Medicare beneficiaries are projected to pay a high price for premiums, deductibles and prescription drugs in retirement, according to a report by the Employee Benefit Research Institute (EBRI).
A 65-year-old man with Medigap and average premiums will need to have saved $96,000 to have a 50% chance of covering premiums and median prescription drug costs, EBRI said. A woman in the same position would need to have shored up $116,000.
These projections rise significantly when the chances of getting these healthcare costs covered go up. To have a 90% chance of meeting their healthcare cost needs, men would need to have saved $166,000, while women would need to have socked away $197,000, EBRI said. Meanwhile, couples would need to save $212,000 to have a 50% chance of covering their medical needs in retirement and $318,000 to have a 90% chance.
In extreme cases, a couple with considerably high prescription drug expenses would need to save $383,000 to have a 90% chance of having enough to cover their healthcare costs, EBRI said.
However, EBRI’s research notes that "enrollees in Medicare Advantage plans generally have lower savings targets."
A man enrolled in Medicare Advantage with median drug expenses and an average usage of healthcare services would need to have saved $56,000 to have a 50% chance of meeting his healthcare spending needs in retirement, EBRI said. The same person would need $96,000 to have a 90% chance of meeting those expenditures.
And a woman would need to save $67,000 to have a 50% chance and $113,000 to have a 90% chance of covering her health care costs in retirement, EBRI said. Couples would need to have amassed $123,000 to have a 50% chance and $184,000 to have a 90% chance of covering their healthcare expenses in retirement.
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Medicare Advantage Plans: Pros and Cons
Medicare Advantage plans offer at least the same level of coverage as Medicare Part A (hospital insurance) and Part B (medical insurance) in addition to added benefits, according to the Medicare marketplace eHealth. These could include vision, dental, prescription drug coverage, and fitness center memberships. But unlike government-administered Medicare, Medicare Advantage is offered by private insurance companies contracted by Medicare. Depending on the type of Medicare Advantage plan people enroll in, prices and scope of services can vary.
In addition, Medicare Advantage plans offer maximum out-of-pocket expense thresholds. So once enrollees breach those limits, they’d typically not pay anything for covered services, eHealth said. Original Medicare doesn’t have out-of-pocket maximum rules.
However, Medicare Advantage plans may impose some limitations on enrollees. Medicare Advantage plans work with specific networks of providers. So some people may not find the coverage they need. Moreover, enrollees may need prior authorization for hospital stays, home healthcare, medical equipment, and other procedures, eHealth said.
"If you have chronic conditions or significant health needs, you may want to think twice," Consumer Reports said in a study. "For one thing, with original Medicare you can see any provider that accepts Medicare, which is most of them."
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The costs of Medicare
The costs of Medicare’s different components and Medicare Advantage Plans (also called Medicare Part C) vary based on several factors.
For instance, Medicare Part A is free for those who have paid Social Security taxes for 10 years, according to Consumer Reports. Medicare Part B costs $165 a month plus copays and coinsurance. Medigap costs $178 a month, based on eHealth estimates.
Medicare Part D costs $22 a month, plus copays and coinsurance, based on eHealth estimates. Higher earners, however, would be charged more. Monthly Medicare Advantage pricing depends on the provider, but on average would cost $18 plus $165 for Medicare Part B, in addition to copays and coinsurance, Consumer Reports said. Higher earners would pay more.
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