According to recently published retiree healthcare cost estimates,1 a 65-year-old couple in 2018 can expect to pay $280,000 in healthcare costs in retirement. That’s a 75% increase over the 2002 estimate of $160,000. As healthcare costs continue to rise faster than the rate of inflation,2 many retirees find themselves facing unanticipated costs that Medicare doesn’t cover. That’s why factoring healthcare costs into your retirement planning is so important. While Medicare Parts A and B (“original Medicare”) cover about 80% of certain healthcare costs in retirement, including hospitalization and doctors’ visits, you’re responsible for covering the remaining 20%, which can add up quickly. Also, keep in mind that Medicare does not cover some of the highest costs retirees may incur in retirement – long-term care and nursing home costs. However, beyond these big-ticket items are a range of healthcare services that many people are surprised to learn are not covered by Medicare.
Medicare Parts A and B (“regular Medicare”) doesn’t cover:
- Outpatient prescription drugs. However, you can purchase a separate Part D prescription-drug policy or a Medicare Advantage plan that covers both medical and drug costs. (Some retiree health-care policies cover prescription drugs, too.)
- Dental care, including routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. Some Medicare Advantage plans cover basic cleanings and x-rays, but they generally have an annual coverage cap.
- Routine eye exams, glasses and contact lenses. Exceptions include an annual eye exam if you have diabetes or eyeglasses after having certain kinds of cataract surgery. Some Medicare Advantage plans provide vision coverage, or you may be able to buy a separate supplemental policy that provides vision care alone or includes both dental and vision care.
- Routine hearing exams and hearing aids, which can cost several thousand dollars. Some Medicare Advantage plans cover hearing aids and fitting exams, and some discount programs provide lower-cost hearing aids.
- Medical costs incurred outside the U.S., except in very limited circumstances. Some Medicare Advantage plans cover emergency care abroad and certain Medigap plans cover up to 80% of services received outside of the U.S.
- Long-term care services, including assisted living, home health aides, institutional and nursing home costs. The national median cost for assisted living is roughly $45,000 per year, while the average annual cost of a private room in a nursing home is $97,000. But keep in mind, costs can vary greatly by state and region.
While this is not a complete list of items and services that are not covered under original Medicare, it does provide insight into how health care costs can add up to hundreds of thousands of dollars over the course of 25 or 30 years in retirement. If you have questions about how rising healthcare costs may impact your income in retirement, contact your local Synergy office today to schedule time to talk.