Plan for Medical Expenses

Spending on health care generally increases with age as the need for care increases. When you are age 65 or older, Medicare helps cover some of your medical expenses. You'll want to start planning well before your 65th birthday because of Medicare enrollment deadlines and possible penalties for missing them.

Medicare basics:

  • Medicare is our country's health insurance program for people age 65 or older.
  • A common misconception is that Medicare provides free or inexpensive health care. In fact, Medicare is a network of benefits with different fees, including premiums, coinsurance, copays and deductibles.
  • Medicare isn't the same as private health insurance — you can't be denied coverage because of a pre-existing condition, and you won't pay higher premiums if you are ill.
  • Medicare doesn't cover all your medical expenses — for example, routine dental care, vision care and hearing aids aren't covered by traditional Medicare.
  • Medicare generally won't provide care you may need while traveling outside the US.

This table provides a snapshot of Medicare coverage.

Medicare at a Glance
  Medicare Part A Medicare Part B Medicare Part C Medicare Part D
What it is Hospital insurance Medical Insurance Medicare Advantage plans provided by Medicare-approved private insurance companies Prescription drug plans provided by Medicare-approved companies
What is covered Helps pay for inpatient care at hospitals and skilled nursing facilities following a hospital stay; covers some hospice and home health care Helps pay a portion of charges for medically necessary doctors' services and outpatient care; pays for some preventive and medical services not covered by Part A Includes hospital (Part A) and medical (Part B) insurance coverage; most plans include prescription drug coverage (Part D); plans vary and may offer additional benefits Varies by plan
Premiums Generally, none; may be purchased if ineligible but certain requirements are met Standard monthly amount; higher-income beneficiaries pay higher premiums; a late enrollment penalty may apply for not signing up when first eligible Monthly Part B premium plus additional amount (varies by plan) Amount varies by plan; higher-income beneficiaries pay higher premiums
Additional out-of-pocket costs Deductibles, coinsurance and copays Deductibles, coinsurance and copays Deductibles, coinsurance and copays; amounts vary by plan Deductibles, coinsurance and copays; amounts vary by plan

Coverages and out-of-pocket costs are subject to change.

Medigap insurance:

  • If you're enrolled in Medicare Parts A and B, you can purchase additional insurance — called Medigap insurance — to cover deductibles, coinsurance and other expenses not covered by Medicare.
  • Medigap policies are available from private insurance companies.
  • If you have a Medicare Advantage Plan, Medigap insurance is generally not necessary or allowed.

Strategies for managing health care costs in retirement:

  • Build up your financial reserves.
  • Include realistic estimates of your medical expenses in your retirement plan.
  • You may be eligible to contribute to a health savings account (HSA) that offers income tax benefits that can help maximize savings. Contributions to an HSA are tax deductible within limits, and you can use your savings plus investment earnings tax free to pay qualified medical expenses.
  • Consider buying long-term care insurance.

Next steps

Talk to your financial advisor about planning adequately for medical expenses in retirement.

Learn more about medical planning strategies by reading:

Log on to the Medicare website at to learn about eligibility, enrollment, coverage and other important information.