Most of us have heard stories of people whose financial security was undermined by surprise medical bills. Medicare enrollees who end up dealing with catastrophic medical bills often make assumptions that leave them vulnerable to these large bills. This type of unfortunate situation can dash lifelong retirement dreams, leaving people to adjust to a harsh, new financial reality. You can ensure this type of situation doesn’t happen to you by getting clear on exactly what Medicare covers and taking steps now to make sure you have the correct policies in place to protect your assets and your future plans from surprise medical bills.
“If I have Medicare that means I’m fully covered right?”
Unfortunately, this is not the case. One common assumption is that Medicare will cover ALL of your health care expenses once you are signed on to both Parts A and B. In reality, there are many services Medicare only pays a portion of and some things they don’t cover at all. This means that if you have Original Medicare only and are hospitalized or have a serious illness you could end up on the hook for thousands of dollars. Medicare generally only pays a portion of certain costs—such as the daily costs of hospitalization—leaving the remaining fees your responsibility. They also only pay about 80% of many services, which means you will pay the remaining 20% out of pocket. If you require significant medical care these deductibles, coinsurance and copayments can quickly add up.
“Medicare has an out-of-pocket annual limit that will protect me from very large bills.”
In the past you may have had health care coverage that included out-of-pocket annual limits, which are designed to protect consumers from overwhelming medical bills. For example, if you had a plan through one of the Affordable Care Act exchanges the out-of-pocket maximum for 2020 was $8,150 for an individual plan and $16,300 for a family plan. Policies provided through employers or unions also often have protective limits on what you can be billed each year. Unlike some other plans, Medicare does not have an annual of out-pocket-limit, which means the more medical care you need, the higher the portions of the bills you will be expected to pay. In one study of Medicare recipients diagnosed with cancer between 2002 and 2016 those without supplemental coverage paid an annual average of $8,115 out-of-pocket, an amount that would likely be significantly more in 2020 dollars and a hardship for many.
“Like my previous plans, Medicare covers routine dental, vision and hearing aid services”
It comes as a surprise to many people that Medicare does NOT cover routine dental, vision or hearing aid services. Since most older adults require these services on a regular basis the associated expenses can quickly add up. Before making appointments and receiving these services keep in mind that Medicare will not cover routine eye exams for glasses or contacts or the cost of glasses or contact lenses. The exception to this rule is that an annual eye exam for diabetic retinopathy and glaucoma is covered if you have diabetes or are at high risk for other reasons. Medicare also doesn’t cover most dental care, dental procedures, or supplies, like cleanings, fillings, tooth extractions, dentures or other dental devices. Serious dental procedures commonly run into the thousands of dollars, leaving many Medicare recipients vulnerable to large out-of-pocket expenses. Medicare will pay for hearing exams, but will not cover hearing aids if they are found to be recommended. The average cost of a hearing aid is between $1,000 and $6,000, which can be doubled if an aid is needed for each ear. Medicare will cover emergency care related to your teeth, eyes or ears, which would include treating an injury or illness.
“Medicare knows I’m on a fixed income, so they will only charge me so much.”
While it is true that many older adults are living on a fixed income—which can make unexpected medical bills even more difficult to deal with—this is not something that Medicare considers. Having a lower fixed income may save you monthly Medicare premiums, but it is not considered when providers bill you for the portion of your health care services that Medicare does not cover. Research shows that many Medicare beneficiaries spend a large portion of their total incomes on medical costs. Over one quarter of people who receive Medicare dedicate 20% or more of their income to health care costs and on average beneficiaries spent $3,024 per year on out-of-pocket costs.
Taking stock of any Medicare misconceptions you might have and fully researching plan options is the best way to ensure you protect your health and financial assets.
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