Myths of Medicare
1) Myth; Medicare is free
There is a misconception that Medicare is “free” once a person reaches the magical, worry-free age of 65. While Medicare is subsidized through payroll taxes (the rate is a total of 2.9%of total gross income paid by both employer & employee) there are still plenty of costs connected to the plan. Unfortunately, not only do subscribers continue to pay as if they are working, they actually can expect to pay even more.
Fact – Medicare has several components; all have which have significant costs attached. Even Part A, which is labeled as “free,” can have hidden fees, including deductibles, co-pays for service, and possible excess charges.
According to HVS Financial’s unique RetireMark Software—the only tool on the market that allows financial advisors to calculate their client’s health costs on an actuarial basis—an “average” 65-year-old couple retiring at age 65 & living to 90 should expect to incur about $650,000 in Medicare premiums alone.
A 55-year-old couple should expect to incur over $930,000 in costs for their healthcare premiums
2) Myth; Medicare covers all of healthcare needs in retirement.
Fact – With original Medicare, little things like routine physicals in which diagnostic tests are run are NOT covered.
Fact – Medicare will only cover procedures that occur when the beneficiary is admitted as an inpatient to a hospital. Because of this rule, services like routine dental, vision, hearing, exams, & podiatry are not covered at all; thus, a 65-year old couple can expect to incur over $310,000 in related costs over a 25-year retirement.
3) Myth; Everybody pays the same.
Since the passing of the Affordable Care Act & the Modernization of Medicare Act, Parts B & D are now means-tested.
Fact – For subscribers, this translates into the more you earn, the more you pay.
The Medicare definition of income is “the total of your adjusted gross income and tax-exempt interest income you may have. These are the amounts on lines 37 and 8b of IRS from 1040. Some examples of income are wages, salaries, tips, taxable interest, certain dividends, business income, capital gains, and unemployment compensation, as well as annuities, Social Security payments and some pensions.”
Fact – Not only is what you pay affected by income, but also state of residency. Where you live may increase your out-of-pocket expenses by as much as 30%! (Keep in mind that Medicare Part D & MediGap plans are sold by private insurance companies that can charge what they want; supply and demand are factors.)
To give you an example from HVS RetireMark software, a 65-year-old couple earning less than the Medicare average, residing in California, will incur $529,000 in costs to cover Medicare Parts B, D, and a MediGap policy.
If they move to Florida, the cost will be $551,000.
If they move to Hawaii, the cost will be $415,000.
4) Myth; There is a choice when it comes to Medicare.
The only choice comes if you purchase a Medicare Advantage Plan. These are constructed and sold by private insurance companies and they must meet the guidelines of Medicare. (They are also subsidized by Medicare, too.)
Fact – with the passing of the Affordable Care Act (ObamaCare) it has been ruled that a person receiving Social Security Benefits MUST also enroll into Medicare when they become eligible.
5) Myth; Currently there is no way to calculate what these healthcare costs will be.
Fact – HVS Financial has designed a unique yet practical software platform that assists financial professionals in projecting their clients’ health care costs in retirement.
HVS RetireMark software was designed by financial professionals who have lived through these expenses firsthand. The company has partnered with the country’s leading actuarial firm and a board of medical physicians to provide much-needed healthcare-cost information to the financial services industry.