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  • Nathan Rubenstein

Lifetime Costs of Medicare

Updated: May 26



I often hear people regard Medicare as a much better form of insurance compared to traditional under 65 health coverage. While many aspects of Medicare are an improvement from group or individual coverage, there several things to keep in mind. First and foremost, Medicare is not free. Part A is free for most people, but there are premiums associated with Part B, Medicare Supplement and Part D plans. Let’s take a look at some of costs of Medicare premiums and talk about how to plan for those costs throughout your lifetime on Medicare.


In 2021, the standard Part B monthly premium is $148.50. If you make more than a certain amount of income, you will pay more for Part B. Let’s use an average cost of a Medicare Supplement plan of $130. Part D prescription plans range in monthly premiums from $10-$80; this number is entirely dependent on the amount and types of medications you are taking. For the sake of this example, we will take an average Part D premium of $20, and monthly out of pocket drug co-pays of $25. Using the numbers in this example, you would pay a total of $323 per month in total out of pocket costs. In my experience, this is towards the low end of the spectrum and represents someone who is newer to Medicare and is very healthy. Insurance and healthcare costs are not decreasing anytime soon, and these numbers will typically increase slightly each year.


Medicare costs should be factored in when considering your overall retirement and financial planning needs and goals. If you and your spouse live until 90 years old, you should expect somewhere between $200-300K in total lifetime healthcare costs during retirement. Depending on your health and the insurance coverage you have, this number could be higher or lower.


3 things to consider as you plan for Medicare:


1. Health Savings Accounts (HSA)


A powerful tool that can be utilized before you join Medicare is the HSA. Health Savings Accounts allow you to save money on a tax-free basis, tax free growth of that money, and withdraw that money tax free to pay for qualified medical expenses. To my knowledge, there is no other type of account that has the triple tax advantage of an HSA. A potential drawback of an HSA is that you have to be enrolled in a qualified high deductible health plan in order to make contributions. Hint- you can use HSA funds to pay for Medicare Part B and Part D premiums, in addition to over the counter and prescription medications. However, you cannot use HSA funds to pay for Medicare Supplement premiums.


2. Long-Term Care


Arguably the biggest gap in Medicare is coverage for Long-term care. Long-term care refers to services like at home healthcare, adult daycare, assisted living, and nursing home care. It’s important to plan for your Long-term care needs before reaching Medicare age. Many people choose to purchase Long-term care insurance, and others choose to self-insure. This is something you should review with your financial professional.


3. Prescription Drug Costs


While many aspects of Medicare offer more comprehensive coverage than group or individual health insurance, it often falls short in regards to prescription drug coverage. This is especially true when it comes to brand and specialty medications. I’ve seen this firsthand. A newly eligible Medicare client of mine is taking a brand name medication and currently paying very little in monthly co-pays. When we analyze their drug costs, something that used to cost $20 per month on their group health insurance plan will now cost them $500 per month on Medicare.


These are just a few things to keep in mind as you plan for your healthcare expenses during retirement. To learn more and receive a complimentary personalized Medicare Cost Analysis, contact us today.

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