For all those baby boomers approaching their 65th birthday, it's time to plan for Medicare.
After years of paying payroll taxes at work to help fund this government program, these older Americans finally get their turn to sign up and have health insurance for the rest of their lives. About 10,000 boomers turn 65 each day.
Yet many new enrollees are surprised to discover that basic Medicare does not cover a variety of health care expenses that can hit retirees pretty hard.
"A lot of people go into it thinking they'll be covered for everything," said Roger Luchene, a Medicare agent with Hammer Financial Group in Schererville, Indiana. "The three big ones are dental, vision and hearing. I'm actually surprised by how many people think that's covered."
About 48 million Americans age 65 and older are enrolled in Medicare, as well as another 9 million or so younger people with disabilities.
Fidelity Investments estimates that the average couple retiring today at age 65 will spend a whopping $280,000 on health care during the remainder of their lives.
Some people with low incomes qualify for programs that reduce their Medicare-related costs. There's extra help for prescription drug coverage, and some state-run savings programs help with copays, coinsurance, deductibles and premiums.
For those who don't qualify, paying out of pocket or buying additional insurance are their options.
Here are some common things basic Medicare does and does not cover and how to prepare.
The ABCs (and D) of Medicare
Basic, or original, Medicare consists of two parts: Part A and Part B.
Part A provides coverage for hospital stays, skilled nursing, hospice and some home health services. As long as you have at least a 10-year work history, you pay nothing for Part A. However, it comes with a deductible of $1,340 per benefit period and has some caps on benefits.
Part B coverage kicks in when you visit a doctor or receive other outpatient services, like a flu shot. It also covers medical equipment, like crutches or blood-sugar monitors.
The monthly premium for Part B is currently $134 for people with an income up to $85,000. If you earn more than that, you'll pay more (see chart below.) It also comes with a $183 deductible. After it's met, you typically pay 20 percent of covered services.
Medicare Part B premiums
| Individual tax filers* | Married, file taxes jointly* | Married, file taxes separately* | What you pay monthly in 2018 |
|---|---|---|---|
| $85,000 or less | $170,000 or less | $85,000 or less | $134 |
| Above $85,000 up to $107,000 | Above $170,000 up to $214,000 | Not applicable | $187.50 |
| Above $107,000 up to $133,500 | Above $214,000 up to $267,000 | Not applicable | $267.90 |
| Above $133,500 up to $160,000 | Above $267,000 up to $320,000 | Not applicable | $348.30 |
| Above $160,000 | Above $320,000 | Above $85,000 | $428.60 |
(Source: Centers for Medicare and Medicaid Services. *Part B premiums are based on tax returns from two years earlier. So for 2018 it's based on your 2016 return.)
Basic Medicare (again, parts A and B) does not cover prescription drugs, although you have the option of getting coverage when you first sign up. If you choose not to and change your mind later, you'll pay a life-lasting penalty unless you meet certain exclusions (i.e., you receive acceptable coverage through a union or employer).
You can get this coverage either through a standalone prescription drug plan (Medicare Part D) or through a Part C plan, which is also called a Medicare Advantage Plan.
If you go with the latter, which often includes some extra benefits above basic Medicare, your Part A and Part B coverage also will be delivered via the insurance company offering the plan.
Teeth, eyes and ears
Generally speaking, original Medicare does not cover dental work and routine vision or hearing care.
This means it does not cover dentures, which can run anywhere from about $1,000 to north of $5,000 for a complete set. And while a routine cleaning and X-ray could set you back about $200 and a filling runs about $150 or $200, a single tooth implant can be upward of $4,000.
However, if a dental condition involves an emergency or complicated procedure, it could be covered.
Same goes for routine vision checks. If you need glasses, it's generally not covered. Yet if you have an eye condition like glaucoma or cataracts, basic Medicare will cover your care.
If you decide to go with an Advantage Plan, there's a good chance dental and vision will be included. It will likely be limited, though.
"You'll get some coverage, but nothing major," said Elizabeth Gavino, founder of Lewin & Gavino in New York an independent broker and general agent for Medicare plans. "You might get a dental cleaning or two a year."
Whether you choose an Advantage plan or stick with basic Medicare, you can purchase a separate policy that gives you more extensive coverage.
Standalone vision plans can cost about $9 a month, Hammer Financial's Luchene said, and dental plans could run somewhere in the neighborhood of $30 to $50 a month, depending on how much coverage you choose to get.
Some plans will add in hearing coverage, although there's usually a low maximum — say, $500 — that the plan will pay. Hearing aids can run anywhere from $1,000 to $4,000 or so.
For the jet-setters
If your later-in-life plans include hopping from country to country, be aware that basic Medicare generally does not cover care you receive outside the United States.
"If you have a heart attack overseas or have to be airlifted … those things can get really expensive," Gavino said.
If you choose an Advantage Plan, emergencies are often covered worldwide. However, routine care received overseas may not be.
In this situation, you can look into travel-medical policies specifically targeted at the 65-and-over crowd. Depending on the specifics of the coverage and your age, these policies can cost about $175 or more a month.
Meanwhile, if you choose to go with just basic Medicare (parts A and B) instead of an Advantage Plan, you have the option of purchasing a Medigap policy that includes coverage while traveling. (You cannot purchase Medigap if you have an Advantage Plan.)
The most popular Medigap plan runs about $159 to $236 for a 65-year-old male, according to the American Association for Medicare Supplement Insurance.
In general, Medigap plans cover the cost of deductibles or coinsurance associated with basic Medicare. Some of them also over coverage during overases travel, with a cap of $50,000.
You also can purchase a standalone plan in addition to Medigap if you anticipate that cap being too low.
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Long-term care
On average, an American turning 65 today will spend $138,000 in future long-term-care costs, according to a 2017 Bipartisan Policy Center report. Long-term care includes things like daily help with bathing and eating.
In general, Medicare does not cover long-term care. There are insurance policies that cover it, although they can be pricey. And the older you are, the more they cost.
For instance, rates for a couple, both age 55, would pay about $2,500 for a yearly policy that offers $164,000 in coverage to each policy holder, according to the American Association for Long-Term Care Insurance. If they are age 60, that amount is about $3,400.
Observation vs. admission
If you end up in the hospital, make sure you know whether you have been admitted or are there for observation. It can make a big difference in what Medicare pays for if your after-care involves skilled nursing.
Say you trip and fall and end up in the hospital. You're there for a few days. After you leave, you need rehab for your injury.
Such skilled nursing care is covered through Medicare Part A if you have been admitted to the hospital for at least three days. However, if the hospital keeps you there for observation instead of admitting you, your rehab would not be covered.
If you can plan in advance, you'll be able to make sure you have the coverage you need when Medicare takes effect.Roger LucheneMedicare agent with Hammer Financial Group
"Observation is considered outpatient," Gavino said. "So then you have a huge bill because you weren't admitted as an inpatient. And in some cases, they won't admit you even if you ask them to."
There are hospital indemnity plans that can cover up to $600 per day for a set number of days. Depending on your coverage, they can run about $35 a month and higher.
Loose ends
Medicare also generally does not cover acupuncture, cosmetic surgery or routine foot care.
Overall, the important thing is to head into your Medicare years armed with knowledge so you can avoid surprises.
"Everyone's situation is a little different," Luchene said. "If you can plan in advance, you'll be able to make sure you have the coverage you need when Medicare takes effect."
