Do you have a plan for healthcare costs not covered by Medicare?

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You've planned for your retirement, but do you have enough for healthcare? Medicare doesn't cover everything, and you’ll need to make up the difference. Understanding what Medicare pays for – and what it doesn't pay for – can help you prepare to handle out-of-pocket medical expenses in retirement.

Anticipating out-of-pocket costs

Let's take a look at common situations where out-of-pocket costs can occur:

  • Part A: When applying for Medicare, most people are automatically enrolled in Part A. This covers nursing care and hospital stays, but not doctors' visits or long-term care. How much is Medicare Part A? You probably won't have to pay a premium if you paid payroll taxes when you were employed.
    • In 2019, the annual deductible is $1,364 per benefit period before the plan pays for hospitalizations.1 Generally, it covers about 80 percent of Medicare-approved inpatient costs for the first 60 days of a hospitalization. If your stay is longer than that, or if a service is above the Medicare-approved amount, you'll be responsible for paying extra.
  • Part B: This pays for a portion of doctor visits, outpatient procedures, laboratory tests, ambulatory care, mental healthcare, and some home health services. The Medicare Part B premium in 2019 is $135.50 monthly (or higher, depending on your income)—plus an annual deductible of $185.
  • Part C: Also known as Medicare Advantage, these plans include Part A and Part B benefits. While Original Medicare has limited dental and hearing coverage, Medicare Advantage plans often include additional coverage for routine dental and hearing care, and prescriptions. That doesn't mean out-of-pocket costs will not pop up. Fortunately, all Medicare Advantage plans offer an annual maximum out-of-pocket limit, after which you pay nothing for covered services.
  • Part D: If you do not choose Part C but still want prescription coverage, you can enroll in a Medicare Part D prescription drug plan. Many plans include a Medicare Part D premium and may require a deductible be met, but it does not cover medications in full, which is another opportunity for unexpected costs to sneak in.

Medicare out-of-pocket expenses

Original Medicare offers limited coverage for dental, vision and hearing services. Routine dental care, prescriptions, eyeglasses, and hearing aids are a few things Parts A and B may not cover depending on the situation. Long-term care (or custodial care), which differs from the nursing care covered under Part A, also is not covered.

Some unexpected fees are not related to a health service at all. For example, you may face a penalty if you do not enroll in Parts B or D when you are first eligible. And if you are traveling outside of the U.S., Medicare typically will not cover any costs sustained during that time.

Understanding what Medicare covers along with what your personal healthcare needs are can help you better plan for out-of-pockets expenses. With this information you can also choose the plan that best meets your needs.

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