In 2017, a U.S. couple planning to retire at age 65, could expect to spend at least $280,000 for healthcare costs, according to a study by the Employee Benefit Research Institute (ERBI). That $280,000 includes premiums for Medicare Part B (physician coverage) and Part D (prescription drug coverage). However, many costs associated with aging, like long-term care and assisted living, aren’t included in this estimate.
The majority of senior healthcare costs are paid for by private insurance and government programs such as Medicare, Medicaid and the Veterans Administration. These programs pay for the majority of healthcare costs American seniors use.
Let’s discuss the different healthcare options for seniors.
Medicare is a federal health insurance program for seniors, aged 65 and older, who have been employed full-time for at least ten years. Medicare is funded by a mandatory payroll tax, monthly enrollee premiums and the government.
The Medicare program is divided into four parts:
- Part A helps cover hospitalization, skilled nursing facility care, hospice care, and some home health care. It is free for most.
- Part B covers outpatient health expenses. Services like doctor visits, labs, preventative care, some surgeries, clinical trials, mental health care, and durable medical equipment and supplies are covered under Part B. This coverage usually costs around $100 a month.
- Part C, aka, Medicare Advantage, allows seniors to enroll in Medicare health plans sold by private insurance companies that contract with Medicare. Costs vary plan to plan.
- Part D covers prescription drugs.
Healthcare under Medicare is not free. The amount a Medicare-covered senior may have to pay for healthcare will depend on a few factors such as:
- Type of care and how often it’s needed
- Type of Medicare coverage
- If your healthcare provider agrees to charge you the same amount Medicare is willing to pay them
- Whether other insurance policies fill coverage gaps
Medicaid is a health insurance program run by individual states and is partially funded by the federal government. It covers low-income individuals, including low-income seniors in some cases.
To qualify for Medicaid, an eligible senior must have spent most of their available assets before Medicaid will kick in and pay for many types of long-term health care, including nursing home care, skilled at-home care and hospice care.
A senior can be “dual-eligible” for Medicaid and Medicare. Medicaid rules are complex and vary from state to state. Low-income seniors need to research their state Medicaid program to understand if they are eligible for benefits.
Private Health Insurance Plans
Seniors can purchase individual health insurance plans, however, these policies can be costly. Insurance companies evaluate an applicant’s age, health and other risk factors before issuing coverage. Seniors who have serious medical conditions and predispositions can be denied coverage or face cost-prohibitive premiums.
In addition, private health insurance companies sell long-term health insurance. These policies help pay for services not covered by health insurance, Medicare or Medicaid, such as home health care, assisted living facilities, nursing care and nursing homes.
Supplemental Health Insurance – Medigap Plans
Medicare provides a good amount of coverage; however, there are still gaps that need to be filled. Thankfully, you can purchase Medicare Supplement Insurance, also known as Medigap. Medigap policies are available to those who have Medicare Part A and B, and cover individuals only. If you and your spouse want coverage, you each must purchase a policy individually.
Medigap policies help cover out-of-pocket expenses for deductibles, co-pays and co-insurance not covered by Medicare.
Medigap policies are sold by private health insurance companies and are applied once Medicare pays their share toward covered health services.
To note, Medigap policies are not the same as Medicare Advantage plans. Medigap supplements your original Medicare plan.
Medigap policies don’t cover dental or vision care, eyeglasses, hearing aids, private duty nursing or long-term care. Also, plans purchased since 2006 cannot cover prescription drugs.
Senior Veterans, Military Retirees, and Their Spouses Healthcare Options
Senior veterans who served in any branch of the armed forces and were honorably discharged may qualify for the Veteran’s Administration (VA) health benefits. The VA system covers veterans who have served 24 continuous months or the full period they were called to active duty or meet other specific criteria.
Also, the CHAMPVA program (Civilian Health and Medical Program of the Department of Veterans Affairs) offers health benefits to eligible beneficiaries, including elderly spouses or widows of certain disabled or deceased veterans.
Veterans and their qualified dependents can use their VA benefits to complement their Medicare policies.
TRICARE, the Department of Defense (DOD) Military Health System, provides health care for active-duty service members, their families and military retirees of all uniformed branches who have served at least 20 years.
In addition, eligible retired military members enrolled in Medicare Part A and B can apply for Tricare for Life (TFL). This program is similar to private Medigap insurance as it pays for some out-of-pocket expenses not covered by Medicare Part B.
PACE, The Program of All-Inclusive Care for the Elderly, is a Medicare and Medicaid program “that helps people meet their health care needs in the community instead of going to a nursing home or other care facility.” PACE organizations provide care and services in a variety of places, such as your home, the community and PACE centers.
The Partnership for Long-Term Care is available in several states and combines private long-term care insurance and Medicaid long-term care coverage. Each state has specific program requirements and is a good option to explore if it’s available in your state.
Seniors have several options for healthcare coverage in the United States, so do some deep research to find the best route for you.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.