Page 2 - Managing Health Care Costs in Retirement

Managing Health Care Costs in Retirement

person in excellent health at age 65 most noticeable when Health employer or a spouse’s employer,
will incur much lower costs than Savings Accounts (HSAs) are immediate enrollment may not be
someone will with heart disease or ignored. HSAs allow a person to the most efficient solution.
diabetes, but is also much more save money for medical costs in a
For the vast majority of people
likely to eventually need more years tax-free account, but they are only
enrollment in Part A of Medicare
of long-term care. available with high-deductible
does not cost a monthly premium.
plans.
People also need to consider their Though immediate enrollment in a
approach to diagnosis and For a retiree who feels the need to free program seems like the obvious
treatment. One person might prefer visit his or her doctor frequently, it course of action, some employers
to visit doctors when they feel is better to use a low-deductible will cancel matched contributions to
unwell for more than a day, another plan that will reach its limit quickly an HSA plan when an individual
might wait for a problem to persist and put most of the costs on the starts any part of Medicare.
for a month before reporting it. The insurer. However, if a retiree rarely However, since the penalty for
former will have higher regular goes to the doctor and has little delaying enrollment in Part A only
payments, but the latter runs the chance of reaching his or her affects the small portion of people
risk of having major expenses from deductible, chances are good that an who have to pay the premium, HSA
a condition that was allowed to HSA will provide both premium plan members may wish to wait
worsen. savings and tax reduction (this is until retirement to use Medicare.
especially true early in retirement.)
Often forgotten, an important part Because Part B requires premium
of an overall health care plan (not Medicare payments, individuals who already
limited to retirees) is creating an have quality health insurance
Medicare can be one of the most
official health care directive. Usually through an employer may not want
influential ways to reduce health
in the form of a living will, people to deal with the extra expense of
insurance costs in retirement. It is
can layout rules for care in the event having double coverage. Part B
government health insurance
they are incapacitated and have allows individuals to delay
available to retirees (typically at age
little hope of recovery. enrollment without penalty if they
65) that is considerably cheaper than
Alternatively, people can grant are enrolled in employer or group
self-funded coverage. The Medicare
power of attorney for medical health plans (COBRA and retiree
program is available to retirees in
treatment to a relative or trusted coverage do not count as employer
three major parts:
friend. Either document can reduce health plans). Individuals who pay
unnecessary medical costs at the • Part A: Hospital insurance that for their own insurance will usually
end of life and, more importantly, covers emergency care and hospice find that immediate enrollment in
grant survivors peace of mind about Part B to be the best choice.
• Part B: General health insurance
proper treatment when the
that covers outpatient services, If Medicare is used at the same time
unthinkable happens. laboratory tests, mental health and as a company health plan, it can
regular doctor services
Savings Strategies become unclear which insurer
• Part D: Prescription drug insurance provides primary coverage. It is
There are a number of ways for
that helps pay for medication essential that employees who intend
retirees to reduce medical costs. The
to work past age 65 talk with their
most effective method is simply to People will often be told to begin
HR representatives and determine
get as healthy as possible. Retirees Medicare coverage as soon as
all the effects of Medicare
who enter retirement in good health possible because of the low rates
enrollment. Only when existing
will not only incur fewer initial available and the penalties that
coverage is understood can an
costs, but will be better able to enjoy could be incurred by delaying
individual find ways to lower costs.
themselves during retirement. enrollment. (Both Medicare Part A
and B carry penalties for those who Long-term Care
As stated earlier, a retiree’s personal
do not enroll during three months
approach to seeking medical care Long-term care (LTC) programs,
preceding or following the month of
influences expenses, many of which whether home care, assisted living
their 65 birthday.) However, if an
th
can be unnecessary if the wrong or nursing care, are extremely
individual is still receiving
health insurance is used. This is expensive. On average LTC creates a
insurance through his or her
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