Medicare and Individual Health Insurance for Retirees

The most troubling budget line item for many people who are retired or retiring is often the cost of individual health insurance. An individual health insurance policy can cost $1000 per month for retirees who aren’t eligible for Medicare.

Most people who have employer group coverage pay some portion of the employer group premium, however because the premium is normally deducted from payroll checks it is often overlooked in retirement budget planning.

Medicare is usually much more affordable for retirees. Here is an overview of how Medicare works. You may click on key words in this post for more detailed information from the Medicare Website. Individuals who have earned 40 quarters of employment credit (10 years) are pleasantly surprised when they reach 65 that they are eligible for Medicare. People automatically qualify for Medicare due to disability after receiving Social Security for 24 months or if they have End Stage Renal Disease, or Lou Gehrig’s Disease (ALS).

Part A of Medicare is called Hospital Insurance, most people receive Part A without paying a premium. Part A covers room, board and nursing care while confined to a hospital. Part A also helps pay for Hospice and Skilled Nursing in-patient rehabilitative care. There are deductibles and co-pays under Part A, Part A does not cover medical care in or outside of a hospital.

Part B is Optional Medical Insurance, it covers medically necessary care in and outside of the hospital. Most people pay $104.90 per month for Medicare. People with higher incomes pay more. People with low incomes may qualify for a Medicare Savings Plan that will pay the premium.

Part B pays for certain preventative care with no deductible or copay. However for most diagnostic, therapeutic, and palliative (pain) care the Medicare Beneficiary pays 20% and Medicare pays 80% after the annual deductible of $147 has been met.

Many people choose to purchase a Medicare Supplement to help pay to co-pays and cost sharing associated with Medicare. Medicare requires that insurance companies offer standard plans so it is easier to shop for the lowest price. This is a wise choice because most of the medical services an individual uses during their lifetime are likely to occur when the individual is on Medicare. Without a Medicare supplement an original Medicare beneficiary would have unlimited exposure for their share of healthcare costs.