Let's just assume that you've been coasting along on an all-expenses covered, cushy, employer-provided health plan. Or not. U.S. citizens are accustomed to complicated world of deductibles, premiums, and surprise charges that make up our health care system. Obviously, these pitfalls can have an enormous impact on your finances. So as people approach their sixties, we usually have them start thinking about the unique challenges of health costs after 65. Here are some of the things you need to know.
Apply for Medicare at 65 (whether you need it or not)
Thanks to one of Medicare's stranger regulations, you will want to apply during the three-month period before you turn 65 for Medicare only (you can wait to apply for social security or spousal benefits later). This is true even if you are still working and covered under your employer's health insurance policy. If you don't apply at 65, you could end up with problems when it is time to use your Medicare, including the possibility of higher premiums. Fortunately, applying for Medicare can be done pretty simply by going online here.
Medicare Might Not Cover As Much As You Think
What if...? It's a typical insurance sales opening intended to get your anxiety up so that you are more willing to buy insurance. Unfortunately, it's also a necessary question when it comes to health care. And let's face it, the likelihood that you will have not any particular medical problems after 65 is pretty small. Most people in my experience figure that Medicare will solve this problem. It does, sort of, but not the degree you'd think.
Like private health insurance policies, you will have to think about copayments and deductibles when deciding what sort of Medicare plan you want. While the government itself provides the baseline Parts A and B, private insurers offer Medigap plans that follow strict rules to fill in where the government won't. Those Medigap plans come in alphabetical order (Medicare Part B, Part C, Part G, etc...) and mean you will pay some level of premiums to get better coverage. Most people who can afford it will choose to buy a supplemental program.
You can see the problem when you look at Medicare's own partial list of things people assume are covered...but aren't:
- Long Term Care (i.e. nursing home or assisted living)
- Most dental care
- Eye examinations related to prescribing glasses
- Cosmetic surgery
- Hearing aids and exams for fitting them
- Routine foot care
Putting aside foot care and hearing aids for a minute (seriously?), the one that really stands out is long-term care—there is no Medigap plan that covers this after the first 100 days. Keep in mind that we aren't just talking about being in a nursing home; long-term care can also include home health care or a skilled nursing facility if you have a chronic illness or an accident (i.e. the broken hip). Medicare pays for your nursing care in such a situation for 20 days. After that, you get Medigap coverage for another 80 days. And then you're on your own.
How can this be, you ask? All those people who can't afford care after 100 days get routed to Medicaid. And that program is only for the financially needy. Given that the average cost of nursing home care in the U.S. was over $6,000 per month back in 2010, people who weren't financially needy when they started often become so.
The only solutions we've found to this problem so far are these: 1. be prepared to lose everything but your home and about $2,000 in cash to get covered by Medicaid; 2. avoid old age; 3. buy long-term care insurance.
I won't go into the particulars of long-term care insurance in this post. Suffice to say that it's expensive to buy and more expensive to not buy. We recommend that couples start looking at a policy as they approach their 60's and single people look a little earlier.
For more information on Medicare and its associated programs, go to Medicare's plan choices site.
For more on programs if you do need to find long-term care for someone, try this site called "Paying For Senior Care."