pay anything.