Here’s How Much Medicare Really Costs

senior surprised by Medicare costs
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As folks already on Medicare likely know too well, it does not cover all medical expenses.

The federal health insurance program for seniors and some younger folks with disabilities is like any other type of health insurance in that the beneficiaries are responsible for certain costs.

And a recent analysis shows just how much Americans with traditional Medicare spend on these out-of-pocket expenses. Also known as Original Medicare, traditional Medicare is the more common of the two main types of Medicare.

The true cost of traditional Medicare

The analysis, by the AARP Public Policy Institute, is based on 2017 Medicare beneficiary data, the latest available. So, keep in mind that all of the following figures would be a bit higher in 2020 dollars.

On average, Medicare beneficiaries spend a total of $5,801 per year — 16% of their income — on out-of-pocket health care costs, AARP found.

Among beneficiaries age 65 and older, this spending is even higher — $6,089, or 15% of their income.

This spending, which includes any supplemental insurance costs, breaks down as follows:

Expense All beneficiaries Beneficiaries age 65 and older
Premiums $2,728 $2,891
Medicare-covered services $1,522 $1,536
Non-covered services $1,551 $1,662

Services that traditional Medicare does not cover include dental care and long-term care, as we detail in “5 Common Medical Expenses That Medicare Won’t Pay For.”

What it means for you

It’s no secret that health care is expensive, particularly for retirees.

A 65-year-old man who retired in 2019 would need a total of $135,000 for medical expenses throughout his retirement, and a woman in the same situation would need $150,000, according to Fidelity Investments’ latest annual Retiree Health Care Cost Estimate.

So, if anything, the AARP analysis findings serve to underscore the importance of planning for retirement health care costs and doing your homework before choosing or changing your Medicare plan.

Perhaps the biggest decision Medicare recipients ever make is whether to go with Original Medicare or a Medicare Advantage plan when they first become eligible for Medicare, which is generally at age 65. Medicare Advantage is the other main type of Medicare.

Beneficiaries have the opportunity to switch between Original Medicare and Medicare Advantage during open enrollment periods, but that can carry risks, as we explain in “4 Dangers for First-Time Medicare Enrollees.”

To educate yourself more on this topic, check out Money Talks News’ latest Medicare articles.

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