I have been considering, idly, possibilities of early retirement after another decade or so, purely for entertainment reasons of course, for a hypothetical guy at 48 or so who has several (say 3-4) millions of $$$.
My big concern was, how would such get health insurance that he could afford without working somewhere. I heard that private HI for a family could be expensive, as in 5k per month or some such amount, which is a lot even for the above listed amount of capital.
Then it dawned on me, that someone with such an amount of capital essentially does not need health insurance. For regular things, like colonoscopies or emergency room visits, he could just pay cash, and the same applies even to catastrophic illnesses.
Depends on a lot of variables. First off, which state the person live in. Second, his or her health. A healthy person in a non-community-rating state will pay a lot less. An unhealthy person in such a state either will pay more or not be able to get private insurance at all. In a state with CR, there may be no variation in the rate at all, though, of course, it depends. This is a useful page to read:
So, what state?
Someone with that much wealth should be looking into a high-deductible catastrophic care policy. Preferably with an HSA associated with it. At least that way, all the stuff you do pay out of pocket for, you pay for with pre-tax dollars -- and there's maximum limit on how much you'll have to spend.
Unless self-employed, the individual may not be able to otherwise deduct any health care/insurance costs. The HSA helps out a lot for that and, again, depending on the individual's health and what state he's in, may not be very expensive at all.
A high-deductible policy is a backstop. Given the costs for some of the most expensive care, it's easy to see how a couple of million could be blown through and then this wealthy retired individual quickly becomes a poor person. It's more like homeowner's insurance. If you need everyday repairs on your house, you pay out of pocket. If your house burns to the ground, getting that kind of cash out of your capital could really put you in, um, the poorhouse.
If he's actually retired, as you say, he could certainly consider moving to a state which favors his situation. (ie. if healthy, move to a non-CR state, if not healthy, move to, well, most of the more strict CR states are in the northeast except for Oregon).
But anyway, before you jump to any real conclusions, get some actual insurance quotes. You might be surprised.
One thing you may be missing is that virtually all health care providers (hospitals, doctors, urgent care facilitys, radiology centers) charge far more if you do not have insurance. Charges if three to five times the Medicare reimbursement rate are not uncommon. The contract rate that insurance companies pay is higher than the Medicare rate but much much much lower than what the uninsured are likely to pay.
One solution to look at is a medical insurance policy with a high deductable, for example, a $5,000 deductable. This allows you to keep the premiums low by self-insuring the first $5,000 each year but the big benefit is that you get the insurance company rates for all the services you use. This is what I did during the years I was self-employed.
The second thing to consider is that no matter how healthy you think you are a financially crippling surprise is possible. Heart bypass surgery, cancer requiring surgery and extensive chemo and/or radiation therapy, renal failure requiring a kidney transplant, etc. can genrate medical bills totaling several hundred thousand dollars. With a net worth of $3 to $4 million you still need catastrophe insurance. With a net worth of $30 to $40 million you could go it alone.:)
One big warning. Make sure you can get the medical insurance you decide you need before you retire. I have a friend who retired early and then discovered that, due to a condition that was well controlled and that he did not view as serious, he was uninsurable. Another friend in the same situation was finally able to get a $5,000 deductable policy but it was very expensive.
Or, consider the possibility of moving to another country, such as Canada, where I live. I pay about $800 per year for medical insurance that covers essentially all sickness and medical treatment or hospitalization with no deductible. I believe various European countries have good health plans too. I don't know about Mexico or Majorca or places like that, but there must be other attractive areas in the world where age and sickness do not translate to the threat of poverty. I realize that this option is not open to everybody, if you need to stay close to friends or relatives or for some reason have to stay where you are for good.
Medicine has advanced so more expensive procedures can extend life. An article on Bloomberg a few days ago was written by a woman who went rhough some $600,000 over a seven year period trying to cure her husband's impending death (they bought a few years extra, perhaps, but at the cost of pain and suffering in partial to full disability). By contrast, take a 24 year old U.S. Marine with a wife and two kids at home, who gets blown away in an instant of error with a funny looking box over in some desert.
Free markets have, for all their faults and for all the abuses by the unscrupulous, proven time and time again to be the MOST efficient manner of distribution for goods and services.
The Bloomberg article also went into the details that pricing is simply "not available" from hospitals. But my dermatologist gives me a
30% discount for my cash. I suspect my dentist (who is a great guy) is charging me rock-bottom prices, and I keep a running account with him, prepaying $500 every time my account runs below $100. So my dermatologist charges me about $350 if there's something to be done, I usually get past my dentist for $700 a year, and my physical (EKG and all that) runs about $350.
Now if we get mandatory insurance for everyone, apparently the cheapest policy I will be forced to pay for and not use runs about $3,000 to $5,000 / year (unless it's a total joke), and if I don't get a policy, I have to pay a fine of about $3,000 a year. If i get a "real" policy, my guess it it will run about $14,000 a year. I happen to think hospitals are a great place to catch staff (staphylococcus) and die. My uncle didn't like them either, nor did my aunt, nor my grandmother, and so on. I recognize I have a limited life span, and when my time comes, well, I only hope it is a good day to die, and that I go with grace commensurate with the way I have lived (hell-for- leather, half the time).
I ask the same question you ask, "What am I missing?"
A capitalist in a democratic country, or in a republic, and an advocate of free markets and free speech and the Bill of Rights, is ready to defend his rights and freedoms with lethal force, at any time, any place, against anyone. What amazes me is the malicious virulence of the communist revolutionary who is willing to attack and die to murder anyone who disagrees with his brand of 'philosophy', whether that be his countryman, brother, or sister, or even a child. I think what I'm missing is the maliciousness of those who would enslave others simply to feel secure, themselves.
Excuse me, but a friend of mine in Canada recently though of moving to the U.S. because taxes in Canada are so high. My impresion is that your health insurance costs are very much higher than $800, and that your waiting lists to even SEE a doctor are months (if not years) long.
3-4 million is not that rich. One catastrophic illness and you are wiped out. As others said, one needs to have at least a high deductible health insurance just in case. Unless one lives in Thailand or India.
Well, you either pay it youself or pay through taxes. Moving to the US to save on taxes? That's just ridiculous. Canada now taxes worldwide incomes, just like the US. Problem with paying it yourself is, depending on your health condition, you may not even be able to find health insurance even if you can pay. In Canada at least everyone is covered.
That is simply not true (the waiting to see a doctor part). Overwhelming majority of Canadians are extremely happy about their health coverage.
My experience has been that taxes are slightly, but not extremely higher in Canada than in the USA. I pay taxes in both countries and have looked at a lot of comparisons over the years. Overall, because of the way tax credits are calculated, the total amount of tax I pay in the two countries is not a lot different from what it would be if all my business were in one country or the other.
For routine doctor visits, my waiting periods vary from about 1 day to
1 week. Waiting lists to see specialists are somewhat longer than in the USA, and considerably longer for elective surgeries, but for life-threatening conditions and critical surgeries there is no waiting at all.
Here's the link to the story that appeared on Bloomberg - it actually is a Businessweek article, "Lessons of a $618,616 Death."
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IMO it provides some interesting insights. Learning about the way the system works while ill and/or under stress is not a good way to go. More information about how hospitals and the entire health care system handle things, how it operates, would probably make life much easier. But I still hold (as do many others) that tort reform to stop predatory lawyers from amassing personal fortunes, and moves to get nurses off their 50% paperwork burden so they could actually work instead of filling out quintuplicate forms for quintuplicate bureaucracies, would cut costs by 50% the day they were enacted.
Then we can get around to asking hospitals to publish "menus" of available options (with prices, thank you - not one of those menus that assumes you don't care how much the food costs).
I wrote about this phenomenon some time ago, offering an example where a patient was charged $1200 for a proceedure, the insurance company wrote it down by a full $1000, paying $180 and leaving the patient with his $20 copay (10%). I posted a follow up to this which was a combination of one readers comment and usenet regular Elle's response, at
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said, I view the high deductible plan as the perfect product for this imperfect system. I think it lowers the cost of coverage, cuts down on the paperwork, and provides a safety net to avoid the risk of ruin that a catastrophe can bring.Joe
Put it this way: Take a poll. Ask 100 Canadians if they would like to switch to a US system of taxation if at the same time they had to accept a US style health-care system. I would guess about 97 would decline the offer. (The other three should be glad they live in Canada because they probably are going to need one of those special doctors.)
I agree that 3-4 million is not that rich when it comes to self- indemnification for health care. What is interesting to me is that the reports I have read indicate that even people with good health insurance plans (= health insurance that is not high deductible) are often bankrupted when a catastrophic illness hits. This is due to plan co-pays and now ever present loopholes. A high deductible health insurance plan will be no better. What health insurance covers is now a very different animal than a few decades ago.
I consider a high deductible plan to be an imperfect solution to an imperfect system. I cannot even say a high deductible plan is prudent financially. This is because even a high deductible plan's premiums are expensive today. Add in that hospitals are ready to negotiate with the uninsured using the rates hospitals charge insurance companies.
I guess the risk of going bankrupt with a high deductible plan is less than if one has no insurance, but I am not sure the risk is that much different. I figure: Maybe a 1 in 20 chance of bankruptcy with an HD plan. Whereas there is maybe a 1 in 10 chance without insurance. Is this difference meaningful? I am not sure it is.
My take: I think what you are missing is what one gets for insurance. It is not about the insurance paying for possible medical fees. It is about how one's insurance premium (presumably under the proposed plan to which you allude above) gives back, with certainty, peace of mind.
In the last couple decades now, the view of what insurance is has evolved to the point people no longer get the basic meaning of "insurance." They no longer understand it is about actuarials and probabilities. Of course as a mathematical rule of the business most people do not get back in services etc. what they pay. But they get something else: The ability to sleep at night.
I think that those generally attacking the tax system tend to misunderstand the cost of living in a peaceful society. Looking at the pie chart at the end of one's 1040 instructions to me shows that our taxes are almost entirely re-distributed to others via social programs that ultimately keep our factories staffed or people employed in the military. All these little guys receiving, one way or another, our tax dollars keep the big machine running, permitting payment of your and my stock dividends; giving you and me decent roads, less crime, better educated neighbors etc.
It is far from a perfect system. But I am trying to point out the philosophy of a harmonious society. Definitionally, a harmonious society cannot exist without those with money paying something to help those without money.
I am not sure this is the same dapperdobbs who posted the link to the great article in "The Nation"
On Mar 8, 1:57 pm, Igor Chudov wrote: snip; please look back for Igor's overview of how the cost of even a high deductible health insurance plan may argue for self- indemnification:
To me, pretty much nothing. Your reasoning is what I use to justify self-indemnification instead of buying an HD plan.
Then again, to demonstrate I arguably am taking a risk, since 2006 I have been calling "self-indemnification" a delusional euphemism.
I would also keep in mind the high bang for the buck that comes from practicing preventive medicine. Just addressing tobacco usage; staying at a healthy weight; and controlling cholesterol and blood pressure pay off handsomely when it comes to health costs.
Wikipedia has a reasonable summary of tax rates around the world
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trying to analyze what taxes are used for gets into stuffrequiring a room full of accountants. I notice sales taxes in Canada are substantially higher than in the USA, but I won't argue your point that in the wash, tax rates are roughly similar (I don't feel like getting into % of GDP numbers to dope out what rates really are, respectively, then the distribution over income brackets). However, I don't see how $800 bucks for insurance is going to cover much. If you have numbers for how much per capita Canada disburses, then that might be compared to the US and, ergo, costs determined. Then issues of quality would figure in. Do you have any further numbers on per capita costs in Canada?
The central issue I see is that of free choice as opposed to compulsory, and underlying that, the issue of responsibility. I see an amazing drift away from the notion Igor brought up, namely: one pays for one's own way (whatever that may be). Many who reference costs and bills are referring to those of insurance companies. If I'm to find myself labelled "self-pay" as if I were a sort of odd-ball anomaly, then I really wonder what direction the society I have been a part of and helped to build, is heading. Perhaps one day those who wish to pay for what they get will be thrown in jail? Recent proposals already involve "fining."
Elle, I'm surprised at you! No specificity! Take an aspirin, calm down, get a good night's sleep, and when you're feeling up to your usual high standards in the morning, please define "catastrophic illness" and associate a cost with it! But do not get upset doing so. I'm going to have a restless night thinking about all the horrible catastrophes that might befall me ... getting my liver eaten by the thing I always knew was in the closet ... alien abduction and infection with Andromeda Strain II ... "Jaws" biting my legs off in my sleep ... my tax bill ... health care reform ... insomnia ... the cost of a day pass at Disney ... divorce papers from a woman I never met ...
Wha... ? You snip my whole part, just leaving PeterL's line?! Bloody 'ell (women can swear!)! You rascal!
Chuckling here. 'sokay, my dapper indeed internet paramour. (Now people will talk!)
Note to Skip: Censoring or censuring this would be not in the best interests of financial planning, since a little levity surely helps us weather this recession.
(A genuine debate of ideas!) Yes, the concept of insurance evolved from or concurrent with capitalism, back in the days of Lloyd's of London, a tea-house where shipping interests met. But how does it apply linearly (a fault the society has committed)? One ship in ten may be lost, so capital was pooled over the ten ships. In healthcare, my impression is that one in ten will die suddenly, without costs, so one is in a sense attempting to insure against a certainty that most will have costs they are unable to pay. Thus, I think, Igor's question about paying one's own way. I usually sleep at night secure in my personal knowledge that I am willing to bear responsibility for my condition.
Yes, roads and regulation of utilities, national defense, law and order, education, but one can extend the notion of harmonious society so far as to produce disharmonious results. That's my apprehension, and I would be happy to have it explained away. Mankind has shown over ages to be prone to various insanities and criminalities. I have wondered what life is like in a socialist society such as Sweden, for example. A Swedish woman once commented that the difference there, between a rich man and a poor man, is that the rich man has slightly nicer furniture.
The central underlying issue of great import that I see is simply that if one accepts the premise that God created all men equal, then one must thereby accept the premise that each man is responsible for his own paths and choices in life, not just in the sense of accepting his condition as one he created, but also in the more important sense of having freedom of choice to create his own future, Isn't there a point where mutual reliance begins to encroach too far on individual rights? At what point do we begin to suppress each individual's future, and so, the future of the society?
I return your affection, and I do indeed take the points you make.
I think that a crucial point may be that some nations, like Canada, regard health care as a natural right instead of a privilege. In other words, health care comes in the same category as police protection, or the roads and streets, or the water supply and the air we breather for that matter. Accordingy, those nations bear most of the cost of health care from general revenues, just like the above services. One conspicuous way Canada makes up for the high cost of medical treatment is that it spends far less than the USA on the military establishment.
While free choice is important in a democracy, in one sense it is secondary to health care. That is, people who are sick and disabled do not really have a lot of "freedom." Their choices are restricted to what their poor health and life circumstances allow.
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