Q: I turn 65 later this year and I’m in good health. How much will Medicare premiums cost, and what other costs will I have? I do not get health insurance where I work.
A: Planning healthcare costs is extremely important, but not an easy task. According to the Kaiser Family Foundation, healthcare expenses, on average, accounted for nearly 15 percent of Medicare household budgets in 2009. But even if you’re in good health today, you’re not out of the woods. The amount you spend on healthcare not only grows every year, but your need for more healthcare services increases with age.
Since you don’t receive health insurance coverage where you work, you will need to enroll in Medicare Part B, which covers doctors and hospital outpatient services when you first become eligible for Part B. That period starts three months before you turn 65, includes the month you turn 65 and ends 3 months after the month you turn 65.
In addition, you will need a plan to cover the portion of costs that Medicare does not pay which are considerable, either a Medicare supplement (Medigap plan) with a Part D plan for drug coverage or Medicare Advantage plan that includes drug coverage. Spending on Medicare and health insurance premiums comprise the biggest share of healthcare costs, nearly two-thirds of overall senior healthcare spending.
Premiums and coverage details can vary enormously, but here are a few things to consider:
1. Compare plans! Use health and drug plan comparison tools found at www.Medicare.gov — Because premiums, out-of-pocket costs and drug coverage vary so enormously between plans, the single best habit to get into is comparing your coverage options every year. Your best tools for comparing health and drug plans coverage and information about premiums and costs can be found online at http://www.Medicare.gov. If you don’t have computer or Internet access, work with a friend or family member who does. Or you can get one-on-one counseling assistance through your state health insurance assistance program (SHIP). Many of these programs operate through local area agencies on aging.
2. Part B — Seniors with incomes of less than $85,000 a year pay a base monthly premium of $115.40, in 2011, which would be automatically deducted from your Social Security benefit. Since 2000, Part B premiums have increased about 154%.
3. Medigap — Medicare supplements tend to have higher premiums than Medicare Advantage plans, but are popular because they cover most of your deductibles and co-insurance costs. Even so, Medicare estimates that average annual premium and out-of-pocket costs for Medigap policies can range around $6,500.
4. Medicare Advantage — Medicare Advantage (MA) plans are popular because they tend to have much lower, or even zero premiums. In addition, many MA plans offer drug coverage. These plans may have deductibles, and charge co-pays for most services, leaving you at risk of more in out-of-pocket costs when you use services. Starting in 2011 for the first time, all plans include a limit on out-of-pocket spending that cannot exceed $6,700.
5. Part D — If you choose a Medigap plan, or a Medicare Advantage plan that does not offer drug coverage, you will need a Part D plan. If you take any prescription drugs, be sure to input your medications to get an accurate estimate of costs and to check the coverage of the drugs you take. Coverage of prescription drugs varies from plan to plan and from one year to the next. The average monthly premium for Part D plans weighted for enrollment is $41. Plans often charge a deductible and in 2011 you would need to spend a total of $4,550 out-of-pocket (not including premiums) before reaching catastrophic coverage.
6. Uncovered healthcare costs — In planning your budget, include costs that Medicare doesn’t cover — dental care, eye exams and eyeglasses, for example. When shopping health plans, some MA plans may offer extra benefits like these.
To learn more about your Medicare benefits download a copy of the “2011 Medicare & You” handbook by visiting www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227).