The latest report from Fidelity, “How to plan for rising health care costs”, is stating that out of pocket healthcare costs for a 65-year-old couple living until roughly 85 for a male and 87 for a female to be $285,000.00.
This number represents the costs associated with Original Medicare (Part A and B) as well as Part D, which is prescription drug coverage and a Supplemental Plan, most likely a Medigap Plan G policy.
To quote Fidelity “the calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B” as well as “certain services excluded by Original Medicare”. This exactly what Medigap Plan G covers for retirees who enroll into it.
The problem with Fidelity’s healthcare number is that once public data is applied this number of $285,000 is not possible to achieve even under the best-case scenario.
In 2020 the Medicare costs, on a national average, are as follow:
- Part A – premium free to those who qualify.
- Part B – $144.60 a month or $1,735.20 annually.
- Part B Deductible – $198.00 annually. This can not be covered by any new Medigap Plan.
- Part D – $69.50 a month or $834.00 annually which includes average deductible.
- Supplemental Plan – $178.05 a month or $2,136.60 annually (Medigap Plan G policy).
- Total per couple who are considered to be fully insured throughout 2020 – $9,411.60.
Please note that Part D and Supplemental plans are based on gender, age, health and residency. They can be exponentially cheaper as well as more expensive depending on these factors.
With Medicare premiums totaling, on average, of $9,411.60 for those who are considered to be fully insured in retirement these premiums would have to inflate at roughly 2.92%. This just happens to not correspond with what the federal government is projecting healthcare costs to inflate at.
According to the Medicare Board of Trustees Report in 2019 Medicare on average is expected to increase by at least 5.80% over the next 8 years.
By Medicare’s own standards this couple should expect to incur, on a national average, over $402,000.00 in just premiums for coverage which does not include the Part B Deductible or if this couple will go out of their prescription drug plan for medications.
The great aspect of Medicare, if one is fully insured under Original Medicare (Par A and B) with a Part D plan and a Medigap Plan G policy, is that is the covered person is admitted into a Medicare recognized facility as an inpatient for a medical need all costs, besides that Part B Deductible is covered.
The only out-of-pocket costs for Original Medicare, besides premiums for coverage, are for procedures not covered by Medicare or if, again, medications are not covered by that Part D plan.
It is great that Fidelity is at least tackling this issue as no other financial firm in the country has yet to address the subject, but with a voice as great as it is their number should be closer to the truth.