Few retirees have the desire or the resources to foot the bill
for their health care on their own. Fortunately, most American retirees don't
have to. They are covered by Medicare, a federal program that is the primary
source of health insurance for individuals age 65 and older.
However, you generally can't rely on Medicare to pay all of
your health costs in retirement. Medicare doesn't cover everything, and you'll
have to satisfy a deductible and make co-payments for some types of care. For
this reason, you may want to look into buying a Medigap policy designed to
supplement Medicare coverage. Or, if you're worried about needing nursing home
care in the future, you may want to look into buying a long-term care insurance
policy, especially if you don't want to rely on Medicaid to pay for possible
nursing home bills.
Note: The following discussion assumes that you will turn
65 before 2003. However, if you are currently age 62 or younger, you should be
aware that your eligibility for Medicare may be affected by the increase in the
normal retirement age for Social Security. The age for collecting full Social
Security benefits will gradually increase from age 65 to age 67 over a 22-year
period (this period began in 2000). This means that the age at which you can
begin receiving Medicare benefits may be greater than 65 (if current law still
applies) because the date you become eligible for Medicare is the date you reach
normal retirement age. However, neither the Social Security Administration nor
the Health Care Financing Administration has yet published information on how
the change in normal retirement age will affect Medicare eligibility.
Your changing health insurance needs in retirement
Your need for health insurance won't automatically
increase after you retire, but it will change. It's wise to be prepared. Here
are some of the ways your health insurance may be affected after you retire:
Your health-care costs may rise
Although you may remain quite healthy, you may find that you need to visit your
doctor more frequently as you grow older. You also may need to take more
prescription medications and require more extensive treatment than you did when
you were younger.
Your employer-sponsored health insurance coverage may end
Retirement may spell the end of your employer-sponsored health insurance.
Generous employers may offer extensive health insurance coverage to their
retiring employees, but this is the exception rather than the rule. If you are
65 or older when you retire, you don't have much to worry about--you'll
automatically become eligible for Medicare benefits upon your 65th birthday. But
if you retire before age 65, you'll need some way to pay for your health care if
your employer doesn't extend health benefits to you. You may want to consider
buying a private health insurance policy or extend your employer-sponsored
coverage through COBRA.
You may become entitled to Medicare and other government
Several government programs exist that can help you pay for health care in
retirement. These programs include Medicare, Medicaid, and certain military
benefit programs that aid retired service-members.
As mentioned, most Americans automatically become entitled to Medicare when they
turn 65. In fact, if you're already receiving Social Security benefits, you
won't even have to apply--you'll be automatically enrolled in Medicare. However,
you will have to decide whether you only need Part A coverage, which is free, or
if you want to pay the premium for Part B coverage. Part A covers home health
care, hospice care, and services associated with inpatient hospital care. Part B
covers other medical care such as physician care, laboratory tests and physical
therapy. You may also choose to enroll in a managed care plan under Medicare
Part C if you want to pay fewer out-of-pocket health-care costs.
If you are aged, disabled, or blind and can't afford medical care, Medicaid may
pay for your hospital and doctor bills, among other things. Approximately 38
million people receive Medicaid benefits, including over 60 percent of all
nursing home residents. However, there are many rules for using Medicaid to pay
for nursing home care. Check with a financial planner or an attorney experienced
in Medicaid planning before relying on Medicaid to pay for long-term care.
Medigap is supplemental insurance specifically designed to cover some of the
gaps in Medicare coverage. Although the name might lead you to believe
otherwise, Medigap is provided by private health insurance companies, not the
government. Federal and state governments do strictly regulate Medigap, however.
Unless you can afford to pay for the things Medicare doesn't cover (e.g.,
prescription drugs), as well as annual co-payments and deductibles that apply to
certain types of care, you may want to buy some type of Medigap policy when you
sign up for Medicare Part B. There are 10 standard Medigap policies that you can
purchase. Each of these policies offers certain basic core benefits, and all but
the most basic policy (Plan A) offer various combinations of additional benefits
designed to cover what Medicare does not. Although not all Medigap plans are
available in every state, you should be able to find a plan that best meets your
needs and your budget.
Health care for veterans is typically available at VA hospitals and health-care
facilities. In general, active duty service-members, retirees, and veterans
other than those who were dishonorably discharged are eligible for military
benefits. Survivors of service-members and veterans are also eligible for some
of the same benefits. However, the rules surrounding these benefits can be
complex and may change frequently. It's best to check with your local VA office
if you have questions about your health-care benefits in retirement.
You may need long-term care
The possibility of a prolonged
stay in a nursing home weighs
heavily on the minds of many
older Americans and their
families. This is hardly surprising,
considering that the annual
cost of nursing home care
in most facilities is more
than most people's annual
salary. There are several
resources you can use in planning
for this potential expense,
Medicare (limited benefits),
Medicaid, and military benefits.
You might also consider purchasing
separate long-term care insurance,
which is designed specifically
for this purpose, especially
since private health insurance
generally doesn't cover nursing