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We all think we know about the cost of health care. According to Fidelity, the average 65-year-old couple in 2020 will need nearly $300,000 for medical expenses over the course of their retirement. And that number does not address the potential for long-term care needs.

There is a common misconception that once you get on Medicare, your health care costs will be all taken care of.  What most people eventually discover is that Medicare doesn’t cover everything. And what it does cover typically comes with a copay or a deductible.

The Costs Behind Medicare

There are 2 primary parts to Medicare. Part A covers hospitalization, while Part B covers doctors, therapies, chemotherapy, etc. While Medicare Part A is free, many people fail to realize that Medicare Part B comes with a monthly premium.

Part B premiums for most people in 2021 are $148.50 per month and the premiums rise for higher-earners. The premium for higher earners is called the income-related monthly adjustment amount, known as “IRMAA”. If you get hit with IRMAA for Part B, you’ll also have to pay IRMAA for Part D, the private part of Medicare that offers prescription drug coverage if you are enrolled. 

You could end up paying an extra $434 per month ($356.40/month for Part B and $77.10/month for Part D), depending on your taxable income from two years ago.  If you’ve had a life-changing event and your income has gone down from two years ago we can help you. Reach out to us and we should be able to make a difference for you on your IRMAA premiums.

Once you’re on Medicare, you will have copays and deductibles for Parts A and B. On top of the copays and deductibles, there is no out-of-pocket maximum with Medicare. You heard that correctly! You can have unlimited expenses with original Medicare.

This is where Medicare Advantage and Medicare Supplement Plans come into play. These plans can help by setting a limit on spending, but this is also where things can get confusing. And this is the point where most couples should turn to a Medicare expert to guide them to a wise course of action.

Prescription Drugs

It’s relatively easy to find the list of drugs that Medicare does not cover (go to for this info). But what about drug costs?

Many retirees fail to understand the impact that drug costs will have on their long-term financial plans because they fail to understand how the drug plans are set up. While many drugs are covered by Medicare, more costly drugs can cause a balloon payment after several months of coverage, sometimes referred to as the “donut hole.” With the “donut hole” and catastrophic coverage issues, there is no cap on prescription drug expenses. And some manufacturers’ programs become off limits once you go on Medicare.

For Example:

  • Part D deductible: $435.

  • Initial coverage limit: $4,130.

  • Catastrophic threshold: $6,550.


You have a medication that costs $1,376.67 and your copay is $100.

Your first three doses cost you $300, but the total spent was $4,130, and you are now in the “donut hole.”

The next time you pick up your medication, your cost goes from $100 to $344.17 because you are now responsible for 25% of the cost of the drug (25% * $1,376.67 = $344.17).

You only spent $300 on your first three prescription fillings, you are already into the “donut hole,” and you don’t get out of the donut hole until you’ve spent $6,550.

After you’ve spent the entire $6,550, your costs will drop to 5% of the cost of the drug ($68.80 per dose).

That means prescribed medications could cost over $10,000 a year, and that’s on the drugs that Medicare includes in the drug plan.

So what should you do to help mitigate the costs of medical care today? A traditional asset manager might suggest you hold cash aside for these expenses. An insurance agent might tell you to buy a long-term care policy. An accountant may suggest that lowering your taxable income through medical expenses could help cover some of the costs of Medicare. Our job at Monotelo is to help you develop a Durable Cohesive Plan of Action, and take all of these issues into account to comprehensively address your healthcare needs in retirement.



Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

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