About 60 years ago, President Lyndon Johnson signed amendments to the Social Security Act that added health insurance for people 65 and older. Known as “Medicare,” the amendments added mandatory coverage for hospitalization (Part A) and optional coverage for physician services (Part B). Medicare was expanded in 1997 to include managed care (Part C) and in 2006 prescription coverage (Part D) was added. About 60 million retired Americans are currently enrolled in Medicare and enrollment is expected grow to 85 million by 2030.
At the time of retirement, married couples spend about $1,000/month for health insurance. During retirement years, the cost of insuring healthcare increases due to aging and inflation. Below are tips for insuring healthcare and links to additional resources. Plan now to financially secure your healthcare after retirement.
Budgeting – During your 20’s, start saving for post-retirement healthcare and other costs of living. Open a Health Savings Account and an Individual Retirement Account (IRA) to save tax-free. It’s never too late to start saving or increase your savings rate. Motivate yourself with rewards for reaching milestones.
Dental, Hearing, and Vision – Medicare doesn’t provide coverage for routine dental, hearing, or vision care, except for limited coverage available to participants in Medicare Advantage plans. Consider purchasing insurance to cover these expenses and asking healthcare providers for discounts available to retired patients.
Drugs – Unless enrolled in a Medicare Advantage Plan, enroll in Part D drug coverage. Enrollment is not automatic. Register for Part D when you are 65 to avoid a late enrollment penalty. Check annually during open enrollment periods to optimize coverage.
Doctors and Hospitalization – Registration for Medicare is mandatory when you turn 65 even if still employed. Delayed signup can cause a gap in coverage and result in penalties. Remember to notify Medicare when ending your pre-retirement insurance coverage. Set up an automatic payment plan since prompt payment prevents loss of coverage.
Managed Care – Medicare Advantage is an optional alternative to traditional Medicare (Parts A, B, and D). Medicare Advantage has slightly more benefits and lower premiums than traditional Medicare, but fewer participating doctors and pre-authorization is required to see specialists. About 50% of Medicare beneficiaries chose Medicare Advantage.