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Medicare Covers A Lot of Costs – But It’s Not Free

As you prepare to call it a career and say goodbye to your employer-provided health insurance coverage, you’ll want to know how much health insurance costs when you retire. And that involves understanding what Medicare is and how it works.

Medicare is how the overwhelming majority of retired Americans get their health insurance. But many Coloradans are unpleasantly surprised to learn that Medicare isn’t free. Just as you have to pay premiums, copays, deductibles, and other expenses with your private health insurance coverage, you’ll need to pay similar health insurance costs when you retire. Additionally, while Medicare covers a significant amount of medical expenses, it does not cover everything. This means that you could be on the hook for enormous medical costs if you get seriously ill or require extensive care.

That is why so many retired Americans also get Supplemental Medicare Insurance, or “Medigap” policies, in addition to Medicare. These private plans also involve paying out-of-pocket expenses, but those pale in comparison to the amounts you would need to pay without such coverage. Additionally, many seniors also enroll in Medicare Advantage plans to expand the scope of coverage, requiring paying monthly premiums.

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The prices for Medigap and Medicare Advantage plans can vary depending on your Colorado zip code, the scope of offered benefits, and other factors. The out-of-pocket costs of Medicare Part A and Part B (“Original Medicare”) are set by the government and change every year. Exactly how much you will pay in any given year depends largely on the specific care and services you need. But you can do some planning for your health insurance costs when you retire by understanding the typical costs of Medicare Parts A and B.

Here are what those health insurance costs would be in 2022 if you enroll in Original Medicare:

Budgeting for Health Insurance Costs When You Retire

Part A Premiums

While some Medicare enrollees may need to pay a premium for coverage under Part A, 99 percent of people don’t because they have earned at least 40 quarters of Medicare-covered employment.

However, if you paid less than 30 quarters of Medicare taxes, you will pay the standard Part A premium in 2022 of $499. If you paid 30-39 quarters worth of Medicare taxes, your 2022 Part A premium is $274.

Part A Hospital Inpatient Deductibles and Coinsurance

Medicare Part A inpatient hospital benefits (including inpatient mental health stays) are subject to a deductible of $1,556 for each benefit period in 2022, which covers the patient’s share of expenses for the first 60 days of an inpatient stay in a given benefit period.

The amount you’ll need to pay in coinsurance for an inpatient hospital stay largely depends on how long you are in the hospital:

  • First 60 days: $0 coinsurance for each benefit period
  • Days 61-90: $389 coinsurance per day for each benefit period
  • Days 91 and beyond: $778 coinsurance for each “lifetime reserve day” after day 90 per benefit period (up to a total of 60 lifetime days)
  • After lifetime reserve days: all costs

Hospice Care and Home Healthcare Under Medicare Part A

You pay nothing for home health care services but will be responsible for 20 percent of the Medicare-approved cost for any Durable Medical Equipment (DME) you may need.

Similarly, you won’t pay anything for hospice care, though you may have a copay of up to $5 for any prescription drug and similar pain relief and symptom control products you need while you’re at home.

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Medicare Part B Out-Of-Pocket Costs

Medicare Part B covers physician visits, preventive care services, outpatient care, and home healthcare visits. However, outpatient prescription drug costs are not a covered benefit under either Medicare Parts A and B. Additional prescription drug coverage can be purchased through Medicare Part D, some Medigap policies, and most Medicare Advantage Plans.

Part B Premiums

The standard Part B premium amount most retirees will pay in 2022 is $170.10. However, suppose the modified adjusted gross income you reported on your federal tax return two years ago is above a certain threshold. In that case, you’ll pay the standard premium plus an extra Income Related Monthly Adjustment Amount (IRMAA) added to your premium.

Part B Deductibles and Copays

In 2022, the Part B deductible is $233. After meeting your annual deductible, average copays are 20 percent of the Medicare-approved amount for:

  • Most physician services (including most doctor services during inpatient hospital stays)
  • Outpatient therapy
  • Outpatient mental health services
  • Durable medical equipment

There are no copays for clinical laboratory work or home health care services.

To find out the out-of-pocket costs with Medicare for specific treatments, services, tests, or procedures, you can go to the Medicare website and search for the particular items. If you can’t find your test, item, or service, speak with your doctor or other health care provider about why you need the treatment in question and ask if Medicare will cover it.

Questions About Health Insurance Costs When You Retire? Turn To An Independent Insurance Broker Specializing in Medicare.

Medicare can be complicated. Understanding your health insurance costs when you retire and whether you need supplemental coverage to reduce or eliminate those expenses is a lot easier with a knowledgeable guide. Contacting an experienced, independent Medicare insurance broker in Colorado is the best first decision you can make to find how much health insurance costs when you retire.