Key Points
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Healthcare can be a huge expense for older Americans.
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Timely Medicare enrollment could make premiums more affordable.
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Reviewing plan choices and understanding plan rules could lead to savings as well.
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Retirement is supposed to be a time to enjoy the money you’ve spent decades saving. But there’s one expense that can make that difficult — healthcare.
As a retiree, you’ll have to budget for doctor visits, prescriptions, medical procedures, and insurance premiums. And while Medicare provides important coverage for Americans ages 65 and older, it doesn’t mean healthcare becomes free.
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In fact, healthcare could become your biggest senior expense, especially if you have chronic medical problems you’re managing. The good news, though, is that the right strategies could help you keep your healthcare spending down. Here are five ways to ease that burden and preserve your retirement savings.
1. Enroll in Medicare on time
One of the most expensive mistakes retirees can make is missing their initial Medicare enrollment window. Most Americans become eligible for Medicare at age 65, but your initial enrollment period spans seven months. It begins three months before the month you turn 65 and ends three months after that month.
If you don’t enroll on time, you could face a lifelong 10% surcharge on your Medicare Part B premiums for each 12-month period you could’ve had coverage but failed to sign up. Over the course of a long retirement, those surcharges could amount to a lot of wasted money.
Now, there are exceptions for people who continue working and have qualifying employer-sponsored health insurance. But before you delay your Medicare enrollment, check with your HR department if you’re still working, or with your health plan administrator, to make sure you truly have creditable coverage that makes waiting safe.
2. Compare Medicare plan options every year
The Medicare plan you start out with isn’t guaranteed to be the most cost-effective one for life. Medicare Advantage and Part D drug plans can change their premiums, deductibles, and covered medications and benefits from one year to the next. So it’s important to review your choices annually during open enrollment.
Medicare’s annual open enrollment period runs from Oct. 15 through Dec. 7 each year. During this window, beneficiaries can switch Medicare Advantage or Part D plans.
When assessing your choices, don’t just look at premiums. A plan with a lower monthly premium isn’t automatically cheaper.
3. Understand your plan’s rules before receiving care
Another way to avoid unnecessary healthcare expenses is by understanding exactly what your Medicare plan covers. This is particularly important if you’re enrolled in Medicare Advantage, since these plans often have specific requirements that can impact your costs.
Medicare Advantage plans require members to use doctors within a designated provider network. Visiting an out-of-network provider could result in higher costs or no coverage at all, depending on the plan.
Prior authorization is another important consideration. Certain procedures may require approval before treatment. If you don’t get that approval, you could face coverage denials or unexpected bills.
Before scheduling an appointment, undergoing a procedure, or filling a prescription, verify your coverage and know what steps you need to take. Understanding your plan’s rules could prevent unpleasant financial surprises.
4. Consider Medigap if you choose original Medicare
The nice thing about original Medicare is that you can see any provider in the country who takes Medicare as insurance. But if you’ll be skipping Medicare Advantage and sticking with original Medicare, it pays to buy supplemental insurance, or Medigap, early on.
Medicare enrollees can face high deductibles, coinsurance, and other out-of-pocket costs. Medigap could help cover these expenses, helping you avoid financial strain. And while Medigap plans do require an additional monthly premium, they can provide greater predictability when budgeting for healthcare.
The best time to purchase Medigap coverage is generally during the six-month window that begins when you’re 65 or older and are enrolled in Medicare Part B. During this period, insurers generally cannot deny coverage or charge more because of preexisting conditions.
5. Don’t be afraid to comparison shop
When it comes to paying for healthcare, don’t assume that the first price you’re quoted is the lowest available. Prescription drug costs are a particularly important place to look for savings.
If you’re facing hefty copays, ask your doctors and pharmacists whether a lower-cost generic medication is available. It also pays to compare prescription prices at different pharmacies, review your plan’s preferred pharmacy network, and ask whether mail-order options offer savings.
Healthcare expenses may be unavoidable in retirement, but that doesn’t mean you have to strain your budget to afford them. A little research, careful Medicare planning, and a willingness to ask questions could help you keep more of your savings without skimping on care.
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