6/26/2014 3:45 PM ET|
5 ways to reduce retirees' health costs
The out-of-pocket costs for a couple in retirement look daunting, but our strategies can ease the pain.
I saw the report that 65-year-old couples will need more than $200,000 for health care costs during retirement. Why is the amount so steep, and what can I do to lower these costs?
Fidelity’s annual retiree health care cost estimate found that couples retiring this year at age 65 will need $220,000 for health care costs during retirement (the same figure as last year’s study). The cost assumes the couple has traditional Medicare and pays deductibles and coinsurance for Part A and Part B (plus the premiums for Part B, which are currently $104.90 per month for most people). It also includes Part D prescription-drug coverage premiums and out-of-pocket costs. It does not include long-term-care costs.
That’s a lot of money, but put those health care costs into context before you panic. And consider these five strategies to help you reduce the price tag.
No. 1: Build tax-free retirement health care savings
Even though you can’t contribute to a health savings account after you sign up for Medicare, you can still use the money you have accumulated in the account tax-free to pay medical expenses after age 65. That includes your Medicare Part B and Part D and Medicare Advantage premiums (but not medigap) and a portion of long-term-care expenses, in addition to co-payments, deductibles and other out-of-pocket health care costs. If you have an HSA-eligible health insurance policy with a deductible of at least $2,500 for family coverage or $1,250 for individuals, you can contribute up to $6,550 to an HSA for the year (or $3,300 for individual coverage), which can grow in the account and be used tax-free for medical expenses in any year. See FAQs About Health Savings Accounts for more details.
No. 2: Become a better health care shopper
If you have to pay any deductibles or co-payments yourself, you can save a lot of money by, for example, getting x-rays at a stand-alone radiology center rather than in a hospital, going to an urgent-care clinic rather than the emergency room, and seeing if your doctor will perform a procedure you need at a less-expensive outpatient surgery center. See 10 ways to cut health care costs for more information.
No. 3: Cut prescription-drug costs
Medicare Part D prescription-drug plans help reduce the cost of medications, but you’ll still need to pay for part of the cost in the “doughnut hole” coverage gap. (In 2014, you get a 52.5% discount on brand-name drugs in the doughnut hole and a federal subsidy of 28% for generic drugs.) You can save a lot of money by switching to generic medications or asking your doctor if you can use a therapeutic-equivalent drug that costs less. Also see if your plan offers special deals at preferred pharmacies or if you can get a break from mail-order drugs. See Lower Your Prescription-Drug Costs for more information. Also search during open enrollment in the fall for a Part D prescription-drug plan that has lower out-of-pocket costs for your drugs. See Time for Medicare Open Enrollment for more information.
No. 4: Find cheaper ways to fill the Medicare gaps
Most people cover the deductibles, co-payments and other gaps in Medicare with a Medicare supplement policy, and the most common policy is Plan F. But some newer types of policies have lower premiums in return for greater cost sharing. Plan N, for example, covers many of the same expenses as Plan F but doesn’t cover the $147 Part B deductible and charges a $20 co-payment for doctors’ office visits and a $50 co-payment for emergency-room visits. See How to Get a Better Deal on a Medigap Policy. Also consider a Medicare Advantage policy, which provides both medical and drug coverage from a private insurer and can be an alternative to the three-part combo of traditional Medicare plus medigap plus a Part D prescription-drug policy. You’ll usually have a limited network of doctors and hospitals and may have higher co-payments than you would with traditional Medicare combined with medigap, but your premiums may be lower (some plans charge nothing beyond the Medicare Part D premiums).
No. 5: Have a plan for potential long-term-care costs
One big number the study doesn’t include is the potential cost of long-term care. The national median rate for a private room in a nursing home is $87,600 per year, according to Genworth’s annual survey, and the median rate for a home-health aide is $20 per hour -- $45,000 per year if you need 44 hours of care per week. Assisted-living costs are $42,000 per year. You can pay for these costs with your savings or long-term-care insurance or a combination of both. See Options for Covering Long-Term-Care Costs for more information.
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This system is massively corrupt. It might be beyond repair.
The problem is with Medicare, like all government programs, has an implied promise of a level of service and care. The federal government forces an individual to pay for these programs over their working life with the implied promise of them caring for them at a time in the future. The problem becomes when the collected revenues do not support the required expenditures. The solution is to change the rules, in the case of Medicare, the amount or cost of health care or the coverage that is available using the service or increase the revenue required from those paying into to the system (redistribution of wealth) or a combination of these.
If there was no government involvement or implied contract the individual would have the freedom to invest these resources currently paid to the federal government in a manner to prepare for their own future health care requirements. Some will argue that the individual is not capable of this or that it is unfair to those that do not earn enough. This is the arguement for all redistribution of wealth programs. That the individual is incapable and requires the support of the government. In fact what redistribution of wealth does is to punish one individual to provide for another who is less capable. At the same time it increase the bloated federal government and costs associated with the redistribution of wealth program thereby diminishing the available resources to fulfill the implied contract.
These socialistic programs that began with the passage of the 1913 "progressive" income tax system, grew under FDR and LBJ, and continue to exapnd under BHO, need to be eliminated. This would restore the freedom to the individual to determine their own priorities in life and support their own success or failure.
It seems I would have been better off if I had invested that $200,000 in a slot machine in Vegas.
The Boomers (of which I am one) could have changed all this by making sure thier representatives actuall did something about Healthcare. Hilary did try in the nineties but was shot down by - Guess who - the health insurance industry. Now us Boomers are going to suffer because we did not forsee the future. You reap what you sow.
Oh yea, Retirees' are going to get their health coverage cut, not by the examples shown above, but by Obamacare, with it's built in Death Panels. The Retirees' and Elderly will be required under a federal mandate to attend the movie, “it's a wonderful life” and given a white pill and small cups of water, then led to the auditorium, where they will be advised 15 minutes into the film to take their white pill and enjoy the rest of the movie, thanks, in part to Obama, Reid and Pelosi… Stay healthy my friends or you too will be on the list for the next showing…
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