You hear a lot about people with “fixed incomes” in retirement. Whether it’s through a pension, savings, or Social Security check, they know exactly how much their income will be each month.
People may also have fixed costs—like rent or a mortgage payment, property taxes and insurance. You can include Medicare premiums in that list, as well.
Unfortunately, overall healthcare costs aren’t so predictable. So it’s important to have the right tools and resources in place to help you manage your medical expenses as you get older.
Medicare, Medicare Advantage and Medicare Supplement plans offer three different paths for keeping healthcare costs from threatening your financial well-being in retirement.
Medicare is a federal health insurance program for people 65 or older, certain younger people with disabilities and people with end-stage kidney disease. Original Medicare is more commonly known as Medicare Part A and Part 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.
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. The standard Part B premium in 2021 is $148.50.
While Original Medicare Parts A and B cover many services, they don’t cover everything. For example, Original Medicare doesn't cover prescription drugs, nor does it pay for long-term care. It also doesn’t cover routine dental care, including dentures; vision care, including eye exams and glasses or contacts; or routine hearing services and hearing aids.
Medicare Advantage plans, often referred to as Part C plans, are offered by private insurance companies approved by Medicare.
These plans are required by law to offer, at minimum, the same benefits as Medicare Parts A and B. Many Medicare Advantage plans offer low and sometimes even $0 monthly plan premiums. You must, however, continue to pay the Medicare Part B premium.
So why pay more for Medicare Advantage, even if it’s just a little bit more? Because you get more.
For example, many Medicare Advantage plans include:
- Coverage for prescription drugs
- Dental care
- Vision care, including coverage for glasses or contacts
- Hearing care, including coverage for hearing aids
- Access to wellness programs that include a gym membership
- The convenience of mail-delivery pharmacy services
These added benefits can really help you manage any unpredictable healthcare costs in your retirement.
If you prefer to stick with Original Medicare but you’re concerned about gaps in your coverage, Medicare Supplement insurance may be a good option. A Medicare Supplement—or “Medigap”—plan can help with some of the out-of-pocket costs that Original Medicare doesn’t pay. That includes things like your copayments, deductibles or coinsurance.
Because Medicare Supplement plans are offered by private insurers, you’ll need to pay an additional monthly premium for this type of coverage.
Medicare Supplement plans can only be paired with Original Medicare, so you must have Original Medicare before you can purchase a Medicare Supplement plan.