3 Ways to Cut Healthcare Costs in Retirement

Retirement is a coveted period for many. The comfortable life, easy days, and low stress are some things most people desire and look forward to. But in reality, retirement may not be all glory. As you grow older, your healthcare needs increase and medical expenses constitute a large part of retirement bills in comparison to other costs. Hence, you would require more money to fulfill your medical requirements. Fortunately, there are ways to reduce this burden and cut down on these charges. However, apart from planning your investments wisely, you also need to cautiously and comprehensively arrange for retirement healthcare.

Here are the three most effective ways to keep these expenses down:

1. Be careful with your Medicare plan selection
   A prominent part of retirement planning is getting an appropriate and affordable healthcare cover. In this regard, a Medicare plan is the first thing you can consider to lower your expenses during retirement. Medicare is a federal program that sponsors hospitals and medical care for senior citizens above the age of 65 years or those disabled before the retirement age. There are essentially four parts of a Medicare plan – A, B, C, and D. Each of these parts cater to different healthcare needs. Here are some things to note:
   • Part A is for hospital coverage. This plan covers healthcare costs in a hospital or a similar facility.
   • Part B is for medical coverage. This part pays for services or supplies that help in diagnosing or treating a medical condition. It also covers costs involved in the preventive treatment of conditions like flu. This includes in-and outpatient doctor services, as well as specific outpatient prescription drugs.
   • Part C is for Medicare Advantage. Often sold by private players, Medical Advantage plans have two categories. These include Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans. These policies provide similar benefits like that of Medicare Plan A, B, and D, to an extent. Apart from this, Medicare Advantage also offers extra benefits like dental care, vision care, hearing aids, and other wellness-oriented services.
   • Part D is for prescription drugs. This plan pays for a list of prescription drugs (known as a formulary). Each prescription plan has a different list divided into different sections and prices.

   Medicare includes an employer contribution at 1.45%, and the same percentage from you on $200,000 for individual income, $250,000 for joint returns, and $125,000 for married taxpayers filing separately.
   Ideally, to reduce outlays, it is advisable to opt for Medicare Advantage, even if it comes at higher premiums initially. Original Medicare plans – A and B, offer lower premiums but have insufficient coverage for your retirement years. During Medicare open enrolment, you can take a Medicare Advantage plan, which is a better alternative and also offers wider protection in comparison to other Medicare parts. If you do not want to pay high premiums but prefer more extensive protection than Part A and B, you can consider taking a Medigap policy. Medigap plans offer different standardized policies that cover a variety of out-of-pocket charges. The price of Medigap starts from $50 per month and goes up to a few hundred dollars, depending on the type of policy and your area of residence. However, Medigap does not include prescription drugs. So, you would need an additional Medicare D policy.

   In case you start working after retirement and get enrolled in a health plan, be sure to check for overlap between your existing insurance policy and your Medicare plan.

2. Stay fit and get preventive care
   Good health ensures independence and security for your retirement years. But even after knowing the importance of staying fit, you often neglect the main aspects. A majority of retirees’ struggle with wellness and health challenges each day. According to the National Council on Aging, approximately 80% of older people have at least one chronic disease. 77% of them have more than one chronic ailment. To add to this, two-third of deaths in the country are due to heart attack, cancer, stroke, or diabetes. Diabetes also affects more than 12.2 million Americans above the age of 60 years, which is roughly 23% of the country’s population.These numbers get more alarming as you consider factors, such as pre-diabetes, hypertension, poor mental wellbeing, and other ailments that are more aggressive in the later years of life. Treating these conditions would require significant financial back-up. In addition to this, regular medical check-ups are also recommended. Preventive care in the form of regular screenings can be helpful to lessen overall costs in the long-run. Preventive measures help you identify risks early, eliminate or reduce the aggressiveness of specific diseases like cancer, and also keep you fit. So, a good way to reduce your medical expenditure as a retiree is to get a preventive health package early on, that includes free-screenings. This will lessen the probability of diseases in the later years.
3. Opt for long-term care insurance
   According to the HealthView Services report, an average physically fit retiree of 55 years is likely to spend $13,165 in annual medical charges by the age of 65. The amount increases to $16,635 in case the retiree has a medical condition such as diabetes. These estimates do not even take into account the most-crucial expense – long-term care. As per reports, 70% of seniors above 65 years are expected to require custodial care at some point in life. In case you would require assistance in routine activities in retirement, expect to shell out a much larger sum than the estimates by HealthView mentioned above. Moreover, Medicare plans do not offer long-term care like nursing homes or home medical services.So, the best method to reduce your medical management expenses in retirement is by opting for a comprehensive insurance cover. Private insurance could cost you more in the present, but will reduce your overall healthcare expenditure in retirement. Also, in case of planned retirements, early enrolment into a private insurance plan can significantly reduce the premiums. However, you must understand the coverage of the insurance policy and ensure it includes long-term care among other add-on benefits. Moreover, most insurances also offer preventive health management benefits, which can ultimately eliminate the need for a separate protective package. This is even more critical if you are married.

   As per studies, a physically fit couple retiring at the age of 65 would be spending more than $285,000 on medical costs after retirement. This figure excludes premiums, prescribed drug charges, etc. With more than a cost of a quarter of a million dollars barely covering the post-retirement medical outlay, a person must have a comprehensive and affordable healthcare cover. That said, combined with the right Medicare plan, long-term care insurance would be beneficial to lower your total medical expenditure as a retiree. Besides, you can also learn to maximize your Social Security benefits to further lower your retirement medical expenses.

To sum it up

With such hefty medical care expenses expected during retirement, it is always advisable to start planning your retirement healthcare early on with extreme prudence. You can also get in touch with professional financial advisors to ensure you secure your future in the right way.