Serving Our Seniors has started to study Erie County's older population (65 to 75-years-old) and those "soon-to-be" senior citizens (55 to 62-years-old). The responses to the surveys have been returned and the data is now being tabulated.
As the surveys were mailed back to our office I would read some of them. I was somewhat surprised at what appears to be a lack of awareness that the "soon-to-be" senior citizens have about the cost of health care once they are on Medicare. So, I thought this would be something good to blog about.
I'm going to give a general description about how Medicare works. I'm not going to get into the complicated details. (If I did, this blog could go on forever.) I'm just going to give you enough information to give you a general understanding of how an older person is insured under our Medicare system. After you read it, tell me if you are surprised by the costs and comment on how prepared you are to meet these expenses in retirement — don't forget to factor in inflation.
Traditional Medicare insurance has 3 parts to it:
Medicare Part A is insurance that covers you while you are in the hospital. There is no monthly premium for this insurance once you are eligible for Medicare, that is, age 65 or permanently and totally disabled. Medicare Part A covers 80% of the bill when you are in the hospital. It's up to you to pay the 20% the Medicare doesn't cover.
This is where "Medigap," (also called, "Medicare Supplemental Insurance Policies") comes in. Medigap insurance is an insurance policy you can buy from a health insurance agent. Our experience is older people who have health problems, pay about $200 per month for this insurance.
Medicare Part B is insurance that pays for out-patient services, i.e., doctors visits, physical therapy, occupational therapy, lab work, etc. Today this insurance costs $96.40 per month. This amount is automatically deducted from your Social Security check. You don't have to buy this insurance if you don't want it. The alternative, however, is to pay for all of your out-patient services out of your own pocket. (Probably not a good idea to take on that financial risk in later life.)
Medicare Part D. This is the prescription drug insurance. Today, there are 52 different prescription drug insurance plans to choose from and they range from about $16.60 to $98.00 per month. The difference in price reflects how comprehensive the coverage is. But all of them have restrictions of some sort or another.
In addition to the premium costs are the deductibles and co-payments that come due when you use a health care professional. And keep in mind that Medicare does not pay for dental care or eyeglasses.
So tell me, are you planning for these costs in your retirement budget?