Understanding your health care costs in retirement

As you plan for retirement, it’s important to consider your health care costs. Medicare is an essential part of health care coverage for those age 65 and over, but understanding the costs can be a challenge.

For example, if we asked you what the average health care costs for a Medicare beneficiary (age 65 and up) were per year, what would you say?

… It’s a tough one, isn’t it?

What if we give you a choice?

If you said, C — congratulations! You’re right. (Officially, it’s $18,620.)

But for many, the answer isn’t so simple.

The people have spoken!

We recently ran a Medicare Basics quiz to find out what people know about Medicare, and how we can help them be more prepared when the time comes for them to choose a Medicare plan.

Eighty percent of the nearly 5,000 people who responded answered incorrectly. And while we don’t have a crystal ball to know what your health care costs will be, let’s see how the numbers overall shake out for all Medicare beneficiaries …

From doctor’s visits to home health care

The $18,620 figure comes from the most up-to-date version available of the “Older Americans 2020: Key Indicators of Wellbeing,” report, published by the Federal Interagency Forum on Aging-Related Statistics. It details the trends in wellness for older Americans.

The average health care costs of $18,620 includes both out-of-pocket expenses and costs covered by insurance. However, it bears noting that this also highlights the importance of having the right plan in place to help cover these costs. More on that later …

Here’s how the report breaks down these health care costs:

Percent of health care expenses

by good or service 2017

Outpatient hospital and physician services - 37%

Inpatient hospital care - 22%

Prescription drugs - 19%

Nursing homes and long-term care facilities - 10%

“Other” costs (short-term institutions, hospice, and dental care) – 10%

Home health care – 3%

Numbers do not equal due to rounding.

More insights from the report

1. Average prescription drug costs quadrupled in less than 25 years.
2. Nearly two-thirds of people over the age of 65 don’t have dental insurance. Dental work can be a big out-of-pocket expense.
3. Medicare paid for approximately 65% of all health care costs of Medicare beneficiaries age 65 and over in 2017.

So, what does this mean to you?

If you’re retired and are happy with your health care coverage, we hope this helps you realize the value you’re getting from your coverage.

If you’re thinking about retiring or planning, we want you to know you don’t have to go it alone. Here are three easy ways to help you make the right choice.

• 1) Talk to an agent. A licensed insurance professional who’s well-versed in all things Medicare can help you in no time at all. Be sure to take your time and find one who listens and walks you through all of your options.
• 2) Head over to the Medicare site. If you prefer to begin researching yourself, visit the Getting Started section of Medicare’s website. (If you don’t have your newest Medicare & You handbook, be sure to download the PDF.)
• 3) Talk to someone at your State Health Insurance Assistance Program (SHIP). If you prefer to have help from a trained counselor, visit shiphelp.org. Local programs go by different names, but the State Health Insurance Assistance Program (SHIP) is a community-based network of counselors throughout the country. SHIP counselors have been screened, trained and certified as Medicare experts.

With this added knowledge, you’ll have a better understanding of the importance of finding the right health care coverage for you in retirement — and what you’re getting with that coverage.