How Medicare Works

MedigapIf you're counting on Medicare to cover your healthcare costs after you turn 65, you may be in for a shock that could mess up your retirement.

Even for seniors who purchase optional Medicare supplementary plans (known as Medi-gap Insurance because they cover expenses that Medicare doesn't), healthcare costs may be as high as $350,000 for a couple during their retirement years. That gigantic number doesn't even count long-term care costs and is based on the current benefits system. The costs could be much greater if Congress alters Medicare.

Here are three big reasons you can't count on Medicare if you have costly health issues after age 65:

Medicare’s coverage of long-term care coverage. About 70% of seniors will need long-term care during their lifetimes, which will be needed for an average of three years. However, Medicare most likely will pay nothing for this care. It just covers skilled nursing care and provides this coverage, only if you have a qualifying hospital stay. Most seniors need custodial care or routine help with daily activities like bathing or preparing food that necessitate long-term care. Custodial care isn't covered by Medicare, Medicare Advantage or Medi-gap policies.

Medicaid will pay for nursing home care, but you'll have to spend down to qualify because of Medicaid's eligibility requirements. You may need an asset protection plan to do this, so talk with an Elder Law attorney.

Medicare’s high coinsurance costs. Medicare doesn’t provide 100% coverage for healthcare services, even when it does cover your care. If you need hospital or inpatient care (covered by Medicare Part A), you will need to pay a $1,316 deductible (in 2017). If you're in the hospital for more than 60 days, your copay will be $329 per day or more depending on the length of your stay.

Medicare Part B covers routine care like doctor visits and durable medical equipment. It also charges a co-pay of 20% for services and Medicare Part D plans for prescriptions may require costly premiums, with deductibles up to $400. It may also have a co-pay based on the tier of a covered drug. Medicare Advantage plans or Medi-gap plans may pay part of the co-pay costs, but this means paying extra premiums, with most of these plans still requiring beneficiaries to cover some of their care expenses.

Medicare’s future. Medicare is financially troubled. A recent report from the Medicare Board of Trustees' revealed that the Hospital Insurance Trust—which covers Medicare Part A expenses—is expected to be depleted by 2029. Financing will need to grow at a faster pace to keep up with projected expenditures.

To make certain that health care expenditures don't ruin your retirement, educate yourself about Medicare coverage limitations as early as possible and make plans to overcome them.

Reference: Motley Fool (November 12, 2017) “3 Reasons Seniors Can't Count on Medicare to Cover Health Costs”


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