Is Medicare enough to pay for health care as you age?
Aging Matters

It's scary to think that a big chunk of one's retirement savings could go toward medical costs. That's what Fidelity Investments found when tracking retirees health care costs for more than ten years. In 2013, the investment company estimated that a couple, 65 years old, will need $240,000 to cover future medical costs. The cost of long-term care is not part of that equation.

The breakdown of the costs includes copayments, deductibles, premiums for optional coverages like prescription medications, doctor visits, hearing aids, eyeglasses, and other out-of-pocket expenses not covered by Medicare.

Next year, it's my turn for Medicare

Next year, I will be eligible for Medicare and welcome the insurance coverage. I hope it will be around for a while and not go broke. Fortunately, I don't face costly health issues. My primary expense is health insurance, dental, vision, and top-notch nutritional supplements. The traditional Medicare choices when reaching 65 are Parts A, B, and D, rather than taking the Medicare Advantage program (Part C.)

  • Part A covers hospital costs, nursing home/rehabilitation stays, home health care, and hospice. There is no premium charge, but it carries a deductible of $1,260.
  • Part B covers doctors visits, preventative care and outpatient services. The premium runs about $105 a month with a deductible of $147.
  • Part D covers prescription drugs, and the costs vary by plan.

Health care costs rise faster than the cost of living, especially if you have a hospital stay. According to data published by Agency for Healthcare Research and Quality, the average stay costs about $10,000.

But if you're lucky and stay out of the hospital, your health care costs will be about $3,100.00 for the basic Medicare coverage. It's better than what I pay today; my health insurance plan costs over $5,000, and that's with a high deductible. Even if you have excellent health and only pay for the necessary but basic plans, the costs add up beyond $30,000 over ten years.

Drug Costs Since 80% of people over 65 years-of-age live with at least one chronic condition, the drug costs to manage an illness will drive the expenses up even faster. Here's a simple example. A friend of mine has diabetes and severe osteoporosis, for which she takes a brand name drug. She pays the Part D premiums and quickly reaches the deductible of $310. After that, she pays 25% of the $570 until the total spend reaches $2,800. That's when she hits the donut hole and becomes accountable for the full cost of the prescription until reaching the total out-of-pocket yearly limit of $4,550. After which time, she pays 5% of the drug costs.

It's confusing but don't fret because Accountable Care makes changes to the coverage gap in 2020. At that time, there will be no more "donut hole." Beneficiaries will pay 25% of the drug costs until reaching the yearly out-of-pocket spending limit.

Is Medicare enough?

Getting back to the question, "Is Medicare enough to pay for health care costs?" The answer is personal and only you know the state of your health and condition. According to the Kaiser Family Foundation, people 80 and older, their average health care spending is close to 18 percent of household spending.

For some, it might be a guessing game on what the future will bring your health. But retirees can always turn to Medicare Advantage and Medigap plans to offset the rising costs.



Part of the Aging Matters Weekly Syndicated Column

Aging Matters is a weekly column tackling everyday challenges that our growing elderly population and their loved ones face. It is also published in a variety of syndication partners including newspapers all over the country.

Learn More



More on Financial Planning