Funding Health Care Costs After Age 65

Below are some basic cost and coverage details regarding Medicare.

Medicare Part A (Hospital Insurance)

Hospital inpatient stay

• $1,600 deductible for each benefit period
• Days 1–60: $0 coinsurance for each benefit period
• Days 61–90: $400 coinsurance per day of each benefit period
• Days 91 and beyond: $800 copayment each day while using your 60 lifetime reserve days
• Beyond lifetime reserve days: You pay all costs

Skilled Nursing Facility (SNF) Care

• Days 1–20: $0 for each benefit period.
• Days 21–100: $200 coinsurance per day of each benefit period
• Days 101 and beyond: You pay all costs

Medicare Part B (Medical Insurance)

Clinical laboratory services

• You pay $0 for Medicare-approved services.

Home health services

• $0 for home health care services.
• 20% of the Medicare-approved amount for durable medical equipment

Medical and other services

• You pay 20% of the Medicare-approved amount for most doctor services (including most doctor services while you're a hospital inpatient), outpatient therapy, and durable medical equipment.

Outpatient mental health services

• You pay nothing for your yearly depression screening if your doctor or health care provider accepts assignment.
• 20% of the Medicare-approved amount for visits to a doctor or other health care provider to diagnose or treat your condition. The Part B deductible applies.
• If you get your services in a hospital outpatient clinic or hospital outpatient department, you may have to pay an additional copayment or coinsurance amount to the hospital.

These costs can be significant. For example, an elderly individual with multiple chronic conditions (e.g., congestive heart failure and Parkinson’s disease) can easily spend thousands of dollars per year on prescription medicines alone. These same individuals may be in and out of the hospital several times each year. If each visit represents a new benefit period, a new deductible is required for each. Deductibles and co-payments on Part B doctor visits can also quickly add up. Even more damaging, a serious illness or accident could put the individual in the hospital for a period in excess of covered days, requiring 100% payment of stratospheric hospital costs.

No sound retirement plan can ignore these potential costs.

Retirees facing this challenge need to think about strategies for funding these excess health care costs after age 65. Strategies for filling gaps between actual health care costs and Medicare coverage include:

• The purchase of so-called Medigap insurance from private vendors
• Using Medicare Part C
• If possible, maintain coverage through an employer-provided health insurance plan
• For low-income seniors, qualify for state assistance in paying some or all Medicare costs (Medicaid)

Medigap insurance is designed to supplement Medicare’s benefits by filling in some of what Medicare does not cover. A Medigap policy pays for Medicare-approved charges that are not paid by Medicare because of deductibles or coinsurance amounts for which the beneficiary is responsible. The cost of Medigap policies varies widely from plan to plan. Care must be taken in choosing the appropriate plan for a retiree’s individual situation.

To discuss the impact of health care costs on your retirement income plan and the optimal solution for your personal situation, contact a Mainstay Capital Management Senior Wealth Advisor toll-free at 866-444-6246.

Sources:

www.medicare.gov