How the Health Reform Ruling Impacts Retirees

Here’s how retiree out-of-pocket costs have changed due to health reform.

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The Supreme Court’s ruling on the Affordable Care Act indicates that many of the Medicare changes impacting older Americans and retirees will remain intact. Here’s a look at how retiree out-of-pocket costs have changed due to health reform:

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Closing the prescription drug gap. Medicare prescription drug plans have a coverage gap, often called the donut hole, that begins after an enrollee incurs $2,930 in drug costs and lasts until catastrophic coverage kicks in after a retiree has spent $6,658 out-of-pocket. However, the Affordable Care Act has already begun to close this coverage gap and will completely eliminate it by 2020. Brand-name drugs purchased in the gap are discounted by 50 percent and generic drugs by 14 percent in 2012. The discounts will increase to 21 percent on generics and 52.5 percent on brand-name drugs in 2013. And in 2010, beneficiaries who fell into the Part D coverage gap received a $250 rebate. The Centers for Medicare and Medicaid Services says more than 5.1 million Medicare beneficiaries have collectively saved over $3.2 billion on prescription drugs due to the rebate checks and prescription drug discounts in 2010 and 2011.

Free preventative care. A free annual wellness visit that includes a health-risk assessment and personalized prevention plan was added to the services covered by Medicare by the Affordable Care Act. Cost-sharing requirements for many preventive services such as cancer screenings, mammograms, and colonoscopies were also eliminated for Medicare beneficiaries.

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Modest premium increases. The standard Medicare Part B premium is $99.90 per month in 2012, up $3.50 from 2011. And many people who first signed up for Medicare Part B in 2010 or 2011 actually saw their premiums decline in 2012. Medicare recipients whose modified adjusted gross income is greater than $85,000 for individuals or $170,000 for couples must pay higher Part B premiums, ranging from $40 to $219.80 per month more than the standard rate in 2012, but premiums also decreased for many high earning retirees.

Lower out-of-pocket costs. The amount of money retirees will need to pay for medical costs throughout retirement declined sharply when the health reform bill was passed, but has started to grow again since then. A 2010 Fidelity Investments study conducted before the health reform legislation was passed found that a 65-year-old couple retiring in 2010 would need $250,000 to pay for out-of-pocket health care costs throughout retirement, including deductibles, copays, and other likely out-of-pocket costs for Medicare Parts A, B, and D. When the analysis was preformed again in 2011, after the health reform bill was passed, the estimate fell by 8 percent to $230,000, before climbing 4 percent to $240,000 in 2012.

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The Employee Benefit Research Institute also found that out-of-pocket health costs for retirees have declined since the health reform legislation was passed. EBRI calculated that a 65-year-old couple with median drug expenses would have needed $210,000 to have a 50 percent chance of having enough money to cover health care expenses throughout retirement in 2009, but that estimate declined to $158,000 after health reform was passed in 2010.