Saturday, August 31, 2019

What Does Medicare Cost?

     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.

17 comments:

gigi-hawaii said...

As my husband, DavidH, has commented on your blog, we prefer Humana Medicare Advantage. If we opt for Humana HMO, we pay zero premiums. If we opt for Humana PPO, we do pay a monthly premium. We are on Humana HMO, which means we stick with one medical center only. To us, it's worth it.

scott said...


TANSTAAFL! Economics instructor wrote that on the board back in college: There Ain't No Such Thing As A Free Lunch - it was a good lesson.

Recently retired, recall having this discussion in the breakroom with a lot of co-workers, most younger than 40. Most all thought Medicare was free. Nope - TANSTAAFL

Anonymous said...

As someone who retired at 63 (now 64, turn 65 in Feb.) and wife 62 and paying for Cobra through my last employer I look forward to paying those costs from Medicare. They will be a lot less money then I pay now. Good point about signing up on time to avoid the penalty. Nicely written as usual. Thanks!

Sydney said...

That was so helpful. Some of my friends have asked me what I know of Medicare (NOTHING!), this is a great summary I will pass along.

DJan said...

I have a Medicare Advantage Plan that covers most of what I need, but it's sure not free, nowhere near. And my co-pays for some specialists is $50 a pop. I like the acronym for TANSTAAFL! Fun post. :-)

Tom said...

Anon ... Oh, don't get me wrong. Medicare is still a great deal. It's a lot less expensive than individual or often even employer-sponsored health insurance, and I am grateful for it ... and I also support expanding it to include younger people. It's just that no one should think it's free.

Sonja said...

We have been taxed our whole working lives this free coverage!

Janette said...

I am wondering why you cannot delay the entrance of Medicare to the time you can get full SS pay. I will be in the loop that I have to send a check somewhere (where I have no idea) until I am 67. BUT it would be WAY too much for the government to think this through.....
Excellent summary, BTW.
As a spouse of a retired military member who was promised free health care for life...we will be paying most of these premiums as well.

Rian said...

Medicare is not free... but it definitely a good deal. We pay for our Medicare, a medicare Rx plan, and a Medicare supplement. We get to pick our own doctors and don't pay anything at appointments. You did explain it well, Tom. And we are very grateful for it.

Janis @ RetirementallyChallenged said...

Great information! My husband joined Medicare earlier this year and I will join up in a few years. It will be less expensive for me than now but, you are right, it isn't free. The best feature, as far as I'm concerned, is that there are no pre-existing conditions. As we age and often need more medical care, this is a huge benefit.

Barbara said...

I have Medicare Part A & B and separate Drug Policy all paid out of my SSA check before it is deposited. I also have AARP-United Healthcare Supplemental Policy. Medicare A&B are great. My drug plan was chosen for my particular insulin coverage. My AARP Supplement was chosen (1) with bad diabetes I need to be prepared in the future and (2) because diabetes is considered a pre-condition and two of the first Supplement Companies I contacted would not cover someone with diabetes so I grabbed AARP as soon as they agreed. By the way, the Supplemental paid the difference on the two cataract surgeries I just had. The one thing I would tell anyone is to buy Supplemental as soon as you can because once you are sick you can't get it. You have to look at Supplemental like car insurance. You hate paying it every month but if you ever need it you will probably recover the money you spent for the benefits you receive.

jimserrettstudio said...

Very informative, and clear. I have been looking into all of the Medicare costs. Extremely helpful.
Thank you. Jim

Kathy @ SMART Living 365.com said...

Hi Tom! I agree that some people seem to believe that Medicare is FREE, but as you say it isn't. My husband Thom is now on it and like you we picked Plan F with United Health Care. The good news for us is that as self employed people who have been paying through the nose for our high deductible health insurance we will be saving a lot--even with the premium option. If you worked for the government or had an employer paying for your health insurance it might seem expensive, but when I switch over next year, 8 months and counting, our family will be saving $800 a month...yes a MONTH. And again, that is for Plan F which is the best available. Unfortunately we know a few people who never signed up beyond the basic FREE hospital plan and now have bad health. I get that no one wants to pay extra but at a minimum a person should go with an Advantage Plan. Hopefully people pay attention to their options. ~Kathy

Kay said...

Oh yes! I definitely knew that!!! It's not cheap, but thank goodness for Medicare. Isn't Trump saying he's going to be gutting it or something like that? I just saw this on Vox.
..."Over the next 10 years, Trump’s 2020 budget proposal aims to spend $1.5 trillion less on Medicaid — instead allocating $1.2 trillion in a block-grant program to states — $25 billion less on Social Security, and $845 billion less on Medicare (some of that is reclassified to a different department)."

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Rebecca Olkowski said...

I was already enrolled in Social Security as a spousal survivor and was automatically enrolled in Medicare when I turned 65. I joined Kaiser which has been great for me because everything is all under the same system.

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