October 21, 2011

Retirement and Health Care Costs: Brick Wall Dead Ahead

I saw a story in the New York Times while on vacation (I know, a vacation & the NY Times?) that highlighted the results of a study done by the Kaiser Family Foundation. No longer associated with the health insurance company, Kaiser Permanente, the foundation is developing a reputation for a non-partisan source of health-related research.

The study provided fresh insight into what has become a problem with no obvious solution: health care cost in this country. As someone striving for a satisfying retirement I keep looking for some light at the end of the tunnel. So far, all I see is a train heading straight for me, and the rest of us. Consider some of the the findings of this research report:
  • The average annual premium for family coverage through an employer is $15,000, or roughly double what it was 10 years ago. 
  • Half of workers in smaller firms now face “deductibles of at least $1,000, including 28 percent facing deductibles of $2,000 or more,” according to the study.
  • A growing number of business owners are delaying or eliminating hiring because of the cost of health coverage.
  • Some provisions of the new health care legislation have added to costs without controlling increases in premiums to cover those costs.

It seems to me the health care bill had several flaws, but one of the worst was the delay of full implementation for several years. All that did was give the insurance industry a green light to raise rates as high as possible prior to the law taking full effect. I know my rates have gone up an average of 17% for the last several years while benefits have decreased and my deductible is a whopping $5,000.

This outcome was as predictable as the bank bailout producing huge profits for that industry at the expense of the rest of us. Haven't we learned anything yet about the ability of large corporations to use any loophole or flaw in a law to maximize profits?

Interestingly, the study reports that the last two years have shown an apparent slowdown in the rate increases for some segments of the industry. There is no reason given but I can guarantee you it isn't because the insurance industry has developed a heart. It is more likely that people have stopped going to doctors and dentists as often, or even as needed, so the insurers' costs are not rising as rapidly.

It could also be that the industry realizes that eventually they will be selling a product not enough people can afford to purchase to keep them in business. With somewhere around 50 million Americans uninsured, the health industry is reaching the point of diminishing returns in driving away customers.

Obviously, I have no answer to this very serious problem. The health care legislation of 2010 had the intent of reigning in costs and providing coverage for those unable to afford the out-of-control increases from health insurers and hospitals. Unfortunately, except for a few benefits for a limited number of folks, the result has been an acceleration of the problem.

What is scary to me are the number of people trying to make it without going to doctors or clinics on a regular basis and waiting for an emergency to get treatment. Then, either the costs bankrupt them, or the charges eventually get passed on to those with coverage. Much like the financial mess we are in, health care and healthy living is becoming a case of the haves and have-nots.

I fully understand the increasing role of personal responsibility for health care. Eating well, exercising, not smoking.....those are steps that everyone can take, insured or not. But, the human body breaks down. I don't care how many servings of fruits and vegetables you have each day, at some point you will suffer from a medical problem that only a doctor and hospital can address. Without adequate insurance, your life will change forever.

I believe a satisfying retirement lifestyle is in large part a matter of personal choices. Your spending habits, your healthy living decisions, your attitude, your relationships, your passions, and your acceptance of responsibility for what you can control all are things you have a major role in determining.

But, in the area of health care insurance, we seem to be on an out-of-control train. I am beginning to wonder if it has to crash completely before we  develop the collective will to find a solution that protects us and still allows doctors, health care professionals and insurers to earn a decent profit.

For retirees, pre-retirees, and frankly anyone who is above ground and breathing, it feels as if we are reaching a breaking point.

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  1. I know. My husband's company just had "open enrollment". A term we have now come to dread because it only means one thing. Higher premiums. You are right about the green light. They will raise them as much as possible now. No one is minding the store.

  2. Bob,
    I'm confused. Wasn't Obamacare supposed to eliminate all these problems? Wasn't it supposed to make our lives better? Health care for all?

    Well, where is it? Where's that rainbow?

    My rates went up 19.8% and that's just the insurance admin costs. I rec'd a letter stating that come Jan '12, I am to expect a rise in medical costs. So, a double whammy.

    My deductible is up to $2400 (from zero) and as noted in my blog, I am getting less and less medical care due to my age (60). Not a good thing. I thought Obamacare was supposed to make those golden years more golden.

    Just sayin'

  3. This is a huge problem, for sure. Our health insurance through my husband's work has increased to nearly double. We pay out over $1,000 a month, and his employer pays 2/3's more. When Obamacare passed, my primary physician's office immediately stopped taking new medicare patients. It was too costly for them.

    I get statements from my health insurance provider, stating the cost of the treatment and what they were willing to pay, which is at least 80% less than the bill. Doctors are now dropping my insurance provider because of it.

    Our only defense at this point is to save, save and save and realize that most of our retirement income will be spent on healthcare. Hopefully, this problem will have some sort of solution soon...

  4. My sister is a small business owner. Mossy of her employees are under40. She has found it cheaper for the last few years to have them be individually covered and then pay the premiums. It started when cobra was paid for by the government. She does the research, pays the deductible and her people are covered.
    The story of my daughter being treated as uninsured- with an operation in the emergency room with a release six hours later convinced me that universal care is important. She was insured. The bill was $17,000 until the insurance got it and paid...$8,000.
    I am worried for the transition. I am insured as are my children...but for how long. I think this is the only thing I truly worry about for retirement. It scares me.

  5. Roberta, Morrison, and Sharon,

    I had high hopes that the health care bill would help the tens of millions of our fellow citizens who are without decent care, and provide a system of competition that forced insurers to stop the practice of massive rate hikes, well in excess of inflation or rationality.

    Also I was looking forward to the end of of only accepting people without "preexisting conditions." Show me a human being over the age of 20 without some preexisting condition! To only insure those who aren't sick and then refuse to pay when an illness occurs is immoral and should result in the end of that company.

    But, as you three accurately point out, and my experience confirms, the promise and hope have had nothing to do with the reality. At least for the moment, we are as much a captive of a broken system as any prisoner I work with in the ministry program.

  6. I think it is a big misnomer to call what passed in the healthcare field "Obamacare". It was not what the president wanted but only what the Republicans would allow to be passed. Of course giving the insurers free reign of co-pays and rates is definitely Republican in nature.

    If Obama had been able to get a single-payer system implemented (much like the rest of the industrial world has) then yes would have been Obamacare. Unfortunately this, like in so many other areas, he "compromised" his principles away.

    Some day we will learn some lessons from the rest of the world when it comes to reigning in healthcare costs. But I don't know what it will take to make that happen.

  7. RJ,

    You will notice I never use that term. Does anyone call the prescription benefit added to Medicare without a way to pay for it Bushcare?

    Obama did compromise away the guts of the program but I'm not sure he had much option. Partisanship on both sides of the aisle has rendered the idea of common good a foreign concept.

  8. Janette,

    The biggest unknown for many of us is turning out to be health care...even with insurance. I have no doubt whatsoever that if and when I have a major bill, my insurer will figure out a way to not pay, or only cover part of the bill.

    Your sister's approach is interesting. I don't think I've heard of her approach to providing coverage for her employees before.

  9. I think you predicted the future in your last paragraph. I believe it will take a complete failure before people will be willing, no, forced to change.

    The healthcare bill was a bandaid, and not a good one because of the delays in taking effect. My two daughters, for example, are uninsurable for minor reasons, one because of a pre-existing condition although she is perfectly healthy.

    Our healthcare system is a train wreck waiting to happen, or perhaps its more like a nuclear meltdown waiting to happen, because when it does happen, it will cause long lasting damage across a wide area.

    I've resigned myself to this eventuality. In the meantime, I've insured myself with low premiums and a high deductible, and my daughters are on the state funded plan. Ironically, this costs the taxpayers more than if I was allowed to buy them private insurance!

  10. Galen,

    Isn't it disturbing to know that virtually everyone with a functioning brain knows the current system is horribly broken. The best the "leaders" can do is use the coming disaster to score political points. I guess they don't yet realize dead people can't vote.

  11. Health insurance is the number one problem for most retirees under age 65. In our case, we retired after the Health Care plan was passed thinking we would be able to get healthcare at a reasonable cost in a few years. Until then, we figured we would be able to pay for the higher health insurance.

    Reality, 14 months later (we retired last Aug, I am now 58 and my husband is 57). It looks like the healthcare plan may not be implemented. The interim high risk pools are too high for most people (including us), and they don't offer a high deductible plan that might be affordable. We were both turned down for high deductible private insurance and are actually pretty healthy - my husband who is a runner and in excellent health got turned down for a sore shoulder! We can no longer go back to work (not that we want to, but employment prospects for our age are slim to none), and we have had to make an uncomfortable choice - as of this month we are no longer insured (Cobra would only last for a few more months anyhow). We are saving the money for an emergency, if needed. We increased the medical on our car insurance to $100K which will cover us in a car crash or if we are hit by a car walking or riding a bike. We have a hospital indemnity plan through AARP that will help a little, and we have located a clinic that is very reasonable for normal care and tests - just no hospital coverage. In the event that the worst happens, I will negotiate with the hospital - I used to be a financial budget analyst for the major hospital in the area - I know what they accept from insurance companies, medicare, medicaid, etc. I will make payments forever on a reduced negotiated rate. If that doesn't work, we might have to sell the house or file bankruptcy, which will drastically change our lives. However, paying the high cost of health insurance until we are 65 will also force us to sell our home.

    We decided to do everything we can to keep ourselves healthy and take our chances. We can only think about this because we are basically healthy and believe in using alternative healing (not paid by insurance anyway) and only using traditional medical services as a last resort or in emergency situations. If the worst happens, we'll deal with it. If we have warning that we will need services, we will purchase the high risk pool policy - the federal plan has no waiting period, but requires being without insurance for 6 months.

    I know we are accepting a risk that we may not be able to control - but we can at least make an effort to control. We cannot control the high cost of health insurance that would slowly force us to go broke (we already live extremely simply on about 30K per yr excluding health insurance).

    I know we are not alone in our decision. There are many of us who are caught in this situation. Maybe it will get fixed someday, but not soon enough to make a difference for those of us who are now over 55 and unemployed (by choice or not).

  12. The future ahead of us all seems pretty interesting to say the least when it comes to health care and how things are going to get paid.

  13. Donnie,

    I am impressed. You have looked at your options and determined the risks of various choices and come to a decision. Too many folks become paralyzed by the horrific state of the system and simply give up.

    Your husband was turned down for a sore shoulder? I guess I shouldn't be surprised. Insurance companies have zero interest in insuring anyone old enough to actually have a medical history. I'm sure if you could get the real truth he was turned down because he is 57.

    I think you may be on to something. I hadn't though about the angle of the car insurance medical coverage to provide some coverage at a low rate. The last time I looked at the AARP indemnity plans they seemed pricey. Maybe I should look again.

    My wife had a series of tests done this summer for various reasons. She has individual insurance that has a $5,000 deductible. However, as you noted, what insurance companies pay and what the uninsured pay are as different as night and day. Her tests "retailed" at over $8,000. We paid the contract rate of under $3,000.

  14. Hi Bob,

    I think the insurance company was afraid of a rotator cuff possibility, although being 57 was certainly part of the picture. It is fine now, but it's too late. Once you have been denied, you must answer yes to the question - have you ever been turned down. (However, we may try again for him)

    The last budget I did for the hospital, the average discount for services was 59%!! Medicaid was more than that, I think Medicare was around the average, and private insurance was not quite that much - thus the average. Of course, Joe Blow with no insurance gets the retail price.

    One of the biggest problems with current healthcare is that it is fee for service - that means the hospitals, octors, etc. only make money when people are sick or tests are done.

    As an example, if you go to a doctor and he runs one test and makes a diagnosis, or you go to another doctor and he runs a dozen tests and then makes the same diagnosis, who got the better service? The patient got the same treatment from both, but the first doctor was a more competent doctor and did not make you go through the many tests. However, with today's system, the first doctor made considerably less money than the second doctor. The question then is - did you really need the dozen tests? (Of course, since doctors are also afraid of getting sued, they run the tests to protect themselves - another issue!)

    Many years ago, I worked for Kaiser Hopsital in CA. Their system put tbe emphasis on truly keeping the patient healthy - they got paid the same whether you were healthy or not, so it was in their best financial interest to make sure you were healthy, had all your preventative tests, etc. They were very prompt at calling to make sure you did just that. I have read (although cannot vouch for the truth) that in ancient times, Chinese doctors only got paid when you were well, and they did not get paid if you were sick.

    I don't have the answer here, just pointing out some of the pitfalls with our entire medical system, even if you take out the insurance factor!

  15. Donnie,

    Excellent points. We have friends who live on Maui and love Kaiser's Medicare Advantage program. Rarely have I heard anyone praise their insurance company like these folks.

    The doctor Betty saw ran all those tests over the summary. When we went in for the consultation his answer was," We confirmed some things from previous tests." Everything you are doing is working. We'll need to repeat the tests every 3-6 months." Needless to say, we won't be going back.

    Not only is he test-crazy, the meds he recommended she try gave her terrible side effects, even after she told him her research said they wouldn't work on her. She has 17 pages of meds she has tried over the years and knows better than any doctor if a certain type of prescription will likely work or not. Doctors never listen until the side effects kick in.

  16. Bob,

    Thanks for this post. Very timely, and scary.

    Unfortunately, we have become a "crisis" oriented society and I too believe that nothing will happen until we are "in the ditch" on this issue.

    I was thinking the other day about universal care or the "public option," which I have always supported (lots of Canadian friends!)and I know and respect that many others do not.

    We tend to only think about the effects of healthcare coverage on our health, but I believe that if we could find a way to provide reasonably priced coverage for all, and the abuses and corruption were controlled, we would see much of the current unemployment problem mitigated and one of the greatest small business and entrepreneurial creation periods in our country's history. I know so many of my friends who would love to retire--could retire "on paper," but do not do so because of the uncertainty of health coverage. If they could, and did retire their job would open up for someone currently unemployed. I think many people are ready and waiting to join us in retirement as soon as there is some degree of certainty and stabilization.

    I also have many friends who have ideas for new small businesses, but hesitate to strike out on their own because of worries about health care coverage. So many of them could start successful small companies, hire a few employees and help to turn both the economy and our unemployment problems around.

    I watched the PBS Frontline program "Sick Around the World," where T.R. Reid examined how health coverage is provided in 5 developed economies in the world (still available on the pbs.org/frontline website). I will never forget the answer of a Japanese politician to the question, "How many people went bankrupt due to healthcare costs in Japan last year?" His reply: "Oh, my.... no one. That would be shameful."

    We all need to keep hoping and keep talking to our government representatives. There may be other alternatives out there.. but I don't see them yet.

    Best of luck to all who struggle with this issue, (and sorry for the long post).


  17. Bob,

    AAh - now you know why I only go to traditional medications as a last resort. For every action, there is a re-action! The side effects from most meds are worse than what they are trying to fix. There are some cases where traditional meds are necessary and are life-saving, but more often than not, they cause more problems than they fix. Our senior citizens are so over-medicated that it is a crime - and we are all paying for it through our current medical system. No wonder medicare is going through the roof!! I will say no more on this for now, but I could write a book!

  18. Rick,

    Your post wasn't too long, it was helpful. Thanks for sharing your thoughts. I agree that the cost of poor health coverage directly affects the economy in ways most of us don't even consider.

    I don't know when people will understand that our current system is helping destroy the economy and peoples' future.

  19. Bob -

    Just have to say that I really enjoy and appreciate your blog and the thoughts you convey. Even though I am barely fifty, I am dreaming of a satisfying retirement and your blog helps me in many ways. Thank you for taking the time (and I know it's a lot...) to do what you feel led to do.

  20. Anonymous,

    Thank you very much for your comments. I enjoy the process of research and writing, especially when folks like you find it useful.

  21. Donnie,

    Betty has found that older medicines almost always work better than the newest prescriptions. They are also available as generics and much more affordable.

    She has cut back from 15 pills a day to 3, plus vitamins and stuff like cinnamon and Chia seeds.

  22. Steve in Los AngelesSun Oct 23, 01:29:00 PM MST

    Hi Bob,

    I will be changing health care providers (through my former employer) for at least one year starting at the beginning of next year. My former employer has open enrollment, during which time I can change health care plans, once a year. Since January of last year, I went to my current health care provider very rarely (mostly for physical examinations). All of my visits were for routine items. I spent quite a bit more for my out-of-pocket insurance premiums than I did for office co-pays with my current provider. My out-of-pocket insurance premiums with my new provider will go down considerably. I did check the co-pays for both my current health care provider and my new health care provider. There is no charge for preventative services, including annual physical examinations.

    Last night, I went to an early Halloween party. I drank only soft drinks and water. I ate only healthy foods. Of course, I am a non-smoker (and I never smoked anything). I am quite thin and have no weight problem. Sadly, there were a fair number of people at this party who were intoxicated, who were overweight, and who were smokers.

    Today, I am meeting with a group of my friends for the 50th birthday celebration for a mutual friend of ours. I estimate that I will walk about 20 miles round trip by the time I get home this evening. Walking that much is not unusual for me. I walked somewhat similar distances last Thursday and Friday. I regularly walk at least four miles every day. Walking saves me a lot of money and, of course, is very healthy. Probably one reason why I am so healthy (and I am age 55) is that I do a lot of walking. I have been doing a lot of walking for about 15 years.

    Thank you for reading this comment.


  23. Steve,

    Switching companies sounds like a great deal. I would guess there are all sorts of folks who would love to have that choice.

    We have exchanged comments before about personal responsibility for healthy choices and healthy behavior. With the unsettled situation of our present system, folks like you and Donnie, whose comments are above, are doing everything possible to delay the day when the inevitable happens.

    Walking 20 miles round trip for a party probably is not possible for most of us (me very much included). But, the idea that there are alternatives to common choices is important to note.

  24. Bob,
    You know, of course, that the reason for the delay in forcing Government health care on is was to drive the insurance companies out of the health care business in the meantime. Then we sheep will happily rush into their arms instead of resisting.

  25. I am so unsure about what is up and what is down anymore you may be correct, though I hope not.

  26. With respect to Steve's post I would like to offer this story:

    A friend of mine, one of the "fittest" guys I know (runner, triathlete) who watched his diet and was very healthy (like Steve, no alcohol, no smoking, etc). One day he got some very bad news from his doctor--he had cancer.

    He approached his fight against the disease with the same determination he had for his training.... and for awhile it seemed to work. Ultimately, his cancer returned.. he continued to fight.. lost his job and then his health insurance, and died in bankruptcy. His widow and children are struggling to regain their lives but by any measure are impoverished.

    Somehow, this is not right. Somehow we need to find an answer to this. People abuse their health and get sick. People do all of the right things.. and still get sick.

    There, but for the grace of God....


  27. Rick,

    I always think of stories like the world famous runner, Jim Fixx, who dropped dead of a heart attack. There was a fellow who followed all the "rules" but was felled by something he couldn't prevent. As the new York Times said about Jim's death, "The first symptom of heart disease is sometimes sudden death."

    I guess all we can do is make the quality of whatever time we have on earth the best it can be. God has control over the quantity. Staying physically fit and eating well won't prevent the unknown from doing you in.

    In the case of your friend, a disease like cancer shouldn't destroy a family due to the financial drain. It is horrible to lose a loved one. It is beyond description for his family to suffer the additional burden of impoverishment. A well-constructed health care system wouldn't allow that to happen.

  28. Steve in Los AngelesMon Oct 24, 02:14:00 PM MST

    Hi Bob,

    I do appreciate what Rick wrote above and your reply to his comment. Of course, there are no guarantees that a person will remain completely healthy. Nonetheless, the fact that a person could develop a terminal illness, such as cancer, is not an excuse for that person to not do their best to stay healthy by making appropriate lifestyle choices.

    Incidentally, although I am healthy, I had serious illnesses in my life. I had chicken pox (as an infant), mumps (which led to partial deafness in only my right ear at, I believe, age 3), measles (at age 7), and walking pneumonia (at age 42 from late April to mid-June of 1998).


  29. Steve,

    Personal responsibility and what the fates and your genes have in store for you are what we must face. It is the cost of being human.

  30. Hi Bob,

    Just an update. We tried again for a high-deductible policy ($7500)on my husband as his shoulder pain has been gone for over a year. He got accepted yesterday---so he will have that policy and I will stay on the high risk policy. It is still high, but do-able and better than no insurance.

  31. Donnie,

    Great news! I guess the rotator cuff healed enough to get him in. It seems unusual for a company to say no, and then change to a yes, but thank goodness!