Your ongoing expenses

3 types of expenses …

  1. Premiums
    The amount you pay for an insurance plan
  2. Deductibles
    Money you pay before insurance will pay a claim
  3. Coinsurance and copays
    You pay a percentage of a payment on a claim

… for several different kinds of plans

 

Medicare

Parts A and B: Traditional Medicare

Part A premiums are usually free, but there will be a brand-new deductible with each hospital stay. After the deductible, Part A will cover the first 60 days of a hospitalization; then coinsurance kicks in.

You’ll also pay premiums for Part B, which covers office visits. And coinsurance is 20% once you meet your annual deductible.

 

Part C: Medicare Advantage

If you want Part C (instead of A+B), you’ll pay premiums that may be more expensive but get coverage that’s more extensive—possibly lowering your out-of-pocket costs.

Part D: Can be added to both types of Medicare

You’ll also pay premiums, deductibles, and coinsurance for Part D (prescription coverage) if you elect it.

Learn more about what Medicare covers

Coverage you can add to Medicare

Supplemental insurance

If you choose traditional Medicare (Parts A+B), you might buy an additional policy for extra coverage (also called “Medigap”). If so, you’ll pay a separate premium for that.

Some Medigap plans have deductibles (but keep in mind that these plans offset other Medicare costs).

Costs vary widely depending on the plan you choose as well as your current health status, your location, and other factors.


Dental, vision & hearing

Most of the time, Medicare doesn’t cover these costs, so if you want insurance, you’ll buy it separately. (Some Medicare Advantage plans do include coverage for these costs.)





How it adds up 

Chart showing the median premium and out-of-pocket costs for someone with traditional Medicare, traditional Medicare plus a supplemental plan, and Medicare Advantage.

High-risk individuals generally smoke, visit the doctor frequently, and/or have at least 2 serious chronic conditions.

Medium-risk individuals generally have higher costs than nonsmokers free of chronic conditions but lower costs than high-risk individuals.

Source: Mercer-Vanguard health care cost model, 2018.


Your unpredictable expenses

Only 52% of retirees ever need to pay for long-term care.† But for those who do, it can get expensive, fast. Temporary care (for example, to recover from a surgery or an accident) falls under Medicare Part A, so it would be at least partially covered. But Medicare doesn’t cover ongoing long-term care.

How it works

Long-term care includes anything from adult day care to residence at an assisted living facility to nursing care. Unless you have long-term care insurance, you’ll likely pay these costs out of pocket. And even insurance will typically start paying only after a predetermined period of time—and then only pay up to certain limits.

If you exhaust all your financial resources, Medicaid may pay these types of costs.

How much does long-term care cost?†

Chart showing the percentage of retirees who spend various amounts of money for long-term care.
Almost half of retirees can expect to incur no long-term care costs.

25% of retirees can expect some long-term care costs up to $100,000.

15% of retirees can expect to pay over a quarter-million dollars in long-term care costs.

Learn more about long-term care

 

 

For more information on the costs of health care in retirement:

See our complete research on health care costs in retirement

 

*Median cost in 2018 for a 65-year-old woman.

**Based on Supplemental Plan F.

†For people turning age 65 between 2015 and 2019. Source: Assistant Secretary for Planning and Evaluation (ASPE) Issue Brief, Long-Term Services and Supports for Older Americans: Risks and Financing, ASPE Research Brief, revised February 2016, Table 5.

Note:

For more information on the research behind Vanguard’s health care cost estimator as well as the figures cited in this article, see Planning for health care costs in retirement.