Health insurance costs after Medicare-eligible

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Gnomon
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Joined: Fri Sep 17, 2021 8:11 pm

Health insurance costs after Medicare-eligible

Post by Gnomon »

I'm currently planning to retire from megacorp around mid 2022 (age 60, single, no dependents), but pandemic-related reasons might delay that.
I've read that if you're retiring "early" your retirement plan needs to include estimates of your out-of-pocket costs for paying for health insurance premiums in the gap years before Medicare kicks in. So I have estimates for those costs in my retirement plan, but it's challenging to guess how much subsidy I might get since I will probably be converting some 401k/tIRA assets to cash in those gap years and (unless I'm mistaken) that will count as income that is considered for subsidy eligibility.

Setting that aside for now, what about once you enroll in Medicare as a retiree?
Your costs don't go to zero, so I'd like to better understand how to plan for those costs once you're Medicare-eligible and until death. What are the additional health insurance types I will need to purchase out-of-pocket once Medicare kicks in, and what are some recommended resources for estimating those costs and choosing plans?
Besides medical insurance, there is vision and dental insurance as well. Are most retirees skipping those and just paying purely out of pocket?

Separate but related, how are people including health insurance premium inflation in your retirement plans? Is there a generally accepted fixed annual percent increase for those estimates?
dbr
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Re: Health insurance costs after Medicare-eligible

Post by dbr »

The landscape for supplementary insurance at Medicare age is complex. There are some good books and websites to consult for Medigap and/or Medicare Advantage plans. It can also happen that retiree insurance from your employer can cover supplementary needs. There is a huge range in costs and benefits. Medigap plans are standardized within a state.

I suppose just off hand supplementary coverage could vary from $50/mo. to $250/mo. but one would have to also estimate burden of uncovered expenses. Some retiree plans might include dental and vision. True dental insurance is pretty much non-existent except mostly just being a prepayment of expenses. The effect on negotiated costs from holding a policy might be significant. It is not unexpected for dental costs in the thousands to happen in retirement.

Sorry to be so vague, but the answer is complicated.
jebmke
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Re: Health insurance costs after Medicare-eligible

Post by jebmke »

Your state insurance regulator may have resources that will give you pricing on Medigap plans in your state. Ours publishes the rate for every policy offered in Maryland.

You will need to add to that any deductibles, a prescription plan (which may cover very little, as in my case) as well as uninsured stuff like dental, vision expenses (these can add up!).

Long term care is a black box (Schrodinger's cat is in there); I didn't even try to estimate this when I first did my retirement budget.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
HomeStretch
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Re: Health insurance costs after Medicare-eligible

Post by HomeStretch »

As an example, my parents each pay the following per month in Medicare premiums:
1. Part A $0
2. Part B $148.50
3. UHC AARP Supplement $290.50
4. UHC AARP RX (Part D) $86

These rates are basic 1x rates. The rates would increase by a factor if subject to IRMAA surcharges. The first IRMAA tier (based on MAGI) is 1.4x.

There is no coverage under original Medicare for non-medical dental, vision and hearing. Veterans may be eligible to obtain free VA coverage for certain services including hearing.

So my parents pay out of pocket for premiums, dental/vision/hearing and RX co-pays/donut hole.

A Medicare Advantage plan (which vary) monthly premium would likely be cheaper for them and might have some coverage for dental/vision/hearing. However, until recently my parents lived part time in 2 states and the Medicare Advantage plans had limited coverage/reimbursement outside of their resident state.
Last edited by HomeStretch on Sat Sep 18, 2021 11:30 am, edited 1 time in total.
dbr
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Re: Health insurance costs after Medicare-eligible

Post by dbr »

One thing to be cautious of when the time comes is that you need to enroll in open enrollment periods or be subject to medical underwriting. It may not be possible to later buy a higher benefit plan if that is not chosen at the start and it may be difficult to change plans or move to plans in another state.

Generally an existing plan should be "qualified coverage" with regard to this, but investigation is needed.
wanderer
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Location: Houston, Texas, USA

Re: Health insurance costs after Medicare-eligible

Post by wanderer »

It good that you are looking to understand Medicare before you become eligible. See the Medicare published booklet "Medicare and You" as a start. https://www.medicare.gov/Pubs/pdf/10050 ... nd-You.pdf

Medicare coverage was created/authorized by congress in parts.
Part A is hospital coverage (generally free).
Part B is medical coverage - charges a premium payable to Medicare. Currently $148.50/month/person
Part C is a Medicare cost assignment option where coverage is handled by private insurance companies called "Medicare Advantage Plans".
Part D is drug coverage.
As an alternative to Advantage plans supplemental coverage is available when choosing to be covered by traditional Medicare parts A and B. These are structured plans labeled A-N. e.g. Supplement Plan G. They do not include drug coverage.

You will need to decide whether to choose they way your insurance is cover based on three options:
a) "traditional" Medicare only, Part A only or Parts A and B by paying the Part B premium
b) Medicare Advantage Plan offered by private insurance company by buying paying the Part B premium and buying an Advantage plan
c) "traditional Medicare plus a supplement plan and a drug plan offered by insurance companies by paying Part B and buying both a supplement plan and a drug plan. (three separate payments)
Most people want the additional coverage offered by either an Advantage plan or a supplement and drug plans (choice b or c).
When first enrolling you generally do not need to prove medical eligibility, but once in Medicare or to continue on a plan. But to change plan types you generally do need to prove medical qualification. There are also penalties for buying in after your first eligibility. So choose wisely.

Supplement plans generally cover more services at a lower cost, but have restrictions similar to PPOs and HMOs requiring pre-authorization to see specialists or out-of-network doctors. "Traditional" Medicare and supplements generally cost more but have no restrictions on doctors, presuming the doctor takes Medicare. Generally you would need to purchase both a supplement plan and a Part D drug plan to cover a typical Advantage plan.
part D drug plan options are based on a formulary of covered drugs and pricing tiers.

Cost history for Medicare part B premiums is available several places on the web. Cost history for Advantage or supplement plans are not so visible, but generally increase with age and the company's claim history. You can find current pricing for Advantage, supplement, and drug plans available in your state/region on the web at Medicare.gov

As a datapoint - We choose "c)" above with a plan G supplement and basic drug plans to provide the the broadest national coverage and live near Houston, Texas. We travel a lot so that was a critical consideration over cost. Our monthly costs are $148.50 each for the Part B premium, $120/127 for a plan G supplement, and $20/24 for part D drug plans. So total cost is about $600 for the two of us.

These plans do not include dental or vision. We have purchased annual plans through our dentist and eye doctor since DW has some issues she would like covered by insurance. These cost are not unreasonable as compared to our previous company provided plans. They have limited out-of-state coverage.

We have "guesstimated" a 7% annual increase in medical costs in our budget. Who knows!

Have fun!
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LilyFleur
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Re: Health insurance costs after Medicare-eligible

Post by LilyFleur »

It's so complicated that entire books are written about it.
Retired Bill
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Re: Health insurance costs after Medicare-eligible

Post by Retired Bill »

Since spouse and I are in our 70's I totally agree it is complicated and the choices are difficult to understand. Just checked Quicken and spent $8239.23 to August 31st. So $1030 per month so far this year. At least no crowns, eyeglasses, hearing aids this year which are out-of-pocket and not covered by insurance. There is no long-term care insurance in our amounts as we believe can pay that out-pf-pocket if needed. The insurance premiums have almost doubled in the past 8 years, and I see no reason why that will not continue. Based on what I observed preparing income tax returns for many years, I am planning on medical expenses (insurance and out-of-pocket) to continue increasing at around 10% a year. Check out the CPI-E (consumer price index for households with someone age 65 or older). Generally speaking older folks tend to spend more on medical care and services which have prices increases higher than many other things.
livesoft
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Re: Health insurance costs after Medicare-eligible

Post by livesoft »

My neighbor who is in the benefits business told me last week that Medicare is about 25% less than what one pays for typical health insurance provied by one's employer while working. So take what you pay now while working and multiply by 0.75 and that's about what you will pay when you have Medicare.
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Topic Author
Gnomon
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Joined: Fri Sep 17, 2021 8:11 pm

Re: Health insurance costs after Medicare-eligible

Post by Gnomon »

Thanks so much for the replies. I'm still digesting it all, but since I was starting essentially from ground zero (having spent my working life with full coverage and essentially no costs besides deductibles) the responses have helped give me other things to look into.

It's probably safe to say I'll have some follow-up questions, but my main goal is I want to avoid retiring reliant on a retirement plan where this big monetary aspect of post-age-65 retirement living expenses contains zero dollars (as my plan does at present). It's clear I'm not going to get a high-confidence single figure since there are too many variables, but even a range, or the 50th percentile and 90th percentile figures if such things were available, would be useful to plug in to my retirement "unreadiness" numbers.
BigJohn
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Re: Health insurance costs after Medicare-eligible

Post by BigJohn »

livesoft wrote: Sat Sep 18, 2021 7:44 pm My neighbor who is in the benefits business told me last week that Medicare is about 25% less than what one pays for typical health insurance provied by one's employer while working. So take what you pay now while working and multiply by 0.75 and that's about what you will pay when you have Medicare.
I assume this is only if you don’t have to pay an IRMAA premium?

OP, I just turned 65 and had to go through the learning curve to ensure I made the best choice for me. It’s unbelievably complex (eg the interaction between IRMAA premiums, Roth conversions and SS claiming strategy). Some of your lowest cost choices at 65 have the potential to impact your healthcare delivery for the rest of your life. So, depending on the assumptions about your future health issue, the costs can have quite a bit of variance.

As you get closer, I’d invest in the book “Medicare for Dummies” and read the pertinent pieces several times over several months with a highlighter and a notepad handy. It took me 3-4 months of reading, research and asking question to become fully confident in my decision.

Here’s my monthly cost and a few notes that might be helpful
1. Part A $0
2. Part B $148.50 (plus any applicable IRMAA premium)
3. UHC AARP Supplement Plan G $125 (for age 65, rises with age as well as medical cost inflation)
4. Aetna Silver Scripts (Part D) $8 (plus any applicable IRMAA premium, can be much more expensive if you take any costly drugs)

Edited to add my costs
Last edited by BigJohn on Sun Sep 19, 2021 3:17 pm, edited 2 times in total.
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BigJohn
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Re: Health insurance costs after Medicare-eligible

Post by BigJohn »

Deleted repeat post
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
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Eagle33
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Re: Health insurance costs after Medicare-eligible

Post by Eagle33 »

Contact your state's State Health Insurance Assistance Program for information about Medicare options & costs.
robphoto
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Re: Health insurance costs after Medicare-eligible

Post by robphoto »

wanderer wrote: Sat Sep 18, 2021 6:50 pm It good that you are looking to understand Medicare before you become eligible. See the Medicare published booklet "Medicare and You" as a start. https://www.medicare.gov/Pubs/pdf/10050 ... nd-You.pdf

Medicare coverage was created/authorized by congress in parts.
Part A is hospital coverage (generally free).
Part B is medical coverage - charges a premium payable to Medicare. Currently $148.50/month/person
Part C is a Medicare cost assignment option where coverage is handled by private insurance companies called "Medicare Advantage Plans".
Part D is drug coverage.
As an alternative to Advantage plans supplemental coverage is available when choosing to be covered by traditional Medicare parts A and B. These are structured plans labeled A-N. e.g. Supplement Plan G. They do not include drug coverage.

You will need to decide whether to choose they way your insurance is cover based on three options:
a) "traditional" Medicare only, Part A only or Parts A and B by paying the Part B premium
b) Medicare Advantage Plan offered by private insurance company by buying paying the Part B premium and buying an Advantage plan
c) "traditional Medicare plus a supplement plan and a drug plan offered by insurance companies by paying Part B and buying both a supplement plan and a drug plan. (three separate payments)
Most people want the additional coverage offered by either an Advantage plan or a supplement and drug plans (choice b or c).
When first enrolling you generally do not need to prove medical eligibility, but once in Medicare or to continue on a plan. But to change plan types you generally do need to prove medical qualification. There are also penalties for buying in after your first eligibility. So choose wisely.

Supplement plans generally cover more services at a lower cost, but have restrictions similar to PPOs and HMOs requiring pre-authorization to see specialists or out-of-network doctors. "Traditional" Medicare and supplements generally cost more but have no restrictions on doctors, presuming the doctor takes Medicare. Generally you would need to purchase both a supplement plan and a Part D drug plan to cover a typical Advantage plan.
part D drug plan options are based on a formulary of covered drugs and pricing tiers.

Cost history for Medicare part B premiums is available several places on the web. Cost history for Advantage or supplement plans are not so visible, but generally increase with age and the company's claim history. You can find current pricing for Advantage, supplement, and drug plans available in your state/region on the web at Medicare.gov

As a datapoint - We choose "c)" above with a plan G supplement and basic drug plans to provide the the broadest national coverage and live near Houston, Texas. We travel a lot so that was a critical consideration over cost. Our monthly costs are $148.50 each for the Part B premium, $120/127 for a plan G supplement, and $20/24 for part D drug plans. So total cost is about $600 for the two of us.

These plans do not include dental or vision. We have purchased annual plans through our dentist and eye doctor since DW has some issues she would like covered by insurance. These cost are not unreasonable as compared to our previous company provided plans. They have limited out-of-state coverage.

We have "guesstimated" a 7% annual increase in medical costs in our budget. Who knows!

Have fun!
In the fourth paragraph, don't you mean, "Medicare Advantage plans generally cover more services at a lower cost, but..."?

For what it's worth, we went with a Blue Cross Medicare Advantage plan (Healthmate for Medicare) mainly for simplicity of use. It does cover at least emergency care outside of the home area.
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nisiprius
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Re: Health insurance costs after Medicare-eligible

Post by nisiprius »

My wife and I pay for traditional Medicare part B at the base premium (no IRMAA); a high-end supplemental ("Medigap") policy; and a low-end part D (prescription drug) policy.

For the two of us, our annual costs are in the high four figures.

There are no provider co-pays, the supplemental pays the deductible, and we each use only a few cheap prescriptions that happen to be zero co-pay.
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