Medicare costsDon’t forget to include Medicare in your retirement plan
Medicare provides health insurance coverage for some 55 million Americans age 65 and over, plus some younger beneficiaries with disabilities.1 According to the Centers for Medicare & Medicaid Services, in 2015 "Medicare spending grew 4.5% to $646.2 billion in 2015."2 The number of people relying on Medicare is expected to increase as life expectancies continue to increase.
Healthcare costs continue to increase. Medicare will continue to play a major role for most retirees, but when planning for retirement, many of us have no idea what Medicare will cost. To help understand the costs of Medicare, here is an overview of some of the costs of coverage.
Medicare Part A
Medicare Part A covers the costs of an in-hospital stay, eligible skilled nursing care facility costs and some home healthcare costs. Per the Centers for Medicare & Medicaid Services, "About 99 percent of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment."3 There are, however, other costs associated with Part A coverage including the following for 2017:4
- Inpatient hospital deductible $1,316
- Daily coinsurance 61st day to 90th day $329
- Daily coinsurance for lifetime reserve days $658
- Skilled Nursing Facility coinsurance $164.50 for days 21-100
Medicare Part B
Medicare Part B covers physician services, outpatient procedures, some home health services, the cost of durable medical equipment and other costs.
The standard 2017 monthly premium is $134, though many Social Security recipients may pay less due to the fact that the Social Security cost of living adjustment was less than the percentage increase in the basic Part B premium. Those with and income of $85,000 or more ($170,000 for joint filers) for 2015 will pay more.5
Other 2017 costs associated with Part B, assuming you are enrolled in original Medicare (Part A):6
- Annual deductible $183
- Coinsurance is 20 percent of Medicare approved costs after the deductible is met.
- Some services are totally free; others may have a specific copay amount.
Medicare Part D
Medicare Part D is the prescription drug plan. It is offered by private insurance companies and the premiums will vary by plan. Additionally, certain prescription drugs and eligible pharmacies may change from year-to-year. Deductibles, coinsurance and copays can also apply and again will vary from plan to plan.
It is wise to check these and other coverage issues not only when you initially enroll, but also each year during the Medicare fall open enrollment period which runs from October 15 through December 7 each year.
If you file jointly and your income is $170,000 or over for the base year (2015 for 2017 costs) then there will be a surcharge added on top of your normal premium. The surcharge starts at an income level above $85,000 for single filers.7
Failing to enroll when first eligible in Part D, a Medicare Advantage plan or other Medicare plan that offers prescription drug coverage, can result in a late enrollment penalty that can be expensive and may increase each year.
You can avoid the penalty if you have what Medicare deems to be creditable prescription drug coverage via other insurance such as a spouse's employer provided plan. You may also incur the penalty if you are without coverage from more than 63 consecutive days or more after the initial enrollment period is over.8
Medicare Part C/Medicare Advantage
Medicare Part C, also known as Medicare Advantage, may be more varied in what is covered. The premiums, deductibles, coinsurance, copays and what is covered will vary from plan to plan. These plans are offered by private insurance companies.
Pulling it all together
So how much should I expect to pay per month for Medicare?
Medicare costs will differ for each individual depending on their situation and what types of plans they have enrolled in. Medicare.gov provides costs for 2018, opens new window which may help you estimate your expenses.
Remember that your healthcare costs in retirement likely will not be uniform each year. Besides any premium increases, you may have a major health issue crop up that can increase health-related costs.
The cost of healthcare in retirement should be at or near the top of the list in terms of expenses that will need to be planned for. If you are still working, it is wise to factor this into the amount needed for retirement. If you have access to a health savings account (HSA) while working this can be a great tool for you to save for these costs.
See plans in your area
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enter your ZIP code below to see plans with their premiums, copays, and participating doctors and pharmacies
Humana answers your Medicare questions
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