Ever since the 2008 presidential elections, America has been in a whirlwind of discussions over our healthcare system. Any American that has paid attention has had healthcare in the forefront of their mind at some point over the past four years. And, once the Affordable Care Act legislation went into effect on October 1, 2013, it has become an increasingly important issue for a specific group of Americans: the retirees.
The estimated retirement healthcare costs are continuing the rising trend from the past decade. The latest estimate from Fidelity Investments puts this year’s figure at $240,000. That figure, up 4% from last year, means that on average, a 65-year-old couple retiring in 2012 can expect to pay $240,000 for their healthcare costs over the remainder of their lifetimes. This figure is based on the average life expectancy of men living to 82 and women living to 85. To add insult to injury, that figure doesn’t include the cost of long-term-care, dental care, and any over the counter medication.
The figure cited for the 2011 cost expectancy broke a long term trend of rising costs as Fidelity cited effects from Obama’s plan for healthcare that would reduce many of the senior citizens out of pocket expenses as the reason for their estimation decrease. That figure was $230,000, a $20,000 drop from 2010. That break in costs has been overwhelmed by overall healthcare trends causing this year’s increase, which is a cause of concern for more and more people nearing retirement.
In this Wall Street Journal article from November 4, 2013, experts weighed in on how Obamacare will affect retirees. Some suggest that retirees’ premiums will have to increase because the Affordable Care Act requires insurance coverage for maternity care (which they don’t need), no caps on the amount the insurers may have to pay, coverage for pre-existing conditions and care of 30 to 40 million people who aren’t now insured. One of the worst consequences is not being able to find doctors who will take Medicare. There is already a shortage of such doctors because Medicare compensation isn’t only low but often delayed by a year or more, so doctors have to factor that into their accounts receivable.
Other experts however see no reason for concern and state that the Affordable Care Act will have no impact on those 65 and over as they have Medicare. For people younger than 65, it will allow those who no longer have employer-provided coverage to buy affordable health care to tide them over until they, too, are eligible for Medicare.
So the question is, what can we do about it? Of course, a shorter lifetime would mean lower costs, but that’s not high on anyone’s investment goals. Luckily there are a few ways to help manage what seems like a pretty intimidating number sitting in your future. Here are a few suggestions.
Know it. Expect it. Plan for it. It’s the most simple, but one of the hard to accept options. Healthcare expenses in America are unpredictable on both an individual and societal level. Legislation may or may not affect your future costs. The figure for this year was based on current legislation, which we all know may, or may not remain in place.
If you are planning your retirement you might not take into account certain expenses (either consciously or subconsciously) such as hearing aids, dental work, the possibility of retirement homes and assisted living facilities. 45% of the total expenses estimated by Fidelity are out-of-pocket expenses. Make sure when you are planning your investments and target figure for retirement you take these things into account. Healthcare is something you don’t want to have to skimp on later because you failed to address it now.
Understand Medicare- what it is and what it could be. If you are looking to retire now, or in the near future, the status of Medicare is somewhat up in air. With each change in legislation, it’s important to know what it will cost you, what will be covered, and how to adjust your budget accordingly. The costs associated with Medicare go beyond the copays, and it’s critical to understand which programs cover what.
Medicare Part A is the general program covering hospital services that most people are familiar with, which doesn’t carry a premium for most beneficiaries. For almost $2,500 a year, a couple can spring for part B which covers many of the doctors and other services that A misses. For an additional expense, you can buy Part D which covers prescription drugs. 32% of the total estimated cost of health care for retirees lies in the premiums for Medicare part B and D.
Then, to cover all things not covered by the various Medicare policies, for another $4,000 a year a couple can purchase a Medigap policy, cleverly named as it fills the gap in coverage of the previously purchased programs. Take the time to figure out what programs you need and what those programs will cost you. A little math now will save you a lot of time, energy, and money later.
Take care of yourself and your body. This might be the most obvious, but commonly overlooked piece of advice. The fewer health problems you have in the future, the less your healthcare will cost you. Prescription drugs costs account for 23% of the total estimated figure for healthcare for retirees. The need for many of those drugs can be reduced, if not completely avoided, by living a healthy lifestyle, starting today. Schedule your checkups. Eat healthy. Get some exercise. These are things that we have been told our entire lives, but now you have dollar signs as your motivation to do so.
The cost of healthcare for retirees is high, but that cost for not planning for it is even higher. Do your homework, keep up with the changes, and add them into your budget. Healthcare costs as a senior citizen doesn’t have to be a morbid subject, unless you forget about it.