Managing Healthcare Costs in Retirement: A Comprehensive Guide

We all wish for those extra years, but what’s the point if we’re not taking care of ourselves? Without a solid healthcare plan, living longer might turn into a burden. As you age, heathcare costs can eat up a big chunk of your spending, and that’s not the retirement dream anyone has in mind.

One study showed that between 2009 and 2019, out-of-pocket healthcare costs for adults over age 65 rose by 41% to well over $6,000 a year. Today, older Americans are spending 13% of their annual expenditures on healthcare costs. For younger Americans that number is just 8%.

Of course, these numbers shouldn’t shock you given that surgeries, unexpected falls, memory loss, hearing or vision loss, and other routine medical expenses increase with age. However, that doesn’t mean you’re ready for them.

As you think about how to prioritize your retirement savings, you’ll want to understand your health insurance options, plan for your potential future medical costs, find ways to protect your health (and by extension your wallet), and consider your long-term care options.

Understanding Medicare

Medicare is the cheapest and best option for Americans over the age of 65. It is the government’s health insurance program which comes with four parts: Parts A, B, C and D.

If you are already claiming social security benefits, you will be automatically enrolled in Medicare. This is great news because if you or your spouse paid into Medicare for at least 10 years, you get Medicare Part A at no cost.

If you’re 65 but not yet retired, you’ll need to choose which parts of Medicare to enroll in and can begin enrolling three months before your 65th birthday. You can sign up online or at your local social security office.

After you enroll, you may want to change your plans. For Medicare, Parts A, B, and D, the open enrollment period begins on October 15 and ends on December 7. If you enroll by December 7, your coverage begins on January 1. For Part C (Medicare Advantage) the open enrollment period happens between January 1 and March 31.

• Medicare Part A
  Part A, also known as hospital insurance, covers inpatient hospital care, nursing facility care, and even home health care for up to 100 days. While these may sound like long-term care services, the 100 day limit means that it comes with limitations. At the end of life, Part A also pays for hospice care.
• Medicare Part B
  Part B, also known as medical insurance, covers your typical appointments including doctors, outpatient procedures, and preventive services for a monthly premium of $164.90 as of 2023.
• Medicare Part D
  Part D, also known as drug coverage, covers prescription drugs. Prices will vary by your plan and income. While you are required to have both Part A and B under original Medicare, Part D is not required.
• Medicare Part C
  If you’re interested in specialized plans, Part C, or the Medicare Advantage plan, are private plans that replace A and B, and sometimes Part D. We’ll discuss these options in the next section.

Adding Medigap or Switching to Medicare Advantage

As mentioned above, even with Medicare, you have some options regarding how much insurance to get. Medigap and Medicare Advantage expand those options.

Medigap

If you want to stay on the standard Medicare A, B, and D plan, you can add on Medigap. Medigap (or Medicare Supplement) is a medicare supplement sold by private insurance companies to help fill the “gaps” in the medicare system. The government provides a full guide to all your medigap options.

Medicare Advantage

Medicare Advantage plans are also private plans that contract with Medicare. These plans must offer all the benefits of Medicare Parts A, B, and usually D, but they also offer things that normal Medicare does not cover. If you have Medicare Advantage, you cannot buy and do not need any Medigap.

Medicare Advantage makes the most sense if you have generally good health and do not anticipate requiring complex services. You’ll have a yearly limit on what you have to pay out of pocket for services and, once you hit that limit, you’ll pay nothing for the rest of the year, except for drug costs. However, Medicare Advantage can be more difficult to use given that all doctors are in-network for original Medicare but not Medicare Advantage.

Managing Healthcare Bills and Prescription Drug Costs

At the end of the day, some medical costs are inevitable, but there are strategies to get the best deals when you go to the doctor, pick up prescriptions, or encounter other medical expenses. While healthcare pricing is not always transparent, you can control some of the variables by doing a little homework.

Ask questions ahead of the appointment.

Before you head to the doctor, make sure you’re going in-network. Websites, like ZocDoc, can help you find doctors who take your insurance. If you’re going for a check-up, making sure it’s in-network should be enough, but if you’re going for a specialist, call ahead to ask for a price estimate. If the…