How Medicare can help
by Dave RichMr. Rich is CEO of Ensurem, specialists in Medicare planning and supplemental health products.
Much like everything else, health care costs are on the rise every year. This is especially true for seniors in retirement who are facing increasing chronic conditions like diabetes, rheumatoid arthritis and heart disease. According to the CDC, chronic conditions account for 90% of the nation’s health care spending. For the average American senior, these conditions can create a huge risk to their financial security.
While Original Medicare does help manage some of this risk, government-provided Parts A and B aren’t enough for most seniors. The private marketplace offers options to help cover the gaps, but it’s up to the consumer to understand what’s necessary to keep their costs from skyrocketing due to their condition.
Health Care Accounts For One Of The Largest Expenses In Retirement
For most retirees, health care accounts for one of their largest expenses. According to a 2021 government report, the median annual income for American 65 years of age or older in 2019 was $27,398, which is barely above the federal poverty level for a family of two.
Considering consumers aged 65 and older spend on average nearly $7,000 a year on out-of-pocket health costs, nearly 25% of their income must be reserved for health care. A chunk which adds up quickly over the span of someone’s retirement.
In fact, the average American couple can expect to spend $285,000 on health care in retirement. Most of which is derived from hospitalizations, emergency room visits and prescription drug use.
Why Are Chronic Diseases A Risk To Seniors’ Financial Security?
The costs referred to above only include those associated with Medicare like premiums, deductibles, copays and coinsurance. It doesn’t include the costs of things not covered by Medicare, like basic dental and vision care, over-the-counter medications or long-term care services. All of which are shown to increase exponentially for people with chronic conditions.
For example, the out-of-pocket costs for treating diabetes are estimated to be $7,900 per year. And a 65-year-old woman with osteoporosis is more likely to have a health care spending level that is five times higher than a woman without osteoporosis.
These costs can be devastating for low-income seniors who may also see their ability to work limited by chronic conditions. Similarly, older adults with chronic health conditions can find it hard to live independently.
Having an ongoing condition means that you need ongoing care and support (such as help with daily living activities or managing medication). Alternatively, you may need more frequent checkups and monitoring of your condition.
For this reason, seniors with chronic conditions are more likely to need Long-Term Services and Supports (LTSS), such as the type provided by home health aides or nursing homes. Original Medicare alone does not cover LTSS. So, seniors who need these services may have to pay out of pocket, which can quickly drain resources.
How Medicare Can Help Manage Chronic Disease Costs
We can’t talk about senior health care without talking about Medicare. There are more than 10,000 US adults aging into Medicare each day. As the last of the baby boomers turn 65 by 2030, Medicare will experience an influx of enrollees like never before.
Medicare classifies 15 different diseases as chronic conditions, including alcohol and drug dependence, autoimmune disorders, cancer, cardiovascular disorders, dementia, diabetes, end stage liver disease, end state kidney disease, hematologic disorders, HIV/AIDS, chronic lung disorders, mental health conditions, neurological disorders and stroke. Each of these conditions comes with its own risk factors, comorbidities and care requirements. Many of them are common concerns for seniors.
Regular doctor visits with proper preventative and screening services are vital in catching these chronic conditions early on when they’re still manageable, but what happens after someone is diagnosed? At this point, care management is a crucial component to helping a patient live their best life despite their condition. The patient also has the responsibility of making small lifestyle changes to help mitigate their risks.
Medicare has done a great job at providing coverage for preventative services, and even more recently, chronic care management services, but Original Medicare alone won’t answer the needs of the chronically ill.
That’s where the private marketplace comes in with products like Medicare Advantage and Medicare Supplement Insurance. These privately managed plans are regulated (and in some cases, funded) by the federal Medicare program.
Going Beyond Medicare With Private Plans
There are two types of private Medicare plans provided by most insurance companies. One replaces Original Medicare while the other supplements it.
If a beneficiary is unhappy with Original Medicare alone, they can choose to replace it with Medicare Advantage (also known as Medicare Part C). A Medicare Advantage Plan is an all-in-one health insurance plan. That means, it works alone to provide the same coverage as Part A and Part B – medical and hospital coverage – with extra benefits. These plans have very low, sometimes even $0 copays, but they aren’t always accepted by doctors and may come with unexpected out-of-pocket costs. There are also types of Medicare Advantage Plans that offer specialized benefits for people living with the chronic conditions listed above.
Some beneficiaries may be better off keeping Original Medicare and purchasing a Medicare Supplement Insurance plan to help cover the costs that Medicare alone doesn’t. Commonly referred to as Medigap, these plans are accepted by all doctors who accept Medicare, but they can cost hundreds of dollars a month and are often too expensive for many seniors who are on fixed incomes.
The difficulty for a consumer – especially one living with one or more chronic conditions – lies in choosing the right option. First, they’re faced figuring out if they should replace their Medicare with Medicare Advantage or supplement it with Medigap. Then, they must figure out which plan works for them. There are up to 10 Medigap plans on the market and thousands of Medicare Advantage Plans.
While Medigap plans are standardized in almost all states and standard benefits don’t change between insurance carriers, Medicare Advantage Plans tends to be a bit more nuanced. On average, a Medicare beneficiary has access to 33 Medicare Advantage Plans in their area, and each will provide different levels of coverage and costs. These plans also heavily utilize cost-sharing, and as such, figuring out expected out-of-pocket costs can be difficult.
When living with a chronic health condition, it’s important to understand which doctors and treatments are covered under a specific plan and which are not. A licensed insurance agent specializing in Medicare solutions from a wide variety of top-rated insurance carriers can provide clarity on each plan’s offerings, and what changes in coverage might be advisable.