Preparing for the Costs of Medicare in 2019

During our working years, it’s all too easy to forget that someday we will be retiring on a fixed income. Downsizing from a working income to a fixed retirement income is easier said than done. If you want to retire comfortably someday, it’s important to account for all of the costs that you will face during your golden years. One of the biggest expenses you must prepare for is healthcare.

In America, we are lucky to have a national health insurance program designed specifically for people aged 65 and older. Although this program covers about 80% of our healthcare expenses in retirement , there are premiums we must pay for this coverage and as we use the coverage, we will also pay deductibles, copays, and coinsurance.

Here are some of the costs related to Medicare that you should prepare for:

Medicare Premiums

Medicare has two original parts: Part A and Part B. Part A covers our hospital stays. Most people pay FICA taxes during their working years and these taxes go to pre-pay our future hospital coverage. When you turn 65 and enroll in Part A, you won’t have to pay anything because you’ve already paid for these benefits.

Part B covers your outpatient medical expenses. When you enroll in Part B, you will pay $135.50 in 2019 unless you have an income that is higher than $85,000 as an individual and $170,000 as a married couple. People in higher income brackets pay more for their Part B. You can find a chart detailing the premiums for high income brackets here .

Medicare also has a voluntary prescription drug program. You enroll in a plan through a private insurance company. There are many plans available in each state and premiums range from very inexpensive - around $15/month – to plans well over $100/month. Medicare’s website has a tool that can help you select a plan that offers the right medications for you.

Deductibles, Copays and Coinsurance

Both parts of Original Medicare have deductibles. If you have an inpatient hospital stay, the deductible in 2019 is $1384. On the outpatient side, there is just a one-time small annual deductible of $185. You will pay these amounts out of pocket before the benefits for each part begin.
If you have a long hospital stay, you begin to incur daily hospital copays at Day 60. These copays start at $341 per day and grow larger with time. The same can be said for skilled nursing facility benefits. Medicare covers the first 20 days but you will pay for days 21 – 100 at $170.50 per day. They can be very costly if you are unfortunate enough to have a long hospital stay.
Lastly there is also coinsurance that you pay for certain benefits. For example, Medicare Part B covers 80% of your outpatient expenses. The other 20% that you pay is your coinsurance.

Uncovered Items

There are also some things that Medicare doesn’t cover, so any good retirement plan needs to account for the fact that you will pay these costs out of pocket. Medicare does not cover long term care expenses, so it’s important to prepare for the possibility that one day you may need to live in assisted living facility. Medicare also not cover routine dental, vision and hearing benefits. Since we still need dental care and vision care during our golden years, you’ll want to consider purchasing an individual insurance plan that will help you to account for the cost of these items. There are many affordable plans on the market to choose from.

You can also purchase Medicare supplement insurance to help you pay for the deductibles, copays, and coinsurance we discussed above. This coverage varies in price based on which plan you choose and where you live. Speak with your financial planner about setting aside enough money so that you can account for these expenses in retirement .