Getting Ready to Retire? Let’s Talk About Medicare Costs.

When most Americans reach the age of 65, they become eligible for Medicare. For many, this represents a transition from private, employer-based health insurance to insurance through a federal program. Seniors may have questions about the cost differences between their private insurance plans and Medicare or wonder what their Medicare costs will be.

Even though most Americans do not pay a monthly premium for Medicare Part A (hospital coverage) because they paid for it through payroll taxes, there is a deductible that must be paid per benefit period. The other half of Original Medicare - Part B (medical coverage) - comes with a monthly fee that is usually deducted from the person’s social security check. There is also a small deductible associated with Medicare Part B and recipients are typically asked to pay 20% of the cost of services. It is important to understand that both Original Medicare and most Medicare Advantage plans come with out-of-pocket expenses such as deductibles and co-insurance obligations that can change from year to year.


Here’s what your Medicare costs could be when you retire


According to a report* by the Employee Benefit Research Institute shared by CNBC, the cost of Medicare premiums and out-of-pocket prescription drug costs and other fees from the age of 65 onward could be $146,000 for a woman and $130,000 for a man. Unfortunately, more than half of seriously ill patients on Original Medicare struggle to pay their medical expenses.


* The study factored in the expenses associated with Original Medicare, combined with a Plan G Medigap policy plus premium costs for a Part D prescription drug plan and its required out-of-pocket spending.


In general, Medicare only covers about two-thirds of a Medicare recipient’s health care costs but the actual expenses that you will pay for healthcare in retirement can vary widely depending on your income and resources, how often you seek medical care, the prescription drugs that you need and the type of Medicare plan that you choose. Many seniors who choose Original Medicare combine it with a Medigap policy to help cover some of the out-of-pocket expenses that Original Medicare doesn’t cover.


One thing that seniors need to keep in mind is that the cost of Medicare Part B and Part D can change from year to year, depending on rate changes and changes in circumstances. Those with higher income will pay more for Part B premiums and other parts of Medicare coverage compared to low-income seniors. The government usually relies on your tax return from two years earlier to determine if you are eligible to pay reduced rates for Part B and Part D. If you are low-income, seek the help of a qualified Medicare agent who can help you apply for the appropriate programs to help reduce your Medicare costs and find the right plan for your needs and budget.


What is the best Medicare plan for seniors?


There are many Medicare plan options available. The monthly costs associated with any Medicare Advantage (MA) plan are going to be different than they are for Original Medicare but they also usually include a lot more coverage such as prescription drug benefits, dental care and hearing aids. Note that MA plans come with their own co-pays, deductibles and Part D premiums. Speak to your Medicare agent to discuss all expenses and benefits associated with any plans you are considering.


Out-of-pocket maximums


One of the big advantages of Medicare Advantage plans is that they come with an out-of-pocket maximum so you know the most you could be expected to pay in a coverage year. Seniors on Original Medicare, do not have a financial cap on out-of-pocket spending.


Contact a PBC Agent for Help


Our independent insurance agents are dedicated to assisting people on Medicare and those who are ready to transition from employer coverage to personal retirement coverage. We help kupuna understand their benefits options and apply for additional coverage, as needed. Because we represent all the major Medicare Advantage and supplement plans in Hawaii, we are able to offer unbiased advice; all at no cost to our clients.


At PBC, our clients are our number one priority and we look forward to getting to know you and your needs. Call us today at (808) 738-4500 to see how we may be of assistance.

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