5 Ways to Slash Healthcare Costs in Retirement
Millions of baby boomers born in 1948 will become eligible for Medicare this year and face the complexities of choosing Medicare plans. Under the original Medicare plan, coverage consisted of two parts: Part A (hospital insurance) and Part B (medical insurance). The 1997 Balanced Budget Act created Part C, which allowed private companies to offer Medicare benefits as well as benefits not offered by Medicare. In 2003, the Medicare Prescription Drug, Improvement, and Modernization Act, the first major revision of the Medicare program since its creation was signed into law, preserving and strengthening the original plan, and offering important new prescription drug and preventive benefits (Medicare Part D), as well as extra help to people with low incomes. Below are 5 ways to slash healthcare costs in retirement.
1. Understand how existing group health plan coverage may coordinate with Medicare.
Many people work past age 65. As a result, Medicare-eligible individuals who have health coverage through their employer or their spouse’s employer may be able to keep that coverage and wait to enroll in Medicare Part B (e.g., doctor and outpatient visits). However, it’s important to check with your plan administrator to determine their policy and how the company size may affect your Medicare enrollment choice. You may want to consider enrolling in Medicare Part A (hospitalization) even if you defer Part B.
2. Choose the right Medicare plans for your needs and financial profile, including important choices when first eligible.
Individuals choosing traditional Medicare still have an average of 20 Medicare Part D prescription drug plans from which to choose. Those evaluating Medicare Advantage plans over traditional Medicare also have an array of options, with an average of 20 plans from which to choose. Most also can choose from 10 standard Medigap policies for supplemental coverage, ranging from basic to comprehensive coverage. However, even though policies are standardized, the price can differ from one company to the next. Adding to the complexity, Medigap plans are not required to accept someone after the person’s initial enrollment period.
3. Follow Medicare enrollment rules and avoid penalties.
Not following Medicare enrollment rules at the outset can cost you dearly for as long as you have Medicare. Those without an approved deferral may need to pay a late-enrollment penalty of 10 percent for each full 12-month period they could have been enrolled in Part B. Likewise, Part D imposes a penalty if someone goes for more than 63 days without coverage after enrolling in Part B.
4. Understand added Medicare costs for higher incomes; and how to potentially lower those costs.
As someone nears 65, their income can change dramatically. If you do not understand how Medicare premiums are set you could end up paying much more than you should in monthly premiums.
Higher-income beneficiaries pay higher premiums for Medicare Part B and prescription drug coverage. For Part B, the 2013 monthly premium is $104.90 for joint filers with income of $170,000 or below ($85,000 for single filers). However, the premium increases to between $146.90 and $335.70 for those with incomes above these thresholds. Likewise, higher-income beneficiaries can expect to pay from $11.60 to $66.40 more each month in prescription drug premiums.
5. Secure healthcare coverage for your spouse or dependents.
You may unwittingly leave your family without health coverage if you leave your employer plan to enroll in Medicare before securing separate coverage for your spouse or dependents. Some employers may continue to provide coverage to a worker’s family, or the individual may need to purchase COBRA coverage or private coverage for their family.