I was surprised when I read in a recent poll from eligibility.com that about half of the people surveyed believe Medicare is free. Is that what you thought?
We who are retired know it's not true. So for the uninitiated -- or the forgetful -- here's a run-down of how much Medicare costs us.
Part A covers hospitals, nursing and other medical services. This is the part that's free -- as long as you've met the work-related requirements to qualify.
Part B covers outpatient care and medical supplies. The standard rate for Part B is currently $135.50 per month. The rate is graduated by income, so higher earners pay more. If an individual earns more than $85,000, or a retired couple makes over $170,000, the rate is $189.60 per person per month. And it goes up from there. For individuals who earn more than $160,000, or couples above $320,000, the rate is $433.40 per person. For most of us this charge is automatically deducted from our Social Security benefit.
Part B also comes with a deductible of $185.00. And after the deductible is met, Medicare only pays 80%, leaving us responsible for 20% of the cost.
Parts A and B do not cover drug costs. So there's a Part D for prescription drugs. The cost for Part D varies depending on how comprehensive the plan is, but the average cost runs around $33 per month. And again, higher earners pay higher premiums.
Since Medicare doesn't pay for everything, most retirees also purchase a supplemental plan of one sort or another from a private insurance company. How much it costs varies with how much coverage you get and the company you buy it from. Just by way of example, I get mine through AARP and United Health Care, and currently pay $184.34 per month. B has her own supplemental plan through Cigna. Some retirees (not us) can still get this coverage from their old employer.
You can also sign up for a Medicare Advantage Plan which typically packages Part A and B with a drug plan. These offerings are often less expensive, but may restrict which medical providers are available to you.
One Medicare pitfall is that if you don't sign up right away, at age 65, you face penalties that will increase the premiums for the rest of your life. If you're already enrolled in Social Security at age 65, then you will automatically be enrolled for Medicare Parts A and B. But if you're not taking Social Security, then it's up to you to sign up. (However, if you're still working and covered by an employer plan, you may be able to delay Medicare without the penalty.)
There is another option for people who can't afford to pay for Medicare. Medicaid provides health coverage for certain low-income people, including the elderly and people with disabilities. Check out HHS.gov to you want to see if you qualify.
One last thing to consider in planning for medical bills in retirement is that neither Medicare nor Medicaid covers everything. Medicare doesn't cover dental work, glasses or contact lenses, over-the-counter drugs, or long-term care. Other policies are available to cover at least some of these expenses. But long-term-care insurance is increasingly hard to find and complicated to negotiate.
Who said there's no free lunch? Some attribute the quote to Depression-era New York City mayor Fiorello La Guardia, others to economist Milton Freeman. Still others say it goes back to the 1800s practice of offering a free lunch in bars to entice people to buy more drinks. Who knows? But at least so far, there's no free medical care.