Medicare beneficiaries need to pay for a sometimes significant portion of their health care costs. Just like private health insurance, Medicare requires beneficiaries to pay premiums, deductibles and coinsurance. But there's a lot you can do to keep these costs manageable. Here are some steps to minimize Medicare's out-of-pocket costs.
Premiums. Most people aren't charged a premium for Medicare Part A hospital insurance. The standard monthly premium for Medicare Part B medical insurance is $104.90 in 2015. This amount is typically deducted from your Social Security check if you are already receiving payments, but those who have not yet claimed Social Security will receive a bill. Retirees with modified adjusted gross incomes above $85,000 for individuals and $170,000 for couples are charged higher Part B premiums.
It's important to sign up for Medicare Part B during the initial enrollment period, which is a seven-month window that begins three months before your 65th birthday. Your Part B premiums will increase by 10 percent for each 12-month period you were eligible for Medicare Part B but didn't sign up for it. "If you are 68 when you sign up for Medicare Part B, you will be hit with a 30 percent premium increase every year for the rest of your life," says Ronald Kahan, a medical doctor and author of "Medicare Demystified: A Physician Helps Save You Time, Money, and Frustration." If you didn't sign up for Medicare Part B at age 65 due to participating in group health insurance through your job, you should sign up within eight months of leaving the job or the coverage ending to avoid the penalty.
Deductibles and coinsurance. The Medicare Part B deductible is $147 in 2015. Once retirees meet the deductible, they typically need to pay 20 percent of the Medicare negotiated cost for each service. "Any time you have any serious medical issues, that 20 percent is going to be a serious amount of money," says Joseph Matthews, an attorney and author of "Social Security, Medicare & Government Pensions: Get the Most Out of Your Retirement & Medical Benefits." There is no annual limit on out-of-pocket costs. Medicare Part A has a $1,260 deductible for beneficiaries who are hospitalized, and if the hospital stay lasts longer than 60 days, there are additional charges.
Supplemental insurance. Medigap policies are supplemental insurance plans that will pay for the copayments, coinsurance and deductibles of traditional Medicare and sometimes extra services in exchange for an additional premium. "A Medigap policy will cut down your irregular out-of-pocket costs," says Sudipto Banerjee, a research associate at the Employee Benefit Research Institute. The Medigap initial enrollment period occurs during the first six months you are 65 or older and enrolled in Medicare Part B. After this period ends, you could be denied the right to purchase a Medigap policy or charged significantly higher premiums.
Preventative care. Medicare covers a variety of preventative care services with no cost-sharing requirements, including a free annual wellness visit, flu shots and screenings for a variety of illnesses. "Vaccines and preventative exams are fully covered as well as some outpatient stuff," Matthews says. However, conditions discovered during these preventative care visits could require additional tests or treatments that do have an out-of-pocket cost, sometimes even during a visit that you thought would be completely covered. "You will be required to pay for it if another procedure is done," says Tanya Feke, a medical doctor and author of "Medicare Essentials: A Physician Insider Explains the Fine Print."
Prescription drug coverage. You can sign up for Medicare Part D beginning three months before you turn 65. A late enrollment penalty is added to your Part D premium if you go 63 or more days without prescription drug coverage after age 65. Medicare Part D premiums, deductibles, coinsurance, copays and covered medications vary depending on the plan you choose and change each year, even if you stick with your existing plan. You can switch Medicare Part D plans during the open enrollment period from October 15 to December 7. "You are allowed to change plans every year without penalty, and I recommend that people do it," Kahan says. "Even if your drugs don't change, the policies of the plan might change." It's important to examine how your costs and coverage will change each year, and consider switching if you can find coverage that suits your needs at more affordable prices. The Medicare Plan Finder can help you compare the plans available in your area.
Prepare for what isn't covered. While Medicare covers many of the services older people need, there are a few common medical services that it doesn't. Medicare won't pay for eyeglasses, hearing aids or dental care. Most significantly, Medicare doesn't typically cover extended nursing home stays or other types of long-term care. "Things like vision care, eyeglass, hearing aids, dental care and non-prescription drugs, these are all things that Medicare doesn't cover at all," Matthews says. "Those are things that you need to figure out another way to pay for."
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