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Can You Afford Medical Care When You Retire?
Posted by: DeLila Bergan on March 05, 2008
Will you be able to pay for increasing medical care costs in retirement? Fidelity Investments (see www.fidelity.com and media releases) today released their latest estimates on the out-of-pocket health care costs anticipated for retirees who have Medicare coverage. Fidelity’s research indicated that a couple retiring at age 65 in 2008 will need roughly $225,000 to pay their medical costs during the course of their retirement years; this number increased from $215,000 last year. This is in addition to what Medicare will pay for their care and includes co-pays, costs of co-insurance (like a Medicare supplement), uncovered medical expenses and prescription drugs. This estimate does NOT include the costs of long term care (such as assisted living or a nursing home) or over-the-counter (non-prescription) medications.
Particularly concerning is that this estimate of medical costs has increased 41% since the 2002 survey, with an average increase in cost estimates each year of 5.8%. Medical costs continue to rise at a far faster rate than income in the U.S., which is certainly unhealthy for us as individuals and for the economy. Don’t blame your doctor, however, he or she is probably working harder for less income with each passing year. In fact, some doctors are now choosing not to accept Medicare at all because of the limited reimbursements they receive from the Medicare program for their services and the burdensome paperwork they must complete to participate in the program.
The Fidelity survey suggests that some of the reasons for the annual increase in health care costs for retirees include the increased costs of physician visits, the increased number of doctor visits per individual, the increased costs of new and better technologies and prescription drugs, and the increased number of patients with chronic diseases, such as diabetes.
Fidelity, being an investment company, naturally urges individuals to save more and invest wisely in order to be able to cover these costs. They also encourage individuals to live healthier lifestyles to decrease their medical costs and to become smarter consumers of health care (easier said than done for most of us). These are all excellent suggestions.
In addition, I would suggest the following steps:
1. Know what your medical insurance covers and purchase supplemental coverage for what it does not cover.
2. If your employer offers health benefits in retirement, be sure you know what is included and how their plan interacts with Medicare.
3. Talk to your doctor about preventive care. It is far less expensive to prevent a serious illness that to attempt to treat and cure it later.
4. Ask questions and understand the options for care when an illness is terminal (terminal is generally defined as an illness from which the patient is likely to die within six months). The majority of the average individual’s medical costs during his or her lifetime are incurred within the last six months of life. Decide, after discussions with your doctor and family, what end-of-life measures you believe to be appropriate for you, and in what circumstances, and what types of care, if any, you would not want to receive. Prepare a health care power of attorney now, before you become critically ill, that includes an advance directive to spell out your choices clearly. Discuss your choices and written directives with your family and doctor in advance and give them copies of the legal documents. Some patients receive far more care than they would have desired at the end of life because they did not create guidelines for physicians and family in advance of an emergency; a unintended side effect of that care is its accompanying cost.
5. In addition to the out-of-pocket costs included in the Fidelity survey, it is prudent to plan for long-term care costs as well, which can include in-home care, adult day care, assisted living, specialized dementia care and care in a skilled nursing facility. As you age, it is quite likely that either you or your spouse, or perhaps both, will need one or more of these services over time. If you can qualify for and afford long-term care insurance, please consider this option. The younger you are when you purchase long-term care coverage, the lower your premiums will be for life, and the more coverage you will be able to obtain. Buying coverage in your 30's and 40's is NOT too early. Coverage can be obtained as late as your early 80's, but premiums go up and the amount of coverage decreases with each birthday that occurs before purchasing a policy. Buy only a well-established policy from a reputable insurance company. Get quotes from several different companies before choosing a policy and carefully compare levels of coverage, the length of coverage, the waiting period before coverage begins, the services covered and the premiums before making a policy choice; compare apples to apples. Premiums do differ among companies for similar coverage because the insurance companies’ claims experiences differ. Some employers offer long-term care coverage as an employee benefit, but group policies generally do not permit you to individualize the coverage for your needs. If you do buy a policy through your employer, be sure that you can keep the coverage if you leave the company. If you cannot and have to purchase new coverage when you leave, you may then end up paying higher premiums for similar coverage because you will be older at the time you purchase your individual policy.
6. Actively encourage our state and federal governments to improve our health care system. Contact your representatives and vote based on the issues. We need a system that contains costs and covers more individuals. We need more emphasis on preventive care. We need to decrease the paperwork (whether done on paper or via the computer) so doctors can return to practicing medicine instead of filling out forms. We need a system that reimburses doctors fairly for seeing older patients, who tend to require more time in a thorough office visit because they typically have more than one medical problem. Our current system rewards doctors for seeing as many patients as possible in a day, regardless of the complexity of the individual patient.
By DeLila Bergan, J.D., M.A., President of E-Senior Services
