Unexpected health care costs are a major concern for pre-retirees and retirees.
Employers continue to cut back on post-retirement health care benefits, according to a report recently published by the Society of Actuaries (SOA). Low-income retirees may spend a large percentage of their resources on health care, according to the report.
And Medicare generally does not cover certain costs, such as dental, vision, hearing and most long-term care, said Cindy Levering, a co-author of the report and a member of the SOA’s Committee on Post-Retirement Needs and Risks. Plus, prescription drugs are covered only if Part D is elected. And Medicare doesn’t cover out-of-country care and care provided by medical professionals who do not contract with Medicare.
“I think a lot of people don't really focus on all of those things,” said Levering.
So, what’s the best way to manage the risk of unexpected health care news and costs?
Make Medicare choices wisely. Medicare is the primary source of coverage for post-65 retirees, said Levering.
“But a lot of people that may retire early don't think about the fact that Medicare is not available to them generally until they're 65,” she said. “So if you're retiring before 65, you have to plan for that gap period.”
Levering also noted that supplemental coverage is available from employer plans, individual Medigap policies, and Medicare Advantage (MA) plans.
Because MA plans typically include supplemental coverage and often drug coverage as well, these may be a way to stretch one’s dollar versus Original Medicare, where most people choose to buy supplemental and Part D drug coverage in addition to Medicare to cover those expenses, according to the SOA report. Plus, dental, vision and hearing coverage is also available within many MA plans and on a stand-alone basis as well.
Some MA plans might be low cost “but they might also have limitations on the doctors or the facilities that you can use under that plan,” Levering noted.
Levering recommended using the Medicare website to search for and select the plan that’s right for you, and to do so every year during the open enrollment period. “It's important to look at that every year and decide whether or not the plans you are in are still meeting your needs,” she said.
Explore the availability of other public support. There might be federal or state-local programs that may assist low-income retirees, Levering said.
Use health savings accounts (HSAs). Many people might not understand HSA, but such accounts can be used while working to accumulate money in a tax-advantaged way to help pay medical costs in retirement.
Consider health care in retirement timing. Instead of retiring from a job with health benefits, employees may choose to keep working, at least part-time, in a job that will allow you to remain covered, said Levering.
Make good lifestyle choices. Keeping yourself healthy, making healthy choices and, living a healthy lifestyle is important, said Levering.
Consider options for early retirees. Those who retire before age 65 might face a gap in health care coverage. For them, individual health coverage is currently available through marketplaces under the ACA, but the choices are limited in some states and premiums are both rising and more volatile from year to year. “But it's worth exploring all of those opportunities,” said Levering.
Take advantage of employer offerings. If you retire before age 65 and your employer doesn’t offer consider COBRA coverage which would last at least for 18 months.
Look into discount programs. Discount benefit plans for some non-covered services, such as dental or vision care.
Buy coverage for travel. Traveling for pleasure or to second homes requires careful consideration of how medical care needs will be covered by insurance or Medicare and Medigap, according to Levering.
Obtain care out of the country. Medical travel or even migration to other countries has gained popularity as a way for consumers to reduce their cost for care. “Obviously there are risks,” said Levering. “You have to really look at that carefully. That's another possibility that might save some money.