Why Women Should Plan for Medicare Differently than Men

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Please welcome Danielle Kunkle Roberts, Medicare expert and author, as she breaks down Medicare and retirement planning for women today!

Women instinctively know their needs in retirement will be different from men’s. Whether you pursued a career outside the home or focused on raising a family, life in retirement will be a huge adjustment—emotionally, physically, and especially financially.

That’s why it’s so important to start thinking now about your health coverage and expenses in retirement. You have time to do your research, make a plan, and put it in motion so you’re prepared to take care of yourself and your health care needs when you’re older.

Some science, biology, and statistics

Women live longer than men—about six to eight years longer, according to the World Health Organization. That may not seem like much, but if you’re living on investments and fixed income in retirement, 30 years of expenses on 25 years of savings can wreck your financial plan.

In addition, if you’re married and relying on your husband’s pension or annuity for part of your income, in most cases, that income stream “dies” along with your spouse.

It’s also true that your chances of developing serious or chronic health conditions, including many types of cancer, increase dramatically as you age. Since women are living longer than ever, their chances of needing costly health care are also increased.

Even if a serious illness isn’t on your radar right now, routine health screenings, preventive care, and wellness visits should be. Women spend more on health care throughout their lives than men do, and on average, they use significantly more health care in their senior years than men.

This is due in part to their longer life expectancy, but also because women tend to have more chronic health issues and take more prescription medications throughout their lives than men. Statistics compiled by the National Institutes of Health showed that men over 65 take an average of 2.4 prescription medications at any point in time, while women over 65 take an average of 3.75 prescription drugs. Of seniors on long-term concurrent medications, only 16% of men used four or more medications on a regular basis; that number jumps to nearly 40% for women.

Finally, the Centers for Medicare and Medicaid Services showed that twice as many women as men need long-term care at the end of life.

Taken together, these numbers demonstrate that women need to plan for more years of health care than men, that their medical expenses will be higher than men’s in retirement, and their out-of-pocket costs for prescription drugs will likely exceed those for men. Is it any wonder women need to plan ahead for Medicare?

Preparing for life with Medicare

Many people aren’t prepared for Medicare’s out-of-pocket costs. Everyone pays a monthly Part B premium, whether they stick with Original Medicare or choose a Medicare Advantage plan. There are deductibles for both Part A and Part B with Original Medicare, and a cost-sharing structure that puts the burden for 20% of your health expenses squarely on your shoulders.

To make matters worse, there is no annual cap on out-of-pocket health care costs with Original Medicare. If you are seriously or chronically ill and use a lot of health care, you could wind up with tens of thousands of dollars in cost-sharing expenses.

You can avoid most of these costs with a Medicare Supplement Plan, but you pay an extra premium each month for the additional coverage. In 2019, the average premium for the most comprehensive Medigap plan was about $185 a month. For women who choose Original Medicare, this coverage is almost a necessity.

There is a catch with Medigap plans, however: They don’t cover prescription drugs. Your Part D Prescription Drug Plan should do a good job paying most of the costs for generic and preferred drugs, but if you need brand-name or specialty drugs, you could spend hundreds each month on medications.

Many women prefer the familiarity and expanded coverage offered by Medicare Advantage plans. Medicare Advantage is offered by private companies; the plans are structured like group health plans you get through an employer. Medicare Advantage typically has additional benefits not offered with Original Medicare. For example, most plans cover routine vision, dental, and hearing care.

They may pay for prescription eyewear, contact lenses, and even over-the-counter medications and health aides. Some plans cover things such as home meal delivery for homebound individuals, non-medical transportation to and from the doctor or pharmacy, home health aides for custodial care, and even home safety equipment and devices.

Most plans use a copayment cost-sharing structure instead of a percentage-based coinsurance amount. Almost all Medicare Advantage plans include Part D prescription drug coverage, eliminating the need to purchase yet another plan. You may or may not have an additional monthly premium for your Medicare Advantage plan.

Perhaps best of all, Medicare Advantage plans have a maximum out-of-pocket limit each year. You can plan for your health expenses knowing they will never exceed a certain amount each year. On the downside, prescription drug costs don’t count toward the cap, so there’s still an element of uncertainty.

The point is, you have more than one option for Medicare coverage, and your premiums, cost-sharing, and benefits are different depending on which option you choose. You owe it to yourself to begin thinking about the type of coverage and benefits you’ll want in retirement—and begin planning for your health care costs.

Paying for health care in retirement

Most women know about IRAs and 401(k), but fewer are familiar with health savings accounts, or HSAs. HSAs are one of the most efficient vehicles for paying for medical expenses in retirement. Every year until you retire, you can contribute pre-tax dollars ($3,500 a year for individuals, $7,000 for families in 2019) into an investment account and the money grows tax-free.

Prior to retirement, you can use the money on qualified health expenses such as deductibles and costs not covered by your health insurance, including vision, dental, and even certain over-the-counter medications. You can’t use them, however, to pay your premiums. Money withdrawn from your HSA for qualified expenses isn’t subject to income tax.

Here’s where HSAs really pack a punch: Unused contributions roll over indefinitely. There’s no limit to how much money you can keep in your health savings account. And once you turn 65, you can use the tax-free money on anything, including your Original Medicare, Medicare Advantage, and Medigap premiums. Opening an HSA is one of the smartest things women can do to plan for Medicare expenses.

If you need help sorting out your Medicare options, exploring ways to pay for your care, or opening an HSA, talk to a financial advisor or Medicare broker. Arm yourself with information today so you can plan for Medicare tomorrow.

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