One reason to have insurance of any kind is to protect against potentially high out-of-pocket costs associated with events that may or may not happen. From the insurer’s perspective, the lower the likelihood of a dreaded event happening, such as a house fire, the less the insurance will cost. Each payout may be high, but since there won’t be very many of them, insurers can charge lots of people low premiums and still make a profit. Homeowners don’t mind paying on a policy that may never pay off because the premiums are so low. When it comes to events that are more likely to happen, however, insurers have to figure out a way to make the math work.
Take teeth, for example. As people get older they are more and more likely to need dental care as crowns break, teeth fall out, and gum disease sets in. These conditions are expensive to fix. If you were running a dental insurance company, you’d probably place a cap on the amount you were willing to pay, dental implants can run up to $6,000 per tooth. A full set can cost $90,000 or more. So in running your profitable dental insurance company you might pay for cleanings, X-rays, and checkups, which are predictable, plus some limited amount toward crowns, root canals, and implants. As a person with teeth, however, you would be looking to insure against the really expensive treatments that may or may not happen—the unpredictable, budget-busting events over which you have no control. You can handle the annual cleanings and checkups because those costs are predictable. But if you are retired and living on a fixed income and crack a tooth while crunching down on a piece of popcorn, you may not be prepared to pay many thousands of dollars in dental bills on a moment’s notice. Unfortunately, you would not be able to turn to your dental insurance policy, because it may not pay more than $1,000 or so. That’s the reality of dental insurance in America. In Drilling Down on Dental Coverage and Costs for Medicare Beneficiaries (their pun, not mine), Kaiser Family Foundation presents a good overview of the dental situation for people on Medicare and includes examples of people with low, medium, and high dental needs. Planning for health care expenses in retirement is not complete until you’ve addressed the dental issue and although the concept of dental insurance sounds comforting, signing up for a separate dental plan or a Medicare Advantage plan that includes dental benefits won’t do it. Because benefits are so limited compared to the potential costs, you will still need to set aside your own pool of money or somehow be prepared to incur high costs with little warning.
What makes the exercise so difficult is the unpredictability of the need for any one individual. According to the Kaiser piece, 49% of people on Medicare have not seen a dentist in the past year. Yet oral health is essential for the prevention of other systemic illnesses, such as infections, coronary heart disease, diabetes, and increased cancer risk, not to mention future dental problems such as tooth decay and gum disease, which will only become exacerbated if not treated. But even the most dentist-compliant people can face late-in-life dental problems.
Most people on Medicare do not have dental insurance, probably for the aforementioned reasons which the Kaiser paper also discusses—the plans’ coverage limitations hardly make it worth it.
You can see below what medicare covers:
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