Paying for Medicare health plans, after retirement

A group of senior citizens stretch their arms upwards during a yoga class.

Healthcare may be one of the most important costs that people need to plan for in retirement. The Bureau of Labor Statistics estimates that Americans aged 55 to 64 spend 8.8 percent of their income on healthcare each year but by age 75, that amount nearly doubles to 15.6 percent.1

Having the right tools and resources in place can help you manage medical expenses as you get older. Medicare, Medicare Advantage and Medicare Supplement plans offer three different paths for keeping healthcare from being a threat to your financial well-being in retirement.

What is Medicare?

Medicare is a healthcare program established by the federal government. Original Medicare is more commonly known as Medicare Parts A and B.

Part A helps cover hospital stays, skilled nursing facility care, hospice expenses, lab tests, surgery, and home healthcare.

Part B is the medical insurance component, which helps cover doctor visits, outpatient care, durable medical equipment, home healthcare, and some preventive services.2

If you or your spouse paid Medicare taxes while you were working, you usually will not pay a Part A premium. The monthly premiums for Part B coverage vary based on your income and tax filing status.

While Parts A and B cover many services, they're not all-inclusive. For example, Medicare doesn't pay for long-term care, many routine dental care expenses including dentures, routine eye exams, routine hearing services and hearing aids, or acupuncture.3

How Medicare Advantage works

Medicare Advantage plans, often referred to as Part C plans, are offered by private insurance companies that are approved by Medicare.

Generally, these plans cover the same expenses that are covered under Medicare Parts A and B. You would likely still pay a Part B premium but you may also pay a separate monthly premium to the insurer.

One benefit of choosing Medicare Advantage over Original Medicare is the additional range of services that may be covered. For example, many Medicare Advantage plans offer dental, vision, and hearing care, along with access to wellness programs. Prescription drug coverage, which is included under Medicare Part D, may also be a feature of these plans.4

According to a 2016 AARP report, the average retail price of brand-name and generic prescription drugs commonly used by older Americans doubled between 2006 and 2013. Having Part D coverage can help pay for some of the expense so your retirement assets aren't compromised by the cost of your medications.5

Filling in the cracks with Medicare Supplement Insurance

Medicare Parts A and B don’t cover everything. A Medicare Supplement Insurance may help with some of the costs that Original Medicare doesn't pay. That would include things like your copayments, deductibles, or coinsurance.

Because Medicare Supplement plans are offered by private insurers, there's an additional monthly premium for this type of coverage.

Keep in mind that a Medicare Supplement plan isn't a substitute for Original Medicare or Medicare Advantage. You must have Original Medicare to purchase a Medicare Supplement plan and you'd need separate Medicare Supplement plan insurance for your spouse if you're married.6

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