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Long-Term Care, Medicare, Medicaid, and More

Decoding the Retirement Healthcare Puzzle. Let’s break down the major areas of healthcare expense for retirees and look at the various alternatives for covering them without wrecking your retirement nest egg.

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What issues should i consider before i retire?

For persons approaching retirement, trying to make good decisions about healthcare costs can seem like so much alphabet soup: Medicare Parts A, B, C, and D; LTCI, and more. And then there’s the problem with trying to sort out the difference between Medicare and Medicaid; they sound alike, but are they? Is there a way to figure which covers what, and how much it’s likely to cost to make sure all your healthcare needs are covered during your retirement years?

These are big questions, and they really matter for your retirement planning. The most recent estimate of costs by Fidelity Investments indicates that a 65-year-old couple retiring in 2022 can expect to spend about $315,000 for healthcare during their retirement. Obviously, the topic requires careful thought and planning.

So, let’s break down the major areas of healthcare expense for retirees and look at the various alternatives for covering them without wrecking your retirement nest egg.

Medicare. This is the government-sponsored medical insurance program for persons 65 and older. There are several parts:

  • Basic Medicare (Medicare Part A) covers most expenses associated with a hospital stay, and it is free for persons who have paid enough in Medicare taxes while they were working (generally about 10 years).
  • Medicare Part B covers expenses related to doctor’s office visits, outpatient care, medical equipment, preventive services, and limited home health care. The premium for Part B is about $170 per month, and it can be more, depending on your income.
  • Medicare Part C (Medicare Advantage) is a government-approved plan from a private insurer that provides the same benefits as Medicare Parts A and B, plus a prescription drug benefit. You pay a monthly premium for Part C that varies from company to company.
  • Medicare Part D covers prescription drugs (for those not in a Part C plan) and is also offered by private companies in accordance with government guidelines. Part D monthly premiums vary from company to company.

Most people sign up for Medicare upon reaching age 65, unless they have qualifying coverage from an employer-sponsored plan. In fact, if you don’t sign up during the open enrollment period during the year you turn 65, you may have to pay a penalty when you do sign up. To learn more about Medicare, visit

Medicaid. This is the government-sponsored program for low-income persons, those who are disabled, low-income families with children, and certain elderly persons. Generally speaking, you must have very few assets before you can qualify for Medicaid. Sometimes, persons utilize trusts and other estate-planning tools to “shed assets” in order to qualify for Medicaid, but this requires careful advance planning, because Medicaid has a five-year “lookback” provision as part of the qualification process. Though Medicaid is a federal program, each state has its own rules for administration and qualification.

Long-term care insurance (LTCI). Persons who require long-term care are those who can longer perform one or more of the activities of daily living (ADLs), such as dressing, basic mobility (getting in and out of bed or a chair, and walking unassisted), feeding themselves for proper nutrition, and using the toilet unassisted. It is important to remember that long-term care is not covered by Medicare; it is covered by Medicaid, subject to qualification. This means that those needing long-term care who do not qualify for Medicaid must either get assistance from a friend or family member or pay for nursing home or home health care services. Either of these latter alternatives are expensive: home health care costs typically amount to $50,000 or more per year, while an average one-year nursing home stay costs over $100,000. For this reason, many persons opt to purchase long-term care insurance, which can cover most or all of the expenses for long-term care. Like life insurance, LTCI is less expensive for younger persons who are in good health. The cost of the monthly premiums must be weighed against the uncertainty of the future need. On the other hand, the US Department of Health and Human Services estimates that nearly 70% of persons 65 and older will require long-term care at some point during their remaining lifetimes.

Milestone Money knows that rising healthcare costs are a concern, especially for those planning for a financially secure retirement. If we can help you sort through your alternatives, please contact us.

What issues should i consider before i retire?

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Life is full of financial milestones. We pay for college, we get married, we start businesses. But the most important financial decision we will ever make is when and how to retire. Milestone Money helps you map success to and through retirement.

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