Health Care Costs in Retirement

Healthcare costs by definition is the expenses related to the delivery of services that include medical procedures, therapies, and medications.

It is a simple definition that covers one of the more complex issues Baby Boomers will face as they head into retirement, and one that has become even more complex due to recent legislation like the Affordable Care Act and the Medicare Modernization Act.

At the birth of Medicare in 1965, Lyndon Johnson’s Great Society Act was a way to simplify health coverage for retirees 65 and over. It provided hospital insurance under the Social Security Act, with a supplementary medical benefits program and an extension of medical assistance for the aged.

Unfortunately today, a modest plan intended to cover about 12 million beneficiaries has now amassed 47 million subscribers, with another 78 million on the way in the next twenty years. 

Aside from massive migration to the program, this once-simple and much-lauded subsidy now consists of an incalculable amount of complexities, including ever-evolving rules and regulations, coverage gaps, loopholes, benefit changes and out-of-pocket costs than ever before. 

In an attempt to present the program in a manageable form for consumers, here are today’s Medicare costs in the most simplistic of terms:

Part A – No premium for those who qualify, but there are some hidden costs like deductibles and co-pays for services (for more on Part A click here).

Part B – a $99.90 monthly premium for those earning under the average amount plus other deductibles, co-pays, and excess charges (for more on Part B click here).

Part D (Drug Coverage) – Premiums (also based on income), deductibles, co-pays & other charges based on the terms & conditions of the Insurance Company selling the plan (for more on Part D click here).

MediGap – This form of coverage takes care of the co-pays, deductibles, & excess charges of Parts A and B, but here are fairly high premiums. (for more on MediGap Plans click here).

Other Out of Pocket Expenses – Medicare does NOT cover dental, vision, hearing, podiatry, or routine exams/physicals. Medicare will only cover procedures after a beneficiary has been admitted as an inpatient to a hospital.

So what do these costs total?

Simple.

It all depends on the person, where they live, how much they earn, how long they live, their gender, and the age they start receiving benefits.

Confused?

Here is the range of what 65-year-old couple residing in Ohio can expect to pay in out-of-pocket expenses.  Changes in variables can have a tremendous impact on overall cost. 

As the chart indicates, each variable can have a tremendous impact on what retirees can be expected to pay.  This information is vital to any financial planner who is truly looking out for the long-term interest of his/her clients

To find out more on determining health care costs in retirement please click here for a free trial of HVS Financial’s RetireMark Health software  Invitation Code – APRSH73RW