In 2021, couples retiring at age 65 could expect to pay $300,000 or more on healthcare throughout their retirement, a 9% increase over 2017’s expectation, with a cumulative 10.55% rate of inflation during the same period of time. As healthcare costs continue to rise, many retirees find themselves facing unexpected expenses that Medicare doesn’t cover, making it more important than ever to factor healthcare costs into your retirement planning.
While Medicare Parts A and B cover about 80% of some healthcare costs in retirement, like hospitalization and doctor visits, you’re responsible for covering the rest which can add up quickly. The average Medicare recipient spent over $5,000 on out of pocket expenses ,and over $9,ooo for both in-network and out-of-network services in 2021. A substantial part of that cost is being spent on services not covered by Medicare. Here’s a list of some of the common healthcare-related needs that are not covered by Medicare Parts A and B:
Outpatient prescription drugs –Prescriptions tend to be some of the largest reoccurring expenses for anyone and even more so for retirees on a fixed income. To cover these expenses, recipients would need to purchase a separate Part D Prescription Drug Plan or a Part C Medicare Advantage Plan that includes drug costs. These plans are typically offered through private insurance companies for an additional premium. When choosing a plan, retirees need to be aware of at least a few key factors, such as separate deductible requirements that need to be met before coverage will take effect, and the annual benefit limits provided.
Dental care – Teeth are a vital part of your health and require just as much care and attention as the rest of your body. This includes routine dental visits, teeth cleanings, fillings, dentures, and most tooth extractions. Some Part C Medicare Advantage Plans will cover basic cleanings, dental exams, and x-rays, but they typically have an annual coverage cap. Paying attention to the specific services that are covered and making sure the plan fits your individual needs is an important step to ensuring these costs are manageable and the proper care is provided.
Vision care – The costs for eye exams, glasses, and contact lenses end up being out-of-pocket for many retirees. There are a couple exceptions, which include annual eye exams for those with diabetes and eyeglasses for those who have undergone certain types of cataract surgery. Like dental coverage, some Part C Medicare Advantage Plans provide vision coverage. Retirees can also consider purchasing a separate supplemental policy that provides coverage for just vision care or includes both dental and vision care. Keep in mind that an additional policy brings a separate premium and deductible.
Hearing exams and hearing aids – Hearing aids are a major expense for seniors who need them. As with dental and vision care, some Part C Medicare Advantage Plans will cover hearing aids and fitting exams, but it is less common, highlighting another reason why it’s important to choose a plan wisely. Seniors can take advantage of discount programs offered by various groups that provide hearing aids at a reduced cost when not covered by insurance.
Medical costs incurred outside the U.S. – Often times, retirees will include international trips on their bucket list, yet medical needs can thwart their plans if relying on Medicare alone. There are a few exceptions, but even in those circumstances, coverage isn’t guaranteed. Some Part C Medicare Advantage plans will cover emergency care while traveling abroad but will typically only pay 80% of the cost of services received after the deductible has been met.
Long-term care services – This includes assisted living, home health aides, and nursing homes. The average cost per month was $4,051 in 2019 for assisted living, which comes out to over $48,000 per year. This number grew to over $94,000 for a private room in a nursing home. While these costs can vary greatly by state and region, it is one of the biggest health-related expenses that retirees face. Separate coverage for long-term care needs can be purchased before retirement to help reduce the financial strain of utilizing these services.
While this is not a complete list of services that are not covered under original Medicare Parts A and B, it does provide insight into how healthcare costs can add up to hundreds of thousands of dollars over the course of 20+ years spent in retirement. If you have questions about how healthcare costs may impact your income in retirement, make sure to reach out to your financial advisor to develop a plan that fits your anticipated needs and your budget.