Preparing for Future Costs of Medicare

Everyone who is decades away from becoming eligible for Medicare must be aware of something. Medicare costs money. In fact, many enrollees will have to shell out at least a few hundred dollars per month in order to cover their out-of-pocket expenses, which include premiums, copays, and coinsurance, by 2021.

When people discover this just as they are signing up for Medicare, it typically surprises and frustrates them. I want everyone who will be 65 in a few decades to be aware of this fact long before they have to pay for it.

Similar to the health insurance plan you had through your employer or the Affordable Care Act marketplace, all enrollees will be required to pay premiums, deductibles, and coinsurance. Participants with lower incomes are eligible for assistance.)

Also, we're not talking little aggregates. Every person who enrolls in Medicare must, at a minimum, pay a monthly premium for Part B, a fundamental part of the program that covers out-of-hospital doctor appointments, tests, and exams. When you are admitted to a hospital, the majority of costs are covered by Part A, which typically does not require payment of a premium.)

The minimum monthly premium for Part B will be $148.50 in 2021. That's per individual. For spouses, there is no coverage that covers both. A spouse cannot sign up for Medicare on behalf of any individual. That amounts to approximately $300 annually for a household with two Medicare enrollees. According to the official Medicare report, the minimum monthly payment for the Part B premium will be $248.50 in 2030. In less than ten years, that amounts to $500 in monthly premium costs for a couple.

And this is assuming that you only need to pay the minimum amount. This year a person with altered gross pay underneath $88,000 and wedded couples with joint pay beneath $176,000 pay the base for Part B. Over those edges you pay more.

Additionally, as with your employer-sponsored health insurance, you may be required to pay deductibles and coinsurance.

Adding a Medicare supplemental policy, or Medigap, to cover the costs that Medicare expects enrollees to pay for is critical if you choose to enroll in Original Medicare (about 60% of enrollees use this system).For new enrollees, the Medigap plan that offers the best inclusion is Plan G. Contingent upon where you reside, an Arrangement G strategy can cost $80 to $300 every month.

If you decide on a Medicare Advantage plan, please be careful not to fall for any advertising that suggests it is free. Absolutely not. You are not required to purchase Medigap with Medicare Advantage and are not permitted to do so; however, if you use your insurance, you may be subject to a coinsurance cost of 20%. This year, Medicare Advantage enrollees have a maximum out-of-pocket cost of $7,550 for Part A (appointments, tests, and treatment outside of a hospital) and Part B (hospital admissions). If you use Original Medicare, there is no maximum amount you can pay out of pocket, so you really need that Medigap policy to protect you.

There are costs associated with prescription drug coverage, but I won't bore you with them right now.

Saving for Future Medicare Costs One of the reasons I urge you to save at least 10% of your salary—15% is even better—for retirement is that your retirement budget must take into account the cost of Medicare participation. I'm not telling you this to make you sad or scared; rather, I'm giving you the confidence to prepare in advance for this expense. That will be far superior to determining when you will retire and enroll in Medicare.