Most Americans become eligible for Medicare once they reach age 65. If you're closing in on that milestone, you may be looking forward to qualifying for that taxpayer-subsidized health insurance. After all, your out-of-pocket costs will likely decrease once Uncle Sam starts picking up part of the tab. If you're a retiree living on a fixed income, every little bit helps. Still, it's important to know what you're getting into before you jump in -- and be prepared for what will come your way once you sign up.
Many people sign up for Medicare without realizing the limitations of the program -- what you do get and what you don't. Among the medical expenses the program doesn't cover for are regular eye exams or glasses, hearing aids, most long-term-care costs, dentures, or most dental care. In addition, while Medicare is subsidized by the government, you will still have some out-of-pocket costs.
You will still pay for what you get
Only Medicare's Part A premiums are totally covered by the government for most recipients. Part A covers hospitalization and hospice care, as well as limited home healthcare and some skilled nursing care expenses. And even then, the care Medicare covers is not free to you. In 2016, there's a $1,288 deductible for any hospital stay, plus coinsurance costs of at least $322 if your stay lasts longer than 60 days.
Medicare Part B coverage comes with an out-of-pocket premium cost of at least $121.80 per month in 2016. It covers doctor visits, wheelchairs, and many other medically necessary treatments. And that's just the minimum: Your premium can be as high as $389.80 per month, depending on your income level.
Even with Medicare Part A and Part B, there are enough vital areas of health care that Medicare doesn't cover -- or doesn't cover fully -- that many people buy supplemental plans to fill in the gaps. Medicare Part C (aka Medicare Advantage) and Part D (prescription drug) plans cover additional healthcare costs and medications, respectively. Those plans frequently come with their own premiums, co-payments, and coinsurance rules.
Before the creation of the Medicare Advantage and prescription drug coverage plans, people who wanted more complete coverage bought Medicare Supplement, or "Medigap," plans. Those are still available and offer standardized benefits, with premiums that vary based on the coverage you select, where you live, and which insurance company you pick. This chart from Medicare details the different types of coverage:
Your household medical bills could still top $250,000
The unfortunate reality is that medical care is expensive, and as we age, we tend to use more of it. The costs for Medicare's out-of-pocket supplemental insurance reflect that reality. Over the course of their retirement, a couple can expect to spend around $250,000 on medical insurance premiums alone, plus their out-of-pocket contribution for any actual medical expenses.
As you get ready for benefits that Medicare offers, understand that even with the government's insurance program in place, you will face additional costs for your health care. Plan for them, and you'll find yourself much better prepared for the rest of your retirement.