Better Financial Health in 15 Minutes (or less!)

The Hidden Costs of Medicare: What Every Retiree Needs to Know

• Stacey Hyde

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The healthcare landscape changes dramatically when you hit retirement age, and Medicare—that government program you've been paying into for decades—finally becomes available. But is it really the free healthcare solution many Americans believe it to be? In this illuminating episode, we unpack the reality behind the Medicare system and what it actually costs retirees.

Many approaching retirement assume Medicare will eliminate their healthcare expenses, but the truth is far more complex. We break down each component of Medicare—from premium-free Part A (hospital coverage) with its surprising $1,600 per-stay deductible to Part B's monthly premiums of $175 for doctor visits and medical tests. You'll learn why Medicare Part C (Advantage Plans) might seem attractive with added vision and dental benefits but could ultimately restrict your healthcare choices, and why traditional Medicare with a supplement plan offers more comprehensive coverage despite higher upfront costs.

The financial reality is sobering: even with Medicare, retirees should budget $6,000-$10,000 per person annually for healthcare expenses. This includes premiums, deductibles, and costs for services Medicare doesn't cover like comprehensive dental, vision, and hearing care. We share practical strategies for managing these expenses, including leveraging HSA accounts from your working years to cover Medicare premiums tax-free, and why coordinating your Social Security start date with Medicare enrollment can simplify premium payments.

Don't get caught unprepared by Medicare's complexities. Whether you're approaching retirement or helping aging parents navigate their healthcare options, this episode provides the clear, straightforward guidance you need to make informed decisions. And remember to review your coverage during the annual open enrollment period from October through December 7th—even if you're satisfied with your current plan, as benefits and networks frequently change.

Envision Financial Planning. 5100 Poplar Avenue, Suite 2428, Memphis, TN 38137. (901) 422-7526. This communication is strictly intended for individuals residing in the United States. Advisory Services offered through Envision Financial Planning, a Registered Investment Adviser.

Speaker 1:

Hi, I'm Stacey Hyde and I'm back for another episode of Better Financial Health in 15 Minutes or Less, and today's topic is going to be geared toward those of our listeners who are a little bit older either early retirees or soon-to-be retirees that are looking toward Medicare, and the reason they are is they're like my medical insurance will finally be free. I've been paying into Medicare all these years and now I won't have to pay for it. Well, that's not exactly true, and also people get confused because there's so many different parts of Medicare. Medicare Part A is free for most people because you've paid into it over time and that covers hospital stays and bills, but there is a deductible of $1,600 per hospital stay. And then you have Part B. This is your doctors, your medical tests, things of that nature. It has a premium of just under $175 a month, so definitely not free. And then there's also all sorts of co-pays and out-of-pockets depending on what you're doing that are set by Medicare Too many to go into. Medicaregov is a great site. I would encourage you, if you're looking for information on Medicare, to actually type that into your browser Medicaregov. That way you know you're not on some other site, because a lot of sites try to spoof that. So I think you're safer, rather than doing a Google search, just type that into your browser's address bar and get the real thing and it'll show you exactly what your responsibilities are.

Speaker 1:

And then part D is drugs. Well, you might say, stacy, you skipped C. What is C? Part C is Medicare Advantage. Those are the all-in-one plans where you still have to pay your Part B premiums, but it groups together your A, b and your D. The difference between that and traditional Medicare is the insurance company creates a network of doctors that may or may not include your doctor, so it's more similar to what you're used to when you're employed. As far as being limited to you know one hospital system versus another. Certain doctors groups are included, certain ones are not. They also tend to be very location specific and have limited benefits outside of your particular area. They got real popular for a while because the insurance companies were making a lot of money on them, and so they started offering vision benefits and some dental benefits and things of that nature. As I've said here on the podcast before, not really a fan of them.

Speaker 1:

And then there's also, if you have traditional Medicare and you have A, b and D, you're. We also recommend that you have a supplement plan, and what the supplement does is it steps in and pays those out-of-pocket co-pays the $1,600 that we talked about for hospital stay, the other testing co-pays, that sort of thing and those run about $150 a month, depending on your age and whether you got it during your initial enrollment period. So then you have obviously your premiums that we talked about. You'll have your Part B deductible, which is rents in the low 200s. But if you have a Plan G supplement, most everything will be covered after that. So, adding that up, you're looking at about $400 a month per person for just the premiums and then you have the Part B deductible and then you have any drug cost. But what a lot of people miss are if your income is over as a married couple, over about $213,000, over as a married couple of over about $213,000, not your taxable income but the big adjusted gross income on your tax return you have to pay higher Medicare premiums and they can be substantially higher, you know, four times the base premium, which can really add up for a couple.

Speaker 1:

Also, dental and vision and hearing are generally not covered. Some Medicare supplements will have limited dental. They may cover cleanings and they may offer some discounts for vision. I will say for the plans that I've looked at the dental and vision plans they don't make a lot of sense because you're paying in premium essentially almost what the maximum that the policy would cover anyway. You're better off talking to your dentist, particularly if you've been going to that dentist for a long time and saying, hey, I don't have dental insurance anymore. If I agree to pay you, you know, at the time of service you don't have to chase me for a bill Will you give me the same discounts that you were giving my insurance company? And most of the time they will, because they're happy to not have to deal with the insurance company. And then for vision, you know you can go to the Costco or the Walmart. I've had great personal experience with Costco Vision Center, great pricing there. But I still go to my long-time optometrist for my exams and that sort of thing.

Speaker 1:

And then you've got inflation and these premiums do go up every year, both for Medicare, part B and your insurance. So you need to plan for about $6,000 to $10,000 per year per person, even in retirement on Medicare. If you were fortunate enough to have a HSA during your working years, guess what. You can still pull money out of that and use it to offset these costs, which is a big reason that we oftentimes tell people, if they can afford it, let their HSA grow during their working years and use it for these premiums in retirement. And in many cases it makes sense to coordinate your Social Security start date with your Medicare start date so that you can have your Medicare premiums deducted from your Social Security benefits. So that would be starting at 65 versus 67.

Speaker 1:

If you don't want to start it then pulled out to get the maximum benefit, then you will actually have to mail in your Medicare Part B premiums on a quarterly basis. They don't allow you to pay monthly. You have to pay them quarterly. So Medicare is not a free ride but it can be a pretty predictable and you definitely don't have the assuming you have traditional Medicare and a supplement. You don't have the risk of huge out-of-pocket costs like you used to have, especially now. Some people would have large prescription drug costs, but now those are capped at $2,000 a year currently.

Speaker 1:

So review your Medicare cost open enrollment for if you're using Medicare Advantage open enrollment and if you have a prescription drug plan which I hope you do both of those open for enrollment in October and goes through. I believe it's December 7th. So it's important to go and look and make sure that, even if you like your plan, to make sure that there's no changes coming for this year, that the doctors haven't changed, the networks haven't changed and some of the benefits haven't changed, because what I'm reading is that some of the insurance have dialed back some of the benefits. So you really want to make sure you pay attention this year. You don't just assume that everything's going to be okay. So happy shopping for Medicare. It is a great program, but you definitely need to pay attention to the details. Thanks for tuning in. This has been another episode of Better Financial Health in 15 Minutes or Less.