7 surprising things Medicare doesn't cover
Medicare pays for most of medical expenses for individuals once they turn 65, but surprising gaps in coverage can wreak havoc with a retiree’s limited budget.
According to the National Academy Of Social Insurance‘s Study Panel on Medicare Financing, “Medicare’s benefit package has been criticized widely for its inadequacy, a problem that leads both to the reliance by many on supplemental insurance and to a very high out-of-pocket burden on beneficiaries.”
Here are seven types of medical expenses that many retirees face but that traditional Medicare doesn’t cover, as well as recommended solutions to help your clients fill the coverage gaps.
Out-patient prescription drugs are not covered by Basic Medicare.
Solution: Clients can enroll in a Medicare Advantage plan with drug coverage or buy a stand-alone Part D prescription drug plan. But some retirees don’t need to bother if they have retiree health coverage that includes prescription drug coverage or if they continue to work and have prescription drug coverage in their current employer or their spouse’s employer. They can enroll in a Medicare Part D plan penalty-free during a special enrollment period if their existing drug coverage ends.
Deductibles and co-pays
Traditional Medicare consists of Part A, which covers hospitalization, and Part B, which covers outpatient services and doctors’ fees. Part A is free for most retirees and spouses who paid FICA payroll taxes for at least 10 years. Part B has a standard monthly premium of $134 per month in 2018. But both Parts A and B have annual deductibles and co-payments.
Solution: Purchase a supplemental Medigap policy to fill the gaps or enroll in a less-expensive Medicare Advantage plan that usually offers additional benefits in exchange for using in-network medical facilities and providers.
Beware of IRMAA!
Medicare Premiums: This notice has been included in Social Security statements. It can take a bite out of your monthly benefits.
“Your Medicare premiums if you are enrolled in Medicare Part B, your monthly Part B premium for 2019 includes any surcharges for late enrollment or reenrollment, plus an IRMAA. Your monthly Medicare Part B premium, including the IRMAA, will be deducted from your social security benefits. If you have Medicare Part D, your IRMAA for Part D coverage will be deducted from your Social Security benefits no matter how you normally pay your Part D plan premium. The law requires you to pay this amount in addition to your Part D premium. If the Part D IRMAA is more than the benefit, we will not be able to deduct it. If this happens, you will get a separate bill from Medicare and you must pay this amount to keep your Part D coverage.
Each year to decide if you must pay IRMAA, we use your federal income tax information for the most recent tax year that is available. However, we do not use any information that is more than three years old. We ask the Internal Revenue Service (IRS) for your tax filing status, your adjusted gross income, and your tax exempt interest income. We then add your adjusted gross income together with your tax-exempt interest income to get an amount that we call modified adjusted gross income (MAGI). We compare your MAGI with the income thresholds set by Medicare law.
MAGI may include one-time only income, such as capital gains, the sale of property, withdrawals from an Individual Retirement Account (IRA) or conversion from a traditional IRA to a Roth IRA. One-time income will affect your Medicare premium for only one year.”
Routine vision care
One of the biggest shocks to new retirees who were accustomed to employer-provided health-care coverage is that Medicare does not cover routine vision care such as glasses, eye exams, prescription sunglasses or contact lenses except in cases such as annual eye exams for those with diabetes or glasses following certain kinds of cataract surgery.
Solution: There are several possible remedies. Most Medicare Advantage plans include vision care or those with traditional Medicare can purchase a supplemental vision insurance plan, often paired with dental insurance.
Dental expenses tend to increase with age as older patients may develop gum disease or require expensive dental procedures such as crowns and root canals. Don’t look to Medicare to take the bite out of those dental bills.
Solution: Consider buying supplemental dental insurance, joining a membership program that offers dental discounts or enrolling in a Medicare Advantage plan. Even those solutions have limits on the number of visits and procedures that are covered and are subject to an annual maximum, though.
Say what? The chance of hearing loss increases with age, but don’t expect Medicare to hear retirees’ cries for help when they discover hearing aids can cost up to $3,000 per ear. Some Medicare Advantage plans cover hearing aids.
Solution: Costco offers some lower-cost alternatives for members. And the Food and Drug Administration has been authorized to create a new class of personal hearing devices that will soon be available over-the-counter.
Medical care overseas
It’s ironic. International travel often tops retirees’ wish lists for how they want to spend their newfound leisure time. But get sick or injured abroad, and they may be out of luck.
Medicare doesn’t extend beyond the U.S. border. Some Medigap policies offer limited coverage overseas. Most Medicare Advantage plans don’t.
Solution: The best bet may be to buy travel insurance that includes medical coverage. Those with health issues should make sure their preexisting conditions are covered, even if they have to pay extra.
Although it surprises many older Americans, Medicare does not pay for long-term care — potentially one of the biggest expenses that can wreck a financial plan. A private room in a nursing home costs more than $100,000 a year and a stay in an assisted living facility about half that much, according to the 2018 Genworth Cost of Care Survey.
Solution: Possible solutions include stand-alone long-term care insurance or a life insurance policy with an LTC rider; earmarking a portion of an investment portfolio or annuity for potential LTC costs; or moving to a retirement community that provides all levels of care in exchange for a hefty entrance fee.