PLanning for health care costs in retirement

But if you don't have enough money for a Lexus, you just don't buy one. Instead, maybe you buy a Camry. The same thing will happen for health care. If you don't have the funds to pay for it, then you will buy something lower, i.e., less of it.

As I said in my first post in this thread, "According to a March 2006 study by Fidelity Investments, a retired couple without employer-sponsored health insurance can expect to pay $200,000 for out-of-pocket health care costs like premiums and co- pays.

If you look at the Fidelity web page I referenced earlier, you will see that most of the cost is for the insurance premiums, deductibles, and co-pays. If the retiree is fortunate enough to have, e.g., a former employer paying the premiums, that might cut the cost in half, but still leaves whatever deductibles and co-pays are included in the plan.

People who don't have adequate savings will have to pay whatever health care costs they incur out of pensions, Social Security, and so forth. If you want to plan adequately, you can do so by allocating $215,000 out of your retirement portfolio for medical expenses. If you don't care about planning adequately, then don't allocate it. If you really don't care about planning adequately, don't even bother to accumulate it. If most people today haven't accumulated enough to pay their projected health care costs, that just shows their opinion about planning for their future, as we well know.

I don't understand this diagram at all.

While actual medical costs may be weighted toward end-of-life expenses, retirees on Medicare and a Medicare supplemental policy probably are pretty well protected against out-of-pocket costs. E.g., my father died of cancer in the mid-nineties, after chemotherapy, radiation therapy, and various hospitalizations. I wouldn't be surprised that his last year's medical bills were mid-five-figures, but his out-of-pocket expense was less than $2,000 for deductibles and co-pays.

Again, this is a planning issue. Failing to plan is planning to fail.

Dave

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Reply to
Dave Dodson
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Little of the current health care discussions talks about the elephant in the room. That is that we want more health care than, as a nation, we can afford. So we must ration it.

As you are suggesting, the normal capitalist mechanism for doing that is pricing. But pricing isn't working. There are three obvious reasons:

1) Much of cost of health care is borne by third parties -- insurance companies and the government. They negotiate prices, but have limited control over the quantity of care that is bought. 2) Much of the optional health care ("buy less of it") is preventative (check ups, blood pressure meds, vaccinations, etc.). This will lower costs over the long term, but is the most likely to be deferred to the detriment of the long term. 3) People that are faced with serious illness are not likely to be price sensitive. My wife has had two bouts of life threatening illness. When I walked into the ICU the first day, I thought "This is costing a fortune." My second thought was "OK".

If I had a solution, I'd run for president.

-- Doug

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Reply to
Douglas Johnson

This discussion has gotten way off of the original poster's question, which was "If I want to ensure we are OK health care wise in retirement, is $10K per year (in todays dollars, inflated at 8% per year) out of pocket a decent estimate to use when planning for costs?"

In answering that question with the information I easily found on the internet, somehow I've been put in the position of defending the information. I think the information deals reasonably with the OP's question. I'm sure that both he and I are not nearly as interested in what other people can afford to do as being as sure as we can that we can afford the care we someday will need. So the discussion to that end is just off-topic and I won't respond to in beyond this post.

The cost in the Fidelity studies was to pay for the insurance and the care that the insurance doesn't pay for. If you don't pay for the insurance, then the health care cost won't be borne by the insurance companies, and only a limited amount of it will be paid by the government.

I've heard it said that some hospitals in my area are not treating people in the emergency room without charging it to their credit card. I don't know if that is true or not, but why shouldn't they deserve to be compensated?

That's probably because you had insurance that would pay most of the bill.

And I might vote for you!

Dave

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Reply to
Dave Dodson

One point -- Do not assume that you can just pack up whenever you want and move to any country of your choice. Many countries have restrictions on immigration of various kinds, financial-wise and health-wise, etc., just as is true in the USA. This is especially true of nations where the living conditions, in addition to health plans, are relatively more desirable. It is better to get the application process started sooner rather than later, during the years when you are in excellent health and in excellent financial shape, with lots of dollars to take along with you to the new residence.

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Reply to
Don

Canada being an example. The immigant qualification visa starts subtracting points when one turns 50. I am personally penalized 8 points on the age part and fall below the visa cutoff :-(

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However there is a "rich immigrant" clause. You can buy a government business investment for about $410K which matures in five years with zero interest.

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Reply to
rick++

snio

Just catching up on my mail but here is a different look

It is a good idea to think about medical expenses after age 65 but I don¹t think that you should spend a lot of time modeling what they might be especially if age 65 is far in the future. I suspect that Fidelity¹s numbers are as good as any other set of numbers. Remember that Fidelity¹s goal is to encourage you to save more for your retirement.

Medicare currently spends an average of $800/month on each Medicare recipient. So that is one number

Medicare consists of Part A (hospitalization) which has no monthly premium, Part B (doctors labs etc) which has a premium of $96.40 a month and Part D (prescriptions ) which costs about $25/month. Long Term Care is not covered by Medicare. Parts A, B and D come with deductibles and co-pays. You can insure against the out of pocket costs of Parts A and B for between $150 and $175/mo. For the worse case (really expensive drugs and lots of then) your out of pocket prescription costs are limited to about $4k for the first $5K of drugs and then 5% of the cost above $5K if you have part D coverage. So if you are fully insured you are looking at a maximum of $7600 in today¹s dollars. plus dentistry. You can get cheaper overage through an HMO

Another data point - a self employed person aged 60 with a few ³controlled² pre-existing conditions will pay nearly $800/mo for a PPO with an $1500 deductible and 30% co-pays. Add a few meds and some dentistry and you are soon at $12K a year.

Will medical costs continue to escalate at their current rate (at some point they will consume the entire GDP)? No. Like all other bubbles it will crash. We all may want the best but I suspect that we will not give up our cable TVs etc or be willing to pay higher taxes to cover costs.

As a Medicare counselor I have been surprised at the number of seniors who will select an HMO over a conventional Medicare Supplement because they will save $200/mo. (even if they can afford a supplement). The ones who refuse an HMO are the Medicaid people because Medicaid will pay for anything (you just have to find a provider who will accept MediCaid) I suspect that more and more people are going to decide that another round of Chemo or another surgery is just not worth it and they will opt for hospice (fully paid for by Medicare Part A). If the government were to freeze or cut payments the providers will find something else to do with their time and costs would not rise as fast as the services would not be available The only people who will want all that stuff are those who will be on Medicaid which pays for darn near everything if your income is < $600/mo and your assets are < $3K.

Note $ are for suburban southern California. May be higher in Beverly Hills, New York City and Palm Beach.

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Reply to
Avrum Lapin

======================================= MODERATOR'S COMMENT: Posters to this thread should relate comments to general financial planning.

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Reply to
Don

I can see that Medicare Supplemental insurance is going to be better for someone moving to a different area of the country, but are there some other advantages?

-- Ron

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Reply to
Ron Peterson

Some consider it an advantage to have the widest choice of health care providers. This isn't the case with an HMO.

But this is a digression from the original post, since the OP and spouse are 41 and 40 years old; when they reach retirtement age there's little likelihood that Medicare will work the same as it does now.

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Reply to
MyVeryOwnSelf

Thanks, Rick. I love rules of thumb. It's a place to start, anyway.

Thanks!

Steve

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Reply to
stevedhoward

Thanks, Elle. I think that would be a last resort, as I am finding it difficult to talk my wife into saving for a second home in Florida where we wouldn't be near the kids 12 months a year :)

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Reply to
stevedhoward

Thanks, Elizabeth.

Yes, absolutely. I committed to losing 40 lbs this year (almost half way there) for just that reason :)

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Reply to
stevedhoward

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