Focus on the real healthcare financial risk in post age 65 retirement

One of the big mistakes retirees make with healthcare coverage is focusing on premiums. The real risk is out of pocket costs, especially if catastrophic medical events happen. 

For example, Medicare Advantage may look great with low, even no premiums and perhaps extra benefits like dental. But MA typically has out of pocket costs, up to $9,250 (sometimes less) per year. That expense can occur year after year.

MA plans generally use deductibles and copays of some type while the lower OOP costs may also mean limited choice of health care providers. There is always some way to manage spending. 

I chose to avoid that risk. We have regular Medicare Parts A, B and D. The standard Part B premium is $202.90 (I pay IRRMA, but that is not relevant to the comparison because it would apply to MA as well.) I also have Medigap G which in my case is $311 a month (higher than normal because I was forced to obtain an age based plan when my employer dropped our coverage). Connie has the same coverage. 

The thing is, our coverage protects me (and Connie) from out of pocket costs above the Part B deductible. We could have taken Plan F but the premium difference wasn’t worth it. 

Now along comes a major illness. We had the ability to receive care wherever we wanted, from whom we want or where our doctors refer us. 

The first incident was Connie’s eye injury which required multiple surgeries included seeking care at a well known eye hospital in Philadelphia. That incident was hundreds of thousands of dollars for which we paid the Part B deductible. 

Now we are dealing with cancer. I haven’t taken the time to add up the costs so far, but the care is expensive. One treatment on December 31 was billed at $14,000 and there are weekly treatments, now spanning two different years. Again our out of pocket costs are the $283 deductible. 

My point is not to argue for standard Medicare or Medicare Advantage, but to suggest the real decision is to focus on where the maximum financial risk most likely resides – and that is in out of pocket costs, especially for serious health care needs which generally increase with age. 

Making coverage decisions based on premiums alone carries higher long-term risks.