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Tags: Medicare, Medicare supplement, Retiree health insurance, Retirement

Ask yourself these two important questions about your Medicare health care costs?

One --Have you included the cost of retiree health insurance in your financial plan?

Two --Are your cost estimates realistic?

Most of you probably answered “yes” to the first question, but may be shocked at medical expense estimates for the future.  Here are new retiree health care cost estimates from Fidelity Investments.

A couple retiring in 2012 will need $240,000 to pay medical expenses through retirement (excluding long term care costs).

Even more sobering is this statistic 61%. 

That’s the amount of your Social Security benefits that will be consumed by health care expenses by the year 2027.  And remember that doesn’t include long term care expenses which over 70% of us will incur after age 65.

These cost estimates apply to people with traditional Medicare insurance coverage.  If you are lucky enough to have retiree health insurance subsidized by your employer, your costs may be lower.  But also remember that a number of employers are cutting back on retiree health benefits so you should plan on a financial cushion for future health care expenses just in case your benefits change.

Fidelity started analyzing retiree health care costs in 2002.  Every year since then, except one, health care costs have increased an average of 6% annually.

If retirement is still a few years away, you’ve got time to plan for how to pay those higher health care costs.  But what if you are near retirement or already retired?  Here are three tips to help control your Medicare health care costs.

1.  Signing up for Medicare when you are first eligible is important.  If you miss sign-up deadlines you will face penalties for years.  Part B has a late sign up penalty.  So do Part D Prescription drug plans.

2.   Select the right type of Medicare health insurance plan.  Medicare supplement plans can be more expensive up-front but you know exactly what you’ll be paying for going forward.  Medicare Advantage plans can have lower premiums, but co-pays and deductibles can make them more costly. Talk with a Medicare health plan advisor to find out which type of plan is right for your health care needs and budget.

3.  Shop and compare Medicare health plans. Don’t assume your employer health insurance company is the right solution for your health needs under Medicare.  The premiums on Medicare supplement plans can vary hundreds of dollars, even though the plan benefits are the standardized by law (by plan letter).  Medicare Advantage plans have very different co-pays and deductibles.  And if you need to go out of network you’ll find your health care costs can skyrocket.

If your premiums have gone up, get Medicare supplement quotes from 2 or 3 different companies so you can compare prices.  Generally, you can change Medicare supplement plans at any time, though you will probably be subject to underwriting.

With Medicare Advantage plans you will probably have to wait until the annual enrollment period. So if you think your Medicare Advantage plan costs are too high, mark your calendar for the annual enrollment period – Oct. 15 – Dec. 7 – when you can change Medicare Advantage and Part D Prescription Drug plans.

With the costs of Medicare insurance continuing to climb, it’s smart to compare plans and prices regularly.  And if you have had a change in your health condition or prescriptions, you’ll really want to make sure the Medicare health plan is still the right plan for you.

So when you review your financial retirement plan also take a look at your Medicare insurance and make sure you’ve got the right plan.  Leaving your Medicare health insurance plan on autopilot can cost you a bundle of money over a lifetime. Be a smart consumer and compare Medicare health plans periodically to make sure you've still got the right plan.