Last Updated Mar 18, 2010 10:22 AM EDT
Medicare's so-called "donut hole" provides a potential rude awakening for working Americans who are contemplating retirement. Suppose you're one of millions of Americans who are using lifetime maintenance drugs for high blood pressure, high cholesterol, diabetes, or other chronic conditions. While you're an active employee, it's likely your medical insurance plan at work will cover most of the cost of these drugs. You only see modest copayments, unaware that the total cost paid by your employer is much, much higher.
It's a different story once you retire, reach age 65, and are covered by Medicare. Under standard Medicare Part D benefits covering prescription drugs, your annual out-of-pocket costs could easily be $1,000, $2,000 or more. And this doesn't include the monthly premiums for Medicare Part D benefits, which can add another $300 to $500 per year.
You'll see what I mean by taking a look at the table below. The left column shows ranges for total annual drug costs. The two middle columns describe the rules for determining how much of the total costs will be paid by individuals. And the last column applies these rules to show what you'll pay out-of-pocket under the standard design for Medicare Part D.
For instance, suppose your prescription drugs have a total cost of $3,000. You've fallen into Medicare's dreaded "donut hole" where you pay 100 percent of the cost of drugs in that range of total drug costs. Applying the above rules, your annual out-of-pocket expenses would be $1,110 (that's $940 on the first $2,830 of your costs, plus 100 percent of the amount over that, or $170 in this case). If these are lifetime maintenance drugs, you'll end up paying tens of thousands of dollars over your lifetime.
That was the bad news; here's the good news. Many of the conditions that require lifetime maintenance drugs are the result of unhealthy lifestyle choices and habits, like eating the wrong foods and too much of them, smoking or not exercising. Don't get me wrong: I know that in many situations, lifetime maintenance prescription drugs are lifesavers and may be the only solution to a serious health problem. However, I also know many people whose doctors have taken them off these drugs; that's because their test results show they're now in a safe range as a result of lifestyle improvements they've made.
Ask your doctor about participating in a medically supervised lifestyle program to safely wean you off lifetime maintenance drugs. Addressing such issues as high blood pressure, high cholesterol, smoking, or obesity with a doctor's help can improve your health and help you save boatloads of money. This is a very important step you can take in the years leading up to your retirement. Most Americans need to make every dollar count in their retirement years, so this can be a very important part of your retirement planning.
Image from iStockphoto contributor Kameleon777.