Though it is important to have medical insurance, you should be aware that this insurance does not cover everything. Medicare, though it is helpful, does not provide complete coverage of health care costs like many people assume it does. Finding out that Medicare doesn’t cover everything can be difficult for many Americans who do not have the money saved up to cover medical costs. It is important that you know how much you will end up paying in medical costs so that you can plan early in life and avoid being blindsided when you have to start paying out-of-pocket costs that you aren’t prepared for.
It has been found that the average retired couple needs around $280,000 in savings to cover out-of-pocket costs for medical insurance. These costs cover things such as Medicare deductibles, copays, prescription drugs, Medicare premiums, dental, and vision care. Many are unaware that these costs will likely be out of pocket, and are not prepared to pay them. Again, it is vital that you know this ahead of time so that you don’t have to struggle to pay the remaining costs that your Medicare doesn’t cover.
Deductibles and copays are a part of these out-of-pocket costs. Medicare Part A exposes you to the following deductibles:
- Inpatient hospital deductible: $1,364
- Out of pocket hospital costs (days 61-90): $341 per day
- Coinsurance for lifetime reserve days: $682 per day (60 additional days past 90 days)
- Skilled nursing facility coinsurance: $170.50 per day
Be aware that you are also responsible for 20% of physician’s fees, lab fees, and durable medical equipment costs under Part B. You will not be responsible for these things if you have additional coverage, along with an annual deductible of $185. For those with chronic conditions, these costs can be a significant blow that is financially devastating. If you’re worried that these costs might affect you, you should be sure to have savings reserved for covering these medical costs.
Some ways that you can protect yourself from unforeseen medical care costs include:
- per year (or more), they are a huge threat for out of pocket costs. Get coverage for prescription drugs if you are able to by enrolling in Medicare Part D or signing up for a Medicare Advantage plan that covers prescription drug costs.
- Enrolling in a Medicare supplement program, or a Medigap plan. These plans have extra coverage that will help you be able to afford Medicare premiums, copays, and other costs. You only pay a small premium for these plans, and they can be beneficial to protecting you from huge shocks to your finances.
- Enrolling in Medicare Advantage, or Part C. These managed care plans provide Medicare Part A and B services and can help protect you from financial shocks that you may experience due to healthcare costs. You have to be enrolled in Medicare Part A and Part B in order to enroll in Medicare Advantage. In addition to this, some Medicare Advantage plans include prescription drug benefits, so check this before enrolling.
- Considering long-term care insurance and other financial avenues. One of the most glaring gaps in Medicare coverage is nursing home and long-term custodial care for chronic conditions. Medicare only covers skilled nursing or assisted living facilities in very limited circumstances, so you will have to pay a lot for these services.
- Aggressively save. You can contribute up to $3,450 for singles if you qualify for a health savings account, and couples can contribute up to $6,900 per year pretax. Withdrawals to pay for medical expenses are also tax free, which can help you save money to cover any unforeseen costs.