Wednesday, February 27, 2013

Retirement Planning: Health Care Update

Last year ago I wrote a short piece comparing the costs of Medicare to those of the Italian health care system. At the time, the Italian system was an incredible bargin compared to ours. That's no longer true in all cases.

This morning Karen at An American in Italy posted information on the current cost of buying into the Italian health care system. In case you're to lazy to click over and read her post it boils down to this:
7.5% of your income up to 20,658 and 4% over that amount up to 51,646
The amounts are euros of course. At the current exchange rate those numbers in dollars are $26995.87 and $67490.99. I expect to have retirement income on the close order of $36,000 per year, including Social Security and income from my 401(k). In euros that comes to about €27,548. That would make my annual cost (in 2013 anyway) about €1825 - $2384.91. Ouch!

Medicare (again, for 2013) works out like this:

Medicare Part A (Hospital Care) - $0.00/ $1184 deductible
Medicare Part B (Medical Insurance) - $104.90/ $147 deductible
Medicare Part C (Medicare Advantage) - optional, may include Part D coverage
Medicare Part D (Prescription Drugs) - $32.50 (Aetna's cheapest plan)

That comes to a total of $137.40 per month or $1648.80 per year. In actual practice it will be a bit different, given regional differences in Part D costs. If you see your doctor a couple times a year and have normal blood work done you'll hit the Part B deductible on the first visit, so that should be added in bring the total to $1795.80- about $600 less than the Italian plan.

What about Part D? I looked at Aetna's plan. It costs $32.50 a month and has a $325 annual deductible amount. So that's another $325 per year (assuming you have pretty minimal drug needs) bringing the total to $2120.80 per year.

Now we're getting closer - only about a $250 difference. The last remaining big difference is potentially huge - in the Italian system prescriptions are "free" (i.e. no co-pay) and many standard disgnostics are completely covered as well. To quote Karen again:
I have seen my regular physician many times for prescription refills related to my Lupus. I have seen an Immunologist related to the Lupus, had lots of blood work, and I have had my regular PAP test and Mammogram, which are free every two years at my age. I saw an orthopedic doctor and had physical therapy when I injured my knees last year. I take medication for thyroidism, lupus, and high blood pressure, and my medical costs outside of the annual fee were less than 500 euro, including the specialist appointments, lots of lab work for the new immunologist, xrays, and month of daily physical therapy...
That's about $653 for a tremendous amount of medical care.

If you fall into the infamous "donut hole" in Medicare drug coverage (it starts at $2,970 worth of drugs for 2013) you start paying a percentage (between 47.5% and 79%) for most prescription drugs up to a total of $3763 when you reach the other side of the "donut".

And there's the big difference - if you're reasonably healthy, Medicare will work for you and it will almost certainly be cheaper than the Italian system. But if you need even a little bit of medical care Medicare can become extremely expensive on a fixed income.

For us the new costs will have to be evaluated as we get closer to retirement. As long as one of us can get insurance through work, it makes sense to stay here. When Beth hits Medicare age (or if one or both of us become disabled) we'll need to carefully evaluate everything. I don't currently need any prescription drugs, but Beth takes medication for hypothyroidism and uses Advair for occasional asthma attacks.

Italy may stll make sense, even as more features of the Affordable Care Act come online. Stay tuned!


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