May

6

Gaps In Medicare Coverage

Posted by cameron

May 6, 2007 |

As I continue to research retirement medical coverage it is clear that understanding Medicare is of paramount importance and not taking the time to understand can leave you with large bills to pay. Medical coverage may well end up being your largest single bill in retirement. You must build a realistic medical plan to stand any chance of enjoying retirement the way you dream of.

Basic Medicare is intended to be catastrophic insurance coverage. Part A, hospital coverage, is free, but part B is not. Part B is for doctor and outpatient coverage and is voluntary but will cost you and your spouse around $93 each per month if you enroll. That’s already higher than the cost of good employer-sponsored plans. That leads me to the issues at hand:

Gap Insurance

Because Medicare doesn’t cover as much as a good employer plan that you and I have been used to, additional insurance will likely be needed. For example, in its infinite wisdom, the government Medicare program does not cover preventive care such as annual physicals. You will need either Medigap coverage or one of the newer Medicare Advantage plans (Medicare Part C). Both of these are private insurances that make up for deficiencies in Medicare. There has been talk among Democratic Presidential hopefuls about adding preventive care to Medicare. Everyone knows it lowers costs in the long run but there is nothing happening yet. In the meantime research both of those private insurance plans to get a reasonable estimate on your needs. The Medicare site has some useful comparison tools for planning purposes. Go here to see for your self.

Prescription drug plan — Medicare part D

This plan is administered by private insurance companies and paid for, in part, by the government. The more you need the more you will pay the insurance company. There is a feature of these plans that appears to have upset many people. It is the so-called “donut hole”.

The standard benefit structure for 2007 looks like this

Initial deductible $265

After the deductible is met: 25% of covered drugs out of pocket

Initial coverage limit: $2400

Exceed this number and you just fell into the famous “donut hole” where you will pay every dollar up to the other limit. When total out of pocket reaches $3850 you exit the no coverage donut hole and enter the “catastrophic coverage” zone. Here there is coverage once again at a good price of $2.15 or $5.35, depending on the drug formulary, or 5% whichever is the greater.

All of the numbers described above can change yearly depending on the government budget.

Medicare has a very nice plan comparison feature on their site. To try it out go here.

You may also be able to pickup some coverage in a Medicare Advantage plan.

Dental

Not Covered by Medicare. You will need insurance.

Vision

Not covered by Medicare. You can pickup some coverage through a Medicare Advantage plan.

Clearly there are no free lunches here so plan carefully. As I said before, this topic can have a profound affect on the finances of any retirement plan and thus your way of life. You could always improve your odds and finances by eating healthy and exercising regularly. A lousy lifestyle will cost big bucks in the end. Hence the term “donut hole”.


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1 Comment so far

  1. THE SKILLED INVESTOR Blog on May 10, 2007 11:44 am

    [...] presents Gaps In Medicare Coverage posted at Empty Nest, saying, “Medical coverage may well end up being your largest single [...]

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