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What Medicare Misses

Richard Connor

ONE OF THE MORE challenging changes that comes with retirement is the loss of your employer’s health care benefits—and I’m not just talking about regular health insurance. Two other benefits that employers commonly provide are dental and vision coverage.

Traditional Medicare doesn’t cover common dental procedures, such as cleanings, fillings, extractions, dentures, dental plates and other dental devices. Medicare also doesn’t cover the cost of eyeglasses, lenses or contacts, which many of us were used to obtaining using our employer’s vision coverage.

Medicare Part A will cover certain dental care that happens in a hospital, such as emergency or complicated dental procedures. Similarly, Medicare will also cover the cost of eye injuries, as I found out recently.

A three-year-old’s heel inadvertently struck my right eye. I quickly developed a veil of dark spots and threads. I saw a local ophthalmologist, who sent me to a retinal specialist. Luckily, there was no tear or detachment.

Four weeks later, my vision is almost back to normal. The costs for my care were submitted to Medicare. The ophthalmologist’s and the specialist’s claims have both been approved. I owe a $20 co-pay for each of the initial office visits, consistent with my Medigap Plan N coverage. I haven’t had any other out-of-pocket costs.

When looking ahead to retirement, it pays to think about dental and vision health, and how we’ll pay for routine services that were often previously covered by our employers’ policies. The first and arguably most important step is to pay attention to your dental and vision health before retirement.

Good dental hygiene is more crucial than many of us realize. Ideally, you adopt good practices in childhood and maintain them throughout your life. It’s never too late to start, however. This will improve your health and save you money. Similarly, regular vision screenings and smart practices—such as wearing eye protection—are great ways to safeguard your vision.

The second step: Make sure you use your insurance benefits in the last years of employment. If your employer funds all or part of your dental and vision insurance, use those benefits to their fullest. If you require expensive care, like dental implants, take care of it while you have insurance and a salary to pay for any expenses that aren’t covered. Also take advantage of any vision services that are covered, like eye exams, cataract assessments and eyeglasses or contacts.

A third strategy: Fund a health savings account, or HSA, during your working years. You get a tax deduction for the amount you contribute, you can invest the money you save, and the earnings grow tax-deferred. When the money is used to pay for qualified medical expenses, the withdrawal is also tax-free.

As you approach retirement, explore how you might replace your employer’s dental and vision insurance coverage. Some Medicare Advantage plans provide dental and vision coverage. What if you choose traditional Medicare? Consider purchasing private dental and vision insurance.

There’s a significant difference in cost and coverage between health insurance and dental insurance. Health insurance policies typically include a maximum out-of-pocket amount. This is the most you’ll have to pay, in addition to any premiums, in a given year. Dental plans, by contrast, define an annual maximum benefit amount. This is the most the insurance company will pay in a year. Any costs above this amount are yours to bear.

Depending on the vision and dental plan you choose, the cost of standard preventive and diagnostic services may or may not count toward your annual maximum benefit. For example, if I have an exam and cleaning that costs $200, that may be covered 100%, but it may also reduce the maximum amount the insurance company will pay for other services. This needs to be confirmed when shopping for a policy.

In the table below, I’ve provided details of two dental plans—Delta Dental PPO (preferred provider organization) Plans A and B—that are offered in my home state of New Jersey. As you can see, these plans often have waiting periods of six or 12 months for various treatments. This is so people don’t sign up for insurance right before they need an expensive procedure, such as implants.

A recent Forbes article provided average dental costs for typical procedures, using American Dental Association data. I took those average costs and the coverage offered by Delta Dental Plan A, and compared the total out-of-pocket costs incurred by two patients, one who is “healthy” and the other who “needs work.”

In my scenario, the healthy patient had two office visits, two cleanings and two X-rays per year. The “needs work” patient had these same preventive procedures, but also had two fillings, a root canal and a crown.

Both patients would pay $865 a year in premiums. The healthy patient incurs $607 in dental services. Since these are all covered preventive and diagnostic costs, and their total is below the plan’s annual maximum, these charges are fully paid by insurance. In this scenario, the healthy patient’s premium cost of $865 exceeded the covered dental expenses of $607, for a net loss of $258.

The “needs work” patient, by contrast, incurred a total of $3,525 in services. The plan covers $2,155 of these costs and the patient owes $1,370. But the $2,155 covered by insurance is over the plan’s annual maximum benefit of $1,500, so an additional $655 is added to the patient’s cost.

The total out-of-pocket cost for the “needs work” patient is an eye-watering $2,890 ($865 + $1,370 + $655). Still, under this scenario, the “needs work” patient saved $635 overall on the costs of the year’s dental work ($3,525 – $2,890) by being insured.

This analysis suggests you may not need dental insurance if you’re one of the lucky people who’s never had a cavity. But if your dental needs often require follow-on procedures, you might benefit from buying coverage.

I’ve assumed in this analysis that the preventive costs were applied to the annual maximum payment. There can also be differences in reimbursement based on the dentist chosen and what agreements the dentist has with the insurance company. It pays to ask what insurance your dentist accepts, and what the dentist’s contractual relationship is with the insurance company.

It’s harder to assess the value of vision insurance policies. Vision insurance generally has a specific purpose: It typically covers eye exams, frames and lenses, or contacts.

Vision care costs can vary sharply depending on location, service provided and eyewear options chosen. The eyewear shop Warby Parker estimates eye exams can range anywhere from $50 to $250 without insurance and cost $10 to $20 for those with vision insurance. Frames can start as low as $6.95 and soar to $1,000 for high fashion. Lenses typically require a co-pay. A policy may or may not cover lens enhancements, such as scratch resistance and UV protection.

Vision insurance plans use co-pays, allowances and discounts in several ways. More expensive plans have more generous allowances, while lower premium plans often offer discounts for some items. The insurer EyeMed offers three plans to individuals. Its offerings provide a good example of how to evaluate a plan.

Let’s assume, for example, that a patient had one eye exam costing $150, and one pair of glasses with $400 frames and $200 lenses, for a total cost of $750. The most expensive EyeMed plan would cover $520 of that cost. The patient would pay the remaining $230 plus $360 in annual premiums, for a total of $590. The insurance results in savings of $160, meaning the services provided cost more than the annual premiums.

The medium-price EyeMed plan costs $150 less in annual premiums but the patient pays $70 more for frames. This plan also has co-pays for some lens enhancements, like scratch resistance and UV blocking, so there could be more costs if those items are chosen.

Depending on your needs, vision insurance might be a good deal. It’s worth spending time reviewing policies to see how they match up with your vision needs. Note that for eye exams, the discount plan has $0 co-pays, but the more expensive plans have $10 co-pays. This is an example of how difficult it is to evaluate these plans. If you usually have an annual eye exam but buy glasses only occasionally, a medium-priced plan may be more attractive than a high-cost plan.

Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

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