With the right strategy, you can keep your expenses down to a manageable level.
Millions of older Americans currently receive health insurance through Medicare. And it can be hard to imagine getting through retirement health care without it.
But one of the biggest misconceptions about Medicare is that Medicare coverage is free. That’s not true in any way.
Medicare participants are likely to face many expenses, so it’s important to know which ones to expect and how to minimize them. Here are three big costs to prepare for.
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1. Insurance premium
Most people with Medicare do not have to pay premiums for Part A, which covers hospital care. However, there is a monthly premium for Part B, which covers outpatient treatment. The standard monthly premium for 2024 is $174.70. However, higher income earners may have to pay a premium.
There are also premiums associated with Medicare Advantage and Part D drug plans. However, these plans may have a premium of $0.
One way to minimize your Part B premiums is to enroll in Medicare on time. The initial enrollment period begins three months before the month you turn 65 and ends three months after that month. If you enroll late, you risk a 10% surcharge on your Part B premium for each 12 months you were eligible for coverage but did not enroll.
Meanwhile, you can keep your Medicare Advantage or Part D plan premiums more affordable by reviewing your coverage each year during the fall open enrollment period. This period is currently in effect and will last until December 7th.
2. Deductible amount
Medicare Parts A and B deductibles are incurred before services are covered. The Part B deductible is a fairly reasonable $240 for 2024. However, if you are hospitalized, you will pay a $1,632 inpatient deductible under Part A. And it only covers the first 60 days.
One way to reduce the burden of high deductibles is to purchase a Medigap plan as supplemental insurance when you first enroll in Medicare (you can also enroll later, but it can be more expensive). there is). Medigap is compatible with Original Medicare, but is not available to Medicare Advantage plan enrollees.
3. Services not covered
Medicare covers a wide range of medical services, but not everything. If you’re enrolled in Original Medicare, you’ll pay for dental care, eye exams, and hearing aids out of pocket.
That being said, Medicare Advantage plans typically offer additional benefits beyond what comes with Original Medicare. If you want coverage for these services, it’s not that hard to find an Advantage plan that includes them. However, you should weigh the pros and cons of an Advantage plan against the pros and cons of Original Medicare to decide which option is best for you.
Check if you are ready
It’s obvious that as a Medicare enrollee, you can face significant expenses. Although there are steps you can take to alleviate them, it’s best to enter retirement with as much savings as possible so you can cover your expenses if needed.
It’s also a good idea to contribute to a Health Savings Account (HSA) during your working years and save that money for retirement. That way, you have dedicated funds to address various Medicare costs.
When you enroll in Medicare, you are not allowed to contribute to an HSA, but you can use existing funds to pay for various expenses that you incur. Also, HSA withdrawals used to qualify for medical expenses are tax-free, so that’s an added benefit.
