5/20/2013 5:45 PM ET|
Rx for health care costs in retirement
Don't let huge medical bills blindside you in your golden years.
Do you worry about your health care costs after you retire?
Americans' out-of-pocket medical spending in retirement can vary widely, but generally the numbers are big -- and they have gotten a lot bigger over the past several years.
"Even though most American retirees benefit from Medicare coverage, a mounting body of research predicts that many will face large and increasing out-of-pocket expenditures for health care costs in retirement and that many already struggle to finance these costs," according to a recent study of consumer health care spending expectations in the American Journal of Law & Medicine. It's not surprising: Recent estimates suggest that about 13% of a Medicare beneficiary's income typically goes to out-of-pocket medical costs, from over the counter medicines to co-pays.
Not only that, well over half of the people surveyed in the American Journal of Law & Medicine study severely underestimated what they will be spending out of pocket on health care when they retire. While a man retiring in 2020 will have a 50-50 chance of having all his future out-of-pocket medical expenses exceed $109,000, the study found that men's median estimate of those costs is just $60,000. (The situation is worse for women: Their median estimate of out-of-pocket costs is just $30,000. But partly because they tend to live longer, they have a 50% chance of having their future expenses exceed $156,000.)
All this means that Americans are in pretty desperate need of more insurance coverage, or more savings, or both. And they certainly could benefit from greater awareness of their needs.
"For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests," says a working paper from the National Bureau of Economic Research.
"There may be space for improvement by helping people know" about their potential outlays, "or by just helping them save more," said Allison K. Hoffman, an assistant professor of law at UCLA's law school and a co-author of the study. This is especially important, she added, "for younger people who are in their earnings years and might have the capability to save."
The only question is how to encourage people to increase savings, add insurance coverage, or both.
"People can make choices and tradeoffs between how much they're spending up front on premiums, versus how much extra money they want to think about tucking away to cushion the potential risks," Hoffman said.
On the savings front, many experts recommend a Health Savings Account. For people with high-deductible health insurance plan, these savings accounts offer a tax-deductible way to set aside money to cover current and future health care costs.
These accounts aren't for everyone, though. The funds cannot be used to cover costs for a dependent child over age 24, even though the Affordable Care Act allows parents to keep children on their insurance until they reach age 26. And if you are in serious financial straits and have to draw on the funds for expenses other than health care, you face significant financial penalties.
For people who are saving less than the maximum in their 401k accounts, there is the option of increasing tax-deferred savings. Simply putting more money aside for health care costs is also, of course, an option.
Options are also limited on the insurance front. "Medicare only covers 60 percent of health care in retirement," Hoffman said. "Even with a Medigap policy or an employer sponsored retiree plan, people are still going to have out of pocket expenses. The hardest thing for people to plan for is to find the balance between the right level of coverage and the right level of what they might spend out of pocket." Retirees do have the option of a high-end Medigap policy that covers more, but that can be expensive protection.
There is hope on the education front, however. In the study that Hoffman co-authored, about 40% of respondents had reasonably accurate estimates of their future health care outlays.
That finding, she said, "raises the question of how do they know these numbers and how do we get other people to know them?"
Hoffman says she and her co-author, Howell E. Jackson of Harvard Law School, hope to study that further, searching for how to boost awareness of future health care costs more widely. With health care so near and dear to many retirees' hearts, in this case knowledge really can be power.
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I currently work for a State Health Insurance Program. Many retirees and Medicare Beneficiaries do not know that help is out there to guide them through the process of getting Medicare and all the insurance options available to them. Many states offer assistance with prescription drug coverage. Medicare and the Social Security Administration also offer assistance with prescription drug coverage. There are a lot more options out there than people who are preparing for retirement know about. Find out where your local SHIP office is in your county and get answers to your questions and guidance through the daunting task of preparing for health coverage when you retire.
There is also help with the costs of premiums and copayments in some situations. There is help but you have to know where to look.
Your average person will NEVER save enough to cover serious medical expenses.
I think people are not trying to save that much to be able to cover these expenses in retirement, because they will NEVER get that much together.
Between the cost of medical care being ridiculous and the cost of nursing home care, the average worker will NEVER get enough money together to take care of those bills. Why should I save 40% of my earnings for these expenses while my neighbor doesn't even try and he can get the same care as I can and the public will pay for it.
If I do save enough for it, I will work and scrimp and save all my life for it, I will do without cars and clothes and vacations, etc and my neighbor gets it without trying.
If I want to collect some free stuff myself, my assets have to be completely wasted before the nursing home care or medical expenses are taken care of.
There is not much in it for me to try.
I can't explain how or why, but I am certain that this is just another way for some big corporation to take all my money. They are outsmarting us again, and we are sheep so we are letting it happen.
While I have good insurance and will retire in six years, the above is why I recently took on as a "concierge doctor" a man who specializes in hormones, aging and nutrition. I figure it's cheaper than a disease or hospital stay.
Also, should I ever need surgery I will head to India where I have friends. Aint gonna get raped by any local hospital.
When we get old and sick and have had enough...
I think Obamacare should give us a Dr. Kevorkian kill pill.
No more suffering, no more medical bills.
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