Medicare coverage kicks in at age 65 for most Americans, and many people look forward to the day when they'll get this government-provided insurance.
Unfortunately, some seniors may be surprised to discover Medicare isn't necessarily all they were expecting it to be. In fact, there are three really big reasons why retirees may end up disappointed with this insurance coverage.
1. There are coverage exclusions
While Medicare covers medically necessary hospitalizations under most circumstances, as well as many types of routine outpatient care, the coverage is far from comprehensive. In fact, there are many things Medicare does not pay for including:
- Eye exams and glasses
- Hearing aids
- Most types of dental care including dentures
- Chiropractic maintenance care
- Routine foot care
In many cases, you'll end up needing some or all of these services as a retiree. To make sure you can pay for them, consider getting supplemental insurance that provides for them. You could also create a dedicated savings account to pay for things that Medicare won't.
2. No long-term care is paid for in most cases
As many as 70% of seniors 65 and over will need long-term care at some time during their lives. Sadly, Medicare almost never pays for this, regardless of whether it's provided in a nursing home or provided by home healthcare aids.
Medicare covers skilled nursing care under limited circumstances. But most people who go to a nursing home or hire a home health aide do so because they need something called "custodial care," or routine help with activities of daily living such as using the bathroom or bathing or eating. And Medicare doesn't pay for custodial care at all.
To make sure you're able to cover these services if you need them, consider buying a long-term care insurance policy. Alternatively, you could work with an attorney to engage in Medicaid planning, which allows you to protect your assets while ensuring you can qualify for Medicaid to pay for your nursing care services. You could aim to save enough to pay for long-term care out of pocket, but the cost could be more than $100,000 a year, so that's a tall order.
3. Coinsurance costs are high
Medicare coinsurance costs are also a shock to many seniors.
See, if you have traditional Medicare, your insurance will pay for 80% of most outpatient services and you'll be on the hook for the other 20% -- with no limits on how much that amount could cost you. If you need a lot of costly medical services, which is more likely to happen as you grow older, you could end up spending thousands of dollars if you rely solely on Medicare alone.
To limit your costs and make them more predictable, you may want to consider buying a Medicare Advantage or Medigap plan. These can either supplement your traditional Medicare in the case of a Medigap plan or serve as an alternative to it in the case of Medicare Advantage.
Healthcare is sure to be more expensive than you think as a retiree, with the Employee Benefit Research Institute estimating out-of-pocket expenditures at around $325,000 for a senior couple turning 65 covered by Medicare. If you're expecting this insurance to pay for everything you need and aren't saving for your healthcare services throughout your career, you could end up very disappointed.