What Medicare Doesn’t Cover And How Planning Now Can Help Avoid Surprises Later
by Ron Carson | Originally posted on Forbes
The month of October is known for a lot of things, shorter days, cooler temperatures, falling leaves and the arrival of pumpkin spice everything—from baked goods to coffee, yogurt, smoothies, beer—and yes, even pumpkin spice turkey. It also marks the start of Medicare’s annual open enrollment period, which begins on October 7 and ends on December 15, 2021. Why is this important? Even if you’re years away from eligibility, understanding what Medicare does and does not cover is essential for anyone saving for retirement. To find out why, grab a cup or a bite of your favorite pumpkin spice concoction, and read on.
More than 63 million Americans currently receive healthcare benefits under Medicare, the federal health insurance program for Americans age 65 and older and younger people with certain conditions and disabilities. Yet, traditional Medicare only covers a portion of your healthcare expenses. What it doesn’t cover can put a real dent in your income in retirement. That’s because healthcare costs remain one of the largest expenses most people face in retirement. In fact, one study suggests that the average couple retiring at age 65 in 2021 will need approximately $300,000 saved (after tax) just to cover healthcare expenses in retirement.
The problem is, you’re not average. Your costs could easily fall below or well above that amount. So, how can you plan ahead for healthcare costs in retirement? The first step is to understand what Medicare does and doesn’t cover.
Out-of-pocket costs can add up fast
Traditional or “original” Medicare includes Medicare Part A (hospital insurance) and Part B (medical insurance). Most people do not pay a premium for Part A, but there are deductibles and limits to what is covered. Many covered services are subject to cost sharing, which means Medicare will pay for the approved amount charged by a medical provider, and you are responsible for paying the remainder. What’s more, there is there is no out-of-pocket maximum, which can get expensive if you have or develop one or more chronic medical conditions in retirement. In Part B, you pay a monthly premium and a deductible, but again, there is a limit to what Medicare covers. However, there is no limit to the out-of-pocket maximum you might pay. In addition, certain services may not be covered at all, or are only partially covered. This list can change each year, so it’s up to your and your medical providers to keep on top of what is or isn’t covered from one year to the next.