Are you considering retirement? One of the top priorities should be securing adequate medical insurance. How to purchase medical insurance after retirement varies based on when you retire.

If you retire before age 65, you will need to obtain general insurance before you can apply for Medicare at age 65. A current option for this is to enroll in the Affordable Care Act (commonly referred to as Obama Care), as you are required to have insurance coverage. You may also check your company policy who normally offers you to buy company insurance when retiring after certain age and until 65. 

Retiring after age 65 is generally more economical. At 65, individuals become eligible for Medicare, the government-sponsored medical insurance. Medicare is divided into three parts:

• Part A: Hospitalization – No premium required.
• Part B: Doctor visits – The monthly fee varies based on the insured’s income, currently ranging between $170 and $578 (as of 2024)
• Part D: Prescription drug coverage – The average monthly cost is approximately $33 (as of 2024)

Keep in mind that Medicare patients are responsible for their own medical expenses, and there is no cap on these costs. For this reason, many opt to purchase additional Medicare Supplement Insurance, such as United Healthcare Supplement, to cover serious illnesses. Details should be discussed with the insurance company directly.

In summary, if you calculate the approximate monthly expenditures, you have about $578 (Part B) + $33 (Part D) + around $98.31 for supplementary coverage, totaling approximately $700 per month, which amounts to $8,400 per year per person.

While it may not be ethical, establishing an irrevocable trust can be a legitimate strategy to qualify for Medicaid. 

How to Become Qualified 
There are specific requirements to be eligible for Medicaid (medicaid.gov) Firstly, applicants can retain certain exempt assets, including one car, their primary residence (up to an equity limit of $730,000), and personal belongings such as clothing and furniture. Beyond these exempt assets, income and asset limits apply. For example, in 2024, the monthly income limit for an individual is $1,500, while for a couple, it is $2,500. Any additional income or assets must be reduced or repositioned to meet Medicaid eligibility criteria. A standard method to achieve this is placing assets into an irrevocable trust.

For instance, if your Social Security income exceeds the income limit set by Medicaid, you may have the option to establish a Qualified Income Trust (QIT), also known as a Miller Trust. This type of trust allows you to place the excess income into it, and the funds can only be used to cover your care or medical expenses. After your death, the state may claim any remaining funds in the trust to recover Medicaid expenses.

In some states, Medicaid offers a "spend-down" program, which allows you to use your excess income on medical bills, long-term care costs, or other qualifying expenses until your income falls below the Medicaid limit. This effectively reduces your countable income for Medicaid eligibility.

Additionally, Medicaid often has provisions for "post-eligibility treatment of income." This means that even if you have excess income, it may be used to pay for nursing home costs. You must pay most of your income to the facility, and Medicaid would cover the remaining costs.

If you are married, your spouse (the "community spouse") may be able to retain a considerable portion of the combined income and assets according to spousal impoverishment rules. For example, the non-applicant spouse can often keep income and assets up to limits specified by the state without affecting the applicant's Medicaid eligibility.

When to Make the Plan
It's also important to note the five-year look-back rule for Medicaid, which means that planning should ideally begin at least five years in advance to set up a trust or other financial arrangements.

​What are the Pro and Cons 
Establishing an irrevocable trust has both advantages and disadvantages. The primary benefit is that it protects assets, allowing them to be preserved for children or other heirs while enabling the applicant to qualify for Medicaid. However, the major drawback is the loss of control over those assets since the trustee manages them. Additionally, family conflicts may arise if the trustee does not act in the beneficiary's best interests or handle the trust appropriately.

The financial impact of Medicaid benefits can be significant, particularly for long-term care. In Texas, the average monthly cost for nursing home care varies depending on the type of room and location.   As of 2023, the median monthly fee for a semi-private room is approximately $5,718, while a private room costs around $6,692 per month. For example, Over five years, this amounts to $300,000, which Medicaid can cover if eligibility requirements are met. This highlights the importance of careful planning and underscores the need to weigh the trade-offs in establishing an irrevocable trust.

However, Medicaid in Texas covers nursing home costs for eligible individuals, but typically only for semi-private rooms.  Medicaid will pay for a private room if it is deemed medically necessary.   This includes situations where isolation is required due to infections, contagious diseases, or behaviors that may harm the resident or others.Note that Texas, compared to other states, has much lower cost long-term care; therefore, it is a good place to have retirement.

In summary , it’s also essential to consult with a Medicaid planning professional or elder law attorney to understand Texas's specific regulations and options.

HSA stands for Health Savings Accounts, a federal program established in 2004 for individuals under the age of 65. People in this age group can contribute pre-tax income to the account for qualifying medical expenses.
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HSAs are typically paired with high-deductible health insurance plans, meaning the insurance requires you to pay high deductibles, ranging from $2000-$3000 per year, before insurance companies cover your cost. Typically, employers may provide benefits to contribute to HSAs, such as $1500 per year, so review your company’s benefits policy for specific details. It should be noted that the high deductible insurance typically provides 100% preventive medical support, such as annual physical examinations, vaccines, weight loss plans, and examination of high-risk diseases such as cancer.

In short, if you have low medical expenses because of good health or can afford high-deductible medical insurance, investing in an HSA account as soon as possible is a great choice

Next, let’s analyze the pros and cons in detail. First of all, HSA has the following advantages:

• No time limit: Unlike FSA (Flexible Saving Account), there are restrictions on the use of the current year. There is no time limit for using money in the HSA account. The bill also has no time limit — you can reimburse your eligible medical expenses incurred after opening an HSA at any time or even after many years.
• Not affected by job changes: HSA can migrate with users when switching jobs.
• Tax-free: The funds used for medical care in a Health Savings Account (HSA IRS Publication 502) can remain permanently tax-free. However, funds withdrawn for non-medical expenses before retirement are subject to federal income tax and a 10% penalty. Additionally, money in an HSA can be invested, and the interest and dividends earned from these investments can also be used tax-free for qualified medical expenses. After retirement, withdrawals for non-medical expenses will only be subject to federal income tax.
• Inheritable but avoid inheritance outside the husband and wife: HSA holders can leave the money in the account to the heirs by designating beneficiaries. If they are husband and wife, the spouse can transfer HSA to their own account and continue to enjoy the tax incentives of HSA. If they are spouses, the heirs must receive the full amount in the current year and pay annual income tax.

In summary, the HSA account offers a triple tax advantage: contributions are tax-deductible, medical expenses are tax-free, and non-medical expenses can be tax-deferred.

Finally, the best strategy for using HSA is as follows:

• Join HSA as soon as possible and invest the maximum amount in the HSA account every year.
• Set up the investment of the HSA account. This is very important because cash will depreciate due to inflation.
• Choose a broker such as Fidelity HSA that has no or low management fee.
• Keep all eligible medical receipts and postpone the reimbursement of the reporting fee until after age 65. The goal is to allow the tax-free growth of funds in HSA. You can take advantage of investment growth and leverage inflation by reporting expenses later.
• After the age of 55, couples each should open an HSA account to use the additional $1,000 that each person can invest (Catch Up).
• If you continue to work after age 65, you can extend the HSA contribution by delaying enrolling in Medicare. In other words, your HSA contribution will be stopped after you start Medicare.
• After the age of 65, prioritize using HSA (limited to eligible medical expenses after you reach the age of 65) or using the pre-deposited bill to withdraw all the money.
• Organizing medical bills: You can sort out HSA receipts by creating digital and physical folders and marking them by date, record type, doctor’s prescription, store, and purchased items. You can also create spreadsheets to manage.

After having your own medical insurance, create an HSA account, make contributions, set up investments, and keep medical bills for future tax-free withdrawals.