3 Reasons You Can’t Rely on Medicare Alone

Executor
Photo by H_Ko / Shutterstock.com

There is a surprising array of senior discounts out there these days. But Medicare may still be the ultimate senior discount.

Many folks count down the days until they are eligible to enroll in the federal health insurance program reserved primarily for people age 65 and older.

But just as you should not rely on Social Security benefits as your sole source of retirement income, you can’t rely on Medicare to meet all your health care needs after age 64.

If you have yet to become eligible for Medicare coverage, you may have time to prepare financially for costs related to Medicare. But if you’re already on Medicare, those costs are all the more reason to do your homework during open enrollment season.

In fact, for current Medicare recipients, investing time in researching your options during open enrollment may be the best way to avoid surprise medical expenses next year. And the 2020 open enrollment period for Medicare started Tuesday.

Why you can’t rely on Medicare

Medicare is a government-run program, but it’s not a government handout.

As with Social Security, you pay into the system via FICA taxes that come out of your paycheck during your working years. Additionally, Medicare is not all-inclusive.

Here are a few reasons why counting on Medicare to cover your health care needs in retirement can cost you:

1. It’s not free

Medicare is like any other type of health insurance in that the insured person is responsible for certain costs. Premiums, deductibles and copays generally still apply.

Take for example the premiums and deductibles for Original Medicare, which is one of the two main types of Medicare. It generally includes Medicare Part A, which primarily covers inpatient hospital stays, and Part B, which primarily covers doctor services and other outpatient services.

Most Medicare recipients don’t pay premiums for Part A due to how long they worked and thus paid FICA taxes. But there is a Part A deductible — currently, $1,364 per year.

The 2019 standard deductible for Part B is only $185 per year. But the Part B premium is $135.50 per month for most folks. That’s $1,626 per year.

And that’s to say nothing of drug costs or various other expenses associated with Original Medicare, which is offered directly by the federal government.

With the other main type of Medicare, called Medicare Advantage, costs vary by plan because these plans are offered by private insurers that are approved by the federal Medicare program.

2. It doesn’t cover everything

Like other types of health insurance, Medicare does not cover every last health-related service and product.

We break down some of the biggest expenses that Original Medicare does not cover — and how you can save money on them — in “5 Health Care Costs That Medicare Does Not Cover.

3. Its future is uncertain

The Medicare program’s Hospital Insurance Trust Fund, which helps fund Medicare Part A, is projected to face being depleted by 2026, according to the latest annual report from the boards of trustees that oversee the Medicare trust funds.

Come 2026, the money going into that trust fund, such as from FICA taxes, is projected to be enough to cover only 89% of costs.

Of course, federal lawmakers could step in to prevent a financial shortfall in the trust fund from resulting in increased costs or decreased coverage for Medicare recipients. Or, lawmakers could change the Medicare program itself.

In short, no one knows what Medicare will look like — or how the program will be funded — in the future.

How to improve your Medicare coverage

If you’re well under the age of 65, you have time on your side.

Use it to take stock of your finances. Look for ways to increase your retirement savings rate. Open a health savings account if you’re eligible for one — there is no better way to prepare for future medical costs of any sort than with a tax-free account.

If you’re already on Medicare, don’t squander the open enrollment period or it could cost you.

Don’t assume that your 2020 coverage or costs will be exactly like your current coverage or costs. As Medicare put it in a recent blog post:

“Plans change and your needs change. Carefully review any materials and changes in costs or coverage that will happen in 2020, and decide if your current Medicare coverage will meet your needs for the year ahead.”

That way, if you find a reason to change your plan for 2020, you will be able to do so before open enrollment ends Dec. 7.

To get started with your open enrollment homework, gather these three things:

  • The 2020 “Medicare & You” handbook: It contains general information about Medicare as well as information about Medicare plans available in your area.
  • Evidence of Coverage (EOC): This document includes information about your current plan, such as what it covers and how much you pay. It is usually sent to Medicare recipients in the fall.
  • Plan Annual Notice of Change (ANOC): This document includes any changes to your plan’s coverage, cost or service area that will take effect in 2020. It also is sent to Medicare recipients in the fall.

If you haven’t already received the handbook, you can download a copy from Medicare.gov, the federal government’s official website for the Medicare program. If you have yet to receive an EOC or ANOC, Medicare.gov suggests that you contact your plan.

Once you assess any changes to your current plan that would start in 2020, you can compare your plan with others. That will enable you to determine whether you could save money or improve your coverage in 2020 by changing your plan during open enrollment.

Again, check your “Medicare & You” handbook — or visit Medicare.gov — for details about 2020 plans available to folks in your area.

Find the right financial adviser

Finding a financial adviser you can trust doesn't have to be hard. A great place to start is with SmartAsset's free financial adviser matching tool, which connects you with up to three qualified financial advisers in five minutes. Each adviser is vetted by SmartAsset and is legally required to act in your best interests.

If you're ready to be matched with local advisers who will help you reach your financial goals, get started now.

Read Next
7 Secret Perks of Individual Retirement Accounts
7 Secret Perks of Individual Retirement Accounts

IRAs come with bells and whistles that many other accounts lack — including some perks you may not know exist.

21 Purchases You Should Never Skimp On
21 Purchases You Should Never Skimp On

With some items, it makes sense to pay a little more rather than hopping on the lowest price.

Secret Ways to Save on Netflix
Secret Ways to Save on Netflix

These little-known savings tactics can help whittle down what you pay for your streaming video subscription — every month.

15 Ways Retirees Can Make Their Savings Last Longer
15 Ways Retirees Can Make Their Savings Last Longer

Study these strategies to make your golden years gleam.

7 Secret Departments of Amazon You Should Know About
7 Secret Departments of Amazon You Should Know About

These little-known sections of Amazon are hidden gems for deal-seekers and impulse shoppers alike.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

5 Ways Joe Biden Wants Social Security to Change
5 Ways Joe Biden Wants Social Security to Change

Here’s where Biden — as well as Trump — stands on the future of the Social Security retirement system.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.