If, in your working years, you’ve had to scramble to buy health insurance or cope with rising co-pays on employer insurance, it’s tempting to think you’ll be home free once you reach 65 and sign up for Medicare. And yes Medicare does have significant benefits: About 80% of doctor-visit and testing costs are covered, as are most hospital costs, and you can even get partial payment for that long-needed mental-health therapy.

But contrary to wishful thinking, Medicare is far from free and has significant gaps in coverage. Health expenses paid out-of-pocket by individuals rise steeply with age, even after Medicare kicks in. While people aged 45-64 spent an average of $8370 for healthcare in 2010, that figure rose to $15,857 a year for those 65 to 84, and to almost $35,000 per person for those 85 years and older.

Ironically, taking good care of yourself and staying healthy can add more, not less, to the total healthcare costs of your retirement years. That’s because many the out-of-pocket expenses are annual premium costs, and living longer means you’ll be paying them longer. Sorry about that.

Here are the top 5 costliest health care expenses that retirees experience, with suggestions about what to do cover them.

“Hidden” Premiums

Medicare premiums are deducted from your Social Security check each month, and because they don’t arrive as a bill, it’s easy to forget you’re paying them. Medicare Part A, for hospital costs, has no premium for people who have worked and their spouses because it’s prepaid through payroll taxes during the working years. If you didn’t work and pay FICA taxes for at least 40 quarters, the premium is $411 a month.

But for Medicare Part B, which covers doctor visits, tests, ambulance rides and supplies, enrollees pay a monthly premium that is currently $104.90 a month, with surcharges for those with incomes over $85,000 a year. Over the retirement years, these premiums cost at least $1,258.80 a year for an individual. Combined with premiums for drug insurance and possibly supplemental or gap insurance to pay the portions of the bills that Medicare doesn’t cover, premiums can take a big bite out of retirement income.

Co-pays and Other Medicare Expenses

Premium costs are only the start of the bills Medicare recipients need to pay. Deductibles and co-pays are also significant. For Medicare Part B the annual deductible rose from $147 a year in 2015 to $166 in 2016. And there’s a $1,288 deductible for a hospital stay. And then there’s meeting the portion of any medical or hospital bills that Medicare doesn’t cover. On average, people aged 65-84 paid $5,887 a year in hospital co-pays and $3,281 a year for physician and clinical services in 2010. For those 85 and older, the costs were $10,405 for hospital co-pays and $4,342 for physician and clinical services.

There are two common strategies for meeting the costs that Medicare only partially covers. One is to join a Medicare Advantage Plan, often an HMO or PPO plan, that covers most Medicare services, and often includes drug insurance as well. The trade-off is that you need to use only the doctors who are part of the HMO or PPO plan, although some plans will cover part of the fee for seeing out-of-plan doctors.

Another strategy is to purchase supplemental or “gap” insurance from a private company. The highest premium plans will cover all Medicare copays and deductibles, with decreasing percentages for lower premium plans. Prescription drugs are not included in these plans. Neither are any expenses (such as dental costs) that Medicare itself doesn’t cover. Premiums average $186 per month and $2,232 annually for an individual. Both Medicare Advantage Plans and Medigap policies can help make medical costs in retirement more predictable. (See Medigap Vs. Medicare Advantage Plans: Which Is Better?)

Drug Insurance and Co-pays

If you don’t join a Medicare Advantage Plan, neither regular Medicare nor a Medigap policy will cover your costs for prescription drugs. Drug insurance, or Part D of Medicare, also has premiums, deductibles, and co-pays, and while buying it at retirement is not compulsory, you pay a penalty for the months you went bare if you decide to get it later. Out-of-pocket drugs costs averaged $1866 for those 64-84 in 2010, and $1935 for those 85 and older.

You can arrange to get your Part D premiums deducted from your Social Security check, but be prepared to use other strategies as well to keep drug costs down. Asking your doctor for generic or inexpensively priced drugs is important, and you may find that buying generics at Walmart, Costco or Target or through Walgreen’s prescription savings club costs you less than paying the co-pays required by your drug insurance.

Eyes, Ears, and Teeth

While Medicare covers most of your body, some parts are left nearly bare. If you need a cataract operation, Medicare will cover a portion of the expense and even allow you a free pair of post-op prescription glasses. But it doesn’t pay for routine eye exams, eyeglass prescriptions, or other visual aids. Neither will Medicare pay for hearing exams or hearing aids.

And if you’re hospitalized because your jaw and teeth are broken in a car accident, Medicare’s got your back, but it does not cover routine dental care, caps, bridges, or other procedures. People between 65 and 84 years old can expect dental services to cost them about $377 a year, and it’s one of the few expenses that declines with age, costing those 85 an older just $341 a year on average in 2010.

Nursing Care

Most of us associate the term “long term care” with nursing-home admission, but we need to think more broadly about how we will be cared for if illness makes us temporarily or permanently unable to take care of ourselves. All of the choices are expensive, including being cared for by family members and friends, who may have to give up paid employment to assist you. For example, lost wages and benefits for women caregivers can total $342,000, not to mention their increasing risk of heart disease and depression.

Costs for home health care, adult day care, assisted living and nursing home residence are substantial – and are best covered by either purchasing long term care insurance or setting up a dedicated investment account for that purpose.

The Bottom Line

Even though it costs more to live longer, staying healthy so you can do the things you enjoy is still the best retirement option. Budgeting for retirement should include a hard look at projected health expenses. Overall, retirees can expect Medicare to cover about 62% of their annual healthcare expenses. About 32% of out-of-pocket costs will be for Medicare part B and part D premiums; 45% on Medicare deductibles, co-pays and cost sharing; and 23% on drug expenses.

Note: The costs cited in this article are average, and there is little way of knowing in advance what your costs or longevity will be. Calculators from HealthView and from AARP can give a more personalized estimate that takes into account your current health conditions.

Read more: Top 5 Costliest Health Issues Retirees Face | Investopedia http://www.investopedia.com/articles/retirement/090216/top-5-costliest-health-issues-retirees-face.asp#ixzz4qPlugqkC
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