Medicare Part B

Medicare Part B

The ability to pay for health care during retirement is a growing concern for both retirees and adults still working. The 2012 Retirement Confidence Survey from the Employee Benefit Research Institute found that only 13 percent of workers feel very confident about having sufficient retirement savings to cover medical expenses. Of those already retired, only 24 percent feel very confident about their ability to pay for medical expenses.

According to a Current Population Report published September 2013 by the Census Bureau, 98.5 percent of individuals age 65 and over cover their health care costs through some form of health insurance, primarily Medicare (92.6 percent). Just over a third of retirees (33.2 percent) have private health care coverage through their former employer, and 25.8 percent purchase coverage directly from an insurance carrier, in addition to Medicare.

Medicare Part B provides supplemental health coverage for recipients of Medicare. Part B covers medically necessary services or supplies needed to diagnose or treat medical conditions as well as services that help prevent or detect illnesses. Prior to 2006, the premium portion paid by all recipients was just 25 percent of the plan’s total costs. Today, Medicare Part B uses an income-based premium scale based on tax-returns from two years ago. For 2013, individuals with more than $85,000 and up to $107,000 in modified adjusted gross income for 2011 ($170,000 to $214,000 for joint filers), typically pay a monthly premium of $146.90.

Something to consider with Part B is the late enrollment penalty. If you don't sign up for Part B when you're first eligible or if you drop Part B and then get it later, you may have to pay a late enrollment penalty for as long as you have Medicare. Your monthly premium for Part B may go up 10 percent for each full 12-month period that you could have had Part B but didn't sign up for it.

Clearly, medical costs will continue to increase as a percentage of retirees’ living expenses. Careful planning before and during retirement can help you ensure you can continue to live comfortably and pay for your health care needs. Contact a financial adviser for help in determining if your existing plan for your retirement allows sufficient funds for health care.

FINANCIAL FACTS

More Taking Out Than Putting In – The number of Americans at least age 65 is projected to increase 37 percent over the next decade and by 85 percent over the next 25 years (source: Congressional Budget Office, BTN Research).   

Thirty Years Ago – When a Social Security committee (chaired by Alan Greenspan) implemented changes in 1983 that gradually increased the age at which a retiree would receive full social security benefits from age 65 to age 67, only Americans that were 20 or more years from turning 65 were impacted (source: Social Security, BTN Research).   

Why Growth Is Needed – An individual living on a fixed income over the past 20 years (i.e., from the end of 1992 to the end of 2012) would have suffered a 38 percent loss of purchasing power over the two decades, using the CPI as a gauge of his or her inflation (source: Department of Labor, BTN Research).