How to Plan for Medicare Costs 13 Years from Now?

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Cheego
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How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

My wife and I are planning to retire at the end of next year. We will be 52 and 51 years of age at that time. We have both been crunching numbers in various ways. And as we get closer to retirement, we are double checking our planned expenses to the best of our ability but we are struggling to estimate Medicare Part B premiums.

Based on today's Part B premium and the IIRMA tier we expect to be in at age 65, we will be paying about $4,800 per year as a couple in today's dollars. We want to estimate the Part B cost 13 years from now. I read that rates are going up by 7% on average each year based on historical premiums. So does it seem right that we could be looking at $11,500 annually as a couple for Part B premiums during our first year on Medicare? (that is 7% increase for 13 years)

I know a lot of things can change in 13 years but we just want to plug in a reasonable number for anticipated Medicare Part B costs (plus a rough estimate of out of pocket expenses and LTC).
Gabelli2020
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Gabelli2020 »

Your base premium for Medicare part B is 144.60/ month. This assumes that your joint income is less than $174000 if you file jointly. The part B premium increases (see Medicare tables) all the way to $491.60 if your joint income exceeds $750K.
Don’t forget part D which is the prescription benefit program- $32.74/month base, but increases to $76.40 at the upper level of joint income.
All of these numbers go up next year.
Additional fees are incurred if you opt for either a Medicare advantage plan( varies state to state but often free and similar to an HMO) or a Medicare Gap policy which is state or regional and has monthly costs - usually $100- $200/ month but is more like a PPO that allows you to see any physician that takes Medicare
I just signed on, turned 65 this month.
Lalamimi
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Lalamimi »

don't forget to factor in Medigap (Plan G) ( cost is about equal to or double that of Medicare B) and prescription (Part D (Cost starts at $7.30 in our are, but depends on location and meds you take). Unless you go with an Advantage plan. If you are that worried about something that cannot be determined now that far in advance, IMO, work longer.
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ram
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by ram »

Healthcare expenses are growing each year in the US. But the rate of growth is slowing down. The last few years the healthcare expenditure growth was 'almost' the same as GDP growth. A decade or 2 ago it was much more than GDP growth.

Most likely you will need less than a 7% compound growth on current expenses.

https://www.healthsystemtracker.org/cha ... item-start
Ram
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Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

Ram - Thanks for reading my post and actually answering the question I had. While I didn't quite understand some of the charts on the link you posted, I think that continued 7% growth in premiums is unsustainable. I'm not sure what rate of growth to plan for and I'm not sure how anyone can plan a retirement without having a sense of the cost of healthcare. Again, thank you for posting a helpful reply.
winner23red
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by winner23red »

Here's my short experience with Medicare Part B premiums (basic rates)

Year Part B premium
2018 $134
2019 $135.5
2020 $144.6
2021 $148.5

So from 2018 to 2021 annualized increase = (148.5/134)^(1/3)= 1.018^.333 or 1.0347 (3.48%) average annual increase
Boglegrappler
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Boglegrappler »

Here's a good resource for medicare understanding. KFF has a viewpoint, but they aren't completely averse to reporting the facts.
https://www.kff.org/medicare/issue-brie ... financing/

When we enrolled in medicare, I became much more interested in how it was funded, and what it cost.

Basically the payroll taxes paid in, and the premiums charged only cover about 3/8 and 1/8 of the total costs, and the rest comes from general revenues. See Figure 7 in the link.

With the baby boomers entering the enrollment, the number of young medicare enrollees is swelling, and lowering the current cost per enrollee, as younger old people are more healthy than older old people. That will change as time goes on.

Good luck with your estimate.
RCL
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by RCL »

winner23red wrote: Thu Nov 19, 2020 7:36 pm Here's my short experience with Medicare Part B premiums (basic rates)

Year Part B premium
2018 $134
2019 $135.5
2020 $144.6
2021 $148.5

So from 2018 to 2021 annualized increase = (148.5/134)^(1/3)= 1.018^.333 or 1.0347 (3.48%) average annual increase
Another data point for 2018 (a hold harmless year?) premium was $134, same as 2017's rate, so that makes the average annual increase even less
2018's increase was 0%
2019's increase was 1.12%
2020's increase was 6.71%
2021's increase will be 2.69%

No idea how to estimate rates years in advance :annoyed
Speigo
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Speigo »

RCL wrote: Thu Nov 19, 2020 10:00 pm No idea how to estimate rates years in advance :annoyed
If it's true that healthcare costs rank as the third most expensive cost in retirement, then how can anyone plan for early retirement or estimate their readiness for retirement even at 65? I just find it weird that there are so many blogs and books about FIRE and when someone asks about it (or even just FI), one of the critical questions is about annual expenses. Yet, no one know how to plan for healthcare costs... one of the biggest expenses we'll all face. :x
tj
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by tj »

Speigo wrote: Sat Nov 21, 2020 11:59 am
RCL wrote: Thu Nov 19, 2020 10:00 pm No idea how to estimate rates years in advance :annoyed
If it's true that healthcare costs rank as the third most expensive cost in retirement, then how can anyone plan for early retirement or estimate their readiness for retirement even at 65? I just find it weird that there are so many blogs and books about FIRE and when someone asks about it (or even just FI), one of the critical questions is about annual expenses. Yet, no one know how to plan for healthcare costs... one of the biggest expenses we'll all face. :x
Well, once you are in Medicare, you're pretty protected. Medicare premiums (even up a few IRMAA tiers) is drastically cheaper than buying coverage on the marketplace with no subsidies.
ModifiedDuration
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by ModifiedDuration »

tj wrote: Sat Nov 21, 2020 1:19 pm
Speigo wrote: Sat Nov 21, 2020 11:59 am
RCL wrote: Thu Nov 19, 2020 10:00 pm No idea how to estimate rates years in advance :annoyed
If it's true that healthcare costs rank as the third most expensive cost in retirement, then how can anyone plan for early retirement or estimate their readiness for retirement even at 65? I just find it weird that there are so many blogs and books about FIRE and when someone asks about it (or even just FI), one of the critical questions is about annual expenses. Yet, no one know how to plan for healthcare costs... one of the biggest expenses we'll all face. :x
Well, once you are in Medicare, you're pretty protected. Medicare premiums (even up a few IRMAA tiers) is drastically cheaper than buying coverage on the marketplace with no subsidies.
Yes, Traditional Medicare helps with predictability (and cost, compared to the marketplace with no subsidies). Simplified:

Part A (hospitals) - no cost (unless you have less than 40 credits, or 10 years, of paying FICA)
Part B (doctors) - $148.50 per month - plus Income Related Monthly Adjustment Amount, if applicable
Part D (prescriptions) - $10 to $50 a month (or more) - depending on plan, plus deductible and coinsurance (and IRMAA, if applicable)

Medigap:
High-Deductible Plan G - $40 to $150 a month - depending on locality and age
Plan G - $150 to $400 a month - covers all the “gaps” in Medicare, except the $203 Part B deductible

In my case, less than a total of $200 a month for Part B, Part D, and high-deductible Plan G premiums (not including deductibles, copays, and coinsurance)

Plus dental, vision, and hearing costs.
Last edited by ModifiedDuration on Sun Nov 22, 2020 11:45 am, edited 1 time in total.
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Eagle33
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Eagle33 »

The big unknown cost is long term care and is not considered part of healthcare. Will you need it? If yes, then what type of care is needed, and how long will each type of care be needed?
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
bradinsky
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by bradinsky »

OP,
This doesn’t answer your question, but it’s something to think about. Medicare part “B” is great, but it still leaves you with significant expenses to pay out of pocket if you need medical care & don’t have part “C” coverage. For us - DW 67 & me 68. Our 2021 premiums for the “G” plan are a monthly cost of $550 for both us. That doesn’t include prescription costs. For the 2021 year, our combined annual Rx costs are $3400. DW has a couple of expensive but necessary medications. So for 2021, that is $10K annually above & beyond the part “B” costs. They claim an average retired couple can expect to spend about $250K during their retirement years. That definitely must be accounted for!! Best of luck!

Brad
Nowizard
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Nowizard »

It should help that IRMAA will begin indexing to inflation in 2020 since that allows you to figure your retirement income for comparisons. Indexing is expected to reduce the number subject to it.

Tim
ModifiedDuration
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by ModifiedDuration »

bradinsky wrote: Sun Nov 22, 2020 9:11 am OP,
This doesn’t answer your question, but it’s something to think about. Medicare part “B” is great, but it still leaves you with significant expenses to pay out of pocket if you need medical care & don’t have part “C” coverage. For us - DW 67 & me 68. Our 2021 premiums for the “G” plan are a monthly cost of $550 for both us. That doesn’t include prescription costs. For the 2021 year, our combined annual Rx costs are $3400. DW has a couple of expensive but necessary medications. So for 2021, that is $10K annually above & beyond the part “B” costs. They claim an average retired couple can expect to spend about $250K during their retirement years. That definitely must be accounted for!! Best of luck!

Brad
You don’t mention it, but I hope that you have looked into a Part D plan for prescriptions.
Last edited by ModifiedDuration on Sun Nov 22, 2020 11:20 am, edited 1 time in total.
retired@50
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by retired@50 »

Cheego wrote: Tue Nov 17, 2020 7:14 pm We want to estimate the Part B cost 13 years from now.

I know a lot of things can change in 13 years but we just want to plug in a reasonable number for anticipated Medicare Part B costs (plus a rough estimate of out of pocket expenses and LTC).
At least you realize that this is a very tall order... Making predictions 13 years into the future. :shock:

Best of luck.

Regards,
This is one person's opinion. Nothing more.
Big Dog
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Big Dog »

Speigo wrote: Sat Nov 21, 2020 11:59 am
RCL wrote: Thu Nov 19, 2020 10:00 pm No idea how to estimate rates years in advance :annoyed
If it's true that healthcare costs rank as the third most expensive cost in retirement, then how can anyone plan for early retirement or estimate their readiness for retirement even at 65? I just find it weird that there are so many blogs and books about FIRE and when someone asks about it (or even just FI), one of the critical questions is about annual expenses. Yet, no one know how to plan for healthcare costs... one of the biggest expenses we'll all face. :x
"nobody knows nothing"

Sorry, OP, what you are asking is impossible to do with any precision; at best you can just guess. Too much of the future of Medicare relies on government policy, which will change. How and when no one knows. You also asked about LTC, which Medicare does not cover.
Well, once you are in Medicare, you're pretty protected.
I wouldn't even go so far as to say that bcos again, no one knows nothing 13 years hence. (For example, folks in the UK can pay out of pocket to jump the queue for hip replacements and if we go down that path....)
tj
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by tj »

I wouldn't even go so far as to say that bcos again, no one knows nothing 13 years hence. (For example, folks in the UK can pay out of pocket to jump the queue for hip replacements and if we go down that path....)
Can people not do that here already?
Topic Author
Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

Big Dog wrote: Sun Nov 22, 2020 11:39 am Sorry, OP, what you are asking is impossible to do with any precision; at best you can just guess. Too much of the future of Medicare relies on government policy, which will change. How and when no one knows.
Right... the best anyone can do is guess. But let's be prudent and try to make an educated guess. At a bare minimum, I think historical health care inflation is a good starting point. And I'd guess that if one does this, then they'd find that 13 years (or whatever) down the road, it might not be as expensive since relatively recent healthcare inflation has been so high that it must reach a ceiling in which recent health care inflation rates are unsustainable.

That would possibly leave the person who is guessing at future health care costs with a bit of an over-estimate... which I'd rather have than an under-estimate. Without a reasonable estimate of health care costs, you can't have the reasonable expectation that your retirement plan will work (unless you are very, very, wealthy when you retire).
Big Dog wrote: Sun Nov 22, 2020 11:39 am You also asked about LTC, which Medicare does not cover.
Yes, I know. My opening question was not about LTC. It was strictly about Part B premiums and I was just using that as a starting point for all health care costs. I know there is Part D, LTC, and supplemental costs, but just wanted to get the conversation started by focusing on Part B since that is a necessity/given for most of us.
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Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

Nowizard wrote: Sun Nov 22, 2020 9:24 am It should help that IRMAA will begin indexing to inflation in 2020 since that allows you to figure your retirement income for comparisons. Indexing is expected to reduce the number subject to it.

Tim
Thank you Tim. That is actually very helpful!
Big Dog
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Big Dog »

Cheego wrote: Sun Nov 22, 2020 4:32 pm
Big Dog wrote: Sun Nov 22, 2020 11:39 am Sorry, OP, what you are asking is impossible to do with any precision; at best you can just guess. Too much of the future of Medicare relies on government policy, which will change. How and when no one knows.
Right... the best anyone can do is guess. But let's be prudent and try to make an educated guess. At a bare minimum, I think historical health care inflation is a good starting point. And I'd guess that if one does this, then they'd find that 13 years (or whatever) down the road, it might not be as expensive since relatively recent healthcare inflation has been so high that it must reach a ceiling in which recent health care inflation rates are unsustainable.

That would possibly leave the person who is guessing at future health care costs with a bit of an over-estimate... which I'd rather have than an under-estimate. Without a reasonable estimate of health care costs, you can't have the reasonable expectation that your retirement plan will work (unless you are very, very, wealthy when you retire).
Big Dog wrote: Sun Nov 22, 2020 11:39 am You also asked about LTC, which Medicare does not cover.
Yes, I know. My opening question was not about LTC. It was strictly about Part B premiums and I was just using that as a starting point for all health care costs. I know there is Part D, LTC, and supplemental costs, but just wanted to get the conversation started by focusing on Part B since that is a necessity/given for most of us.
I spent 20+ years in health care focusing on policy & economics and I know enuf to not even try bcos the unknowns far outweigh the knowns. (I'm much better at timing the market, and I'm pretty bad at that.)
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Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

Big Dog wrote: Sun Nov 22, 2020 4:51 pm I spent 20+ years in health care focusing on policy & economics and I know enuf to not even try bcos the unknowns far outweigh the knowns. (I'm much better at timing the market, and I'm pretty bad at that.)
Then any serious attempt to plan for retirement is impossible and thus a waste of time. Health care costs are too big of a piece of the retirement puzzle to just not care about it (for me anyhow).
tj
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by tj »

Cheego wrote: Sun Nov 22, 2020 5:20 pm
Big Dog wrote: Sun Nov 22, 2020 4:51 pm I spent 20+ years in health care focusing on policy & economics and I know enuf to not even try bcos the unknowns far outweigh the knowns. (I'm much better at timing the market, and I'm pretty bad at that.)
Then any serious attempt to plan for retirement is impossible and thus a waste of time. Health care costs are too big of a piece of the retirement puzzle to just not care about it (for me anyhow).
Your plan should be Medicare + Medigap. The only time it becomes extremely expensive is when you have an extremely high income.
bradinsky
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by bradinsky »

ModifiedDuration wrote: Sun Nov 22, 2020 9:30 am
bradinsky wrote: Sun Nov 22, 2020 9:11 am OP,
This doesn’t answer your question, but it’s something to think about. Medicare part “B” is great, but it still leaves you with significant expenses to pay out of pocket if you need medical care & don’t have part “C” coverage. For us - DW 67 & me 68. Our 2021 premiums for the “G” plan are a monthly cost of $550 for both us. That doesn’t include prescription costs. For the 2021 year, our combined annual Rx costs are $3400. DW has a couple of expensive but necessary medications. So for 2021, that is $10K annually above & beyond the part “B” costs. They claim an average retired couple can expect to spend about $250K during their retirement years. That definitely must be accounted for!! Best of luck!

Brad no
You don’t mention it, but I hope that you have looked into a Part D plan for prescriptions.
Modified,
Sorry I didn’t include that. The $3400 combined Rx costs are the total we will spend, during the year, for monthly part “D” premiums & our portion of the drug costs. If you are on any tier 3 medications, things can get expensive. FWIW, my premiums & drug costs for the year should be a total of $87.00.

Brad
averagedude
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by averagedude »

I"m sorta in the same boat as you. I just expect and financially plan on spending $15,000 per year in today's dollars as a couple for heathcare after age 65. This is an unknown, but could be a good baseline. If you end up having less health issues this number should work. If you are someone who has alot of health issues at 65, this number may also be good, because you will likely not live to 90 years old, thus your portfolio won't need to last as long.
Topic Author
Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

averagedude wrote: Sun Nov 22, 2020 10:04 pm I"m sorta in the same boat as you. I just expect and financially plan on spending $15,000 per year in today's dollars as a couple for heathcare after age 65. This is an unknown, but could be a good baseline.
A big thank you for the suggestion. What I should have asked right from the start on this thread is "what is your planned health care expense number when you turn 65?" My own failure to ask this is why this thread never really developed into anything useful.

You're number helps but let me ask two things... Is the $15k just for you alone or does that also include a spouse? And how far away is 65 for you?
averagedude
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by averagedude »

Cheego wrote: Mon Nov 23, 2020 9:15 am
averagedude wrote: Sun Nov 22, 2020 10:04 pm I"m sorta in the same boat as you. I just expect and financially plan on spending $15,000 per year in today's dollars as a couple for heathcare after age 65. This is an unknown, but could be a good baseline.
A big thank you for the suggestion. What I should have asked right from the start on this thread is "what is your planned health care expense number when you turn 65?" My own failure to ask this is why this thread never really developed into anything useful.

You're number helps but let me ask two things... Is the $15k just for you alone or does that also include a spouse? And how far away is 65 for you?
I'm 51. I will be using ACA until 65 years of age. At age 65 I figure 15k a year in today's dollars for both of us for all medical expenses and insurance premiums. This figure is assuming no long term care. It is unknowable, but you do need to come up with a reasonable number for planning purposes.
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Cheego
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Re: How to Plan for Medicare Costs 13 Years from Now?

Post by Cheego »

averagedude wrote: Tue Nov 24, 2020 5:56 pm I'm 51. I will be using ACA until 65 years of age. At age 65 I figure 15k a year in today's dollars for both of us for all medical expenses and insurance premiums. This figure is assuming no long term care. It is unknowable, but you do need to come up with a reasonable number for planning purposes.
Thanks. My best guess is $19.5k for my spouse and I in 13 to 14 years. That doesn't include LTC but it does include premiums, supplemental insurance, and some out of pocket money. This forum will probably still be here in 14 years and I'll be able to look back on this post and it will feel like one of the following...

:D :x :oops:
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