August 16, 2012
Out-of-Pocket Medicare Costs Bite Deep
People born on the tail end of the baby boom wave are suddenly waking up to retirement, which is barreling towards them. While many have no idea how Medicare works or how much they will pay for health care, the program’s future has emerged as a key issue in a presidential campaign with competing notions of how best to slow Medicare’s growth to a more sustainable level.
Whatever your political stripe, the costs of retirement health care are rising “significantly,” according to a forthcoming report by the Center for Retirement Research, which sponsors this blog.
Medicare covers a large portion of health costs, but retirees must pay Medicare premiums, which are deducted from their monthly Social Security checks, as well as copayments for doctor visits and other medical services such as some tests. These additional expenses are often, though not always, covered by employer-sponsored or private “Medigap” insurance policies, which smooth out these expenses for retirees.
But out-of-pocket expenses not covered by Medicare will be on an upward trend over the long term, despite a temporary dip in recent years, according to forecasts from the Centers for Medicare and Medicaid Services. For the typical beneficiary, out-of-pocket costs will increase to about 18 percent of Social Security benefits over the next decade, up from 15.5 percent currently.
These costs do not even include the premiums for Part D coverage of prescription drugs. When Part D costs are included, the health care bite this year is 24 percent of benefits – and will approach 29 percent in 2022.
Retirees received no federal drug coverage prior to the Part D program signed into law by President George W. Bush. The government has estimated that Part D has saved seniors – believe it or not – nearly $4 billion since going into effect in January 2006.
Squared Away readers who are already retired are welcome to comment below on the impact on their lives of rising medical costs.