April 11, 2015
Medical Bills After Retirement: Be Prepared
It probably comes as no surprise that the number one concern of retirees is the unknown cost of on-going and future health issues. Even with Medicare, private insurance through a former employee, or some other way of paying for health costs, many of us are unprepared and in for a rude awakening over what lies ahead.
Recent studies tell us that up to $300,000 in costs are very possible for those over age 65. Don't we assume that with Medicare, a Medigap policy, an Advantage option, and drug coverage that can't possibly be right?
Unfortunately, the most expensive parts of our health costs aren't covered by those items. Moving into an assisted living facility can easily cost $3-$4,000 a month (or more). A nursing home might be closer to $5,000 a month. Medicare pays nothing, or for only a limited period of time. If you elect to stay in your home you will still need expensive on-site nursing and custodial care that can cost about the same as being in a facility. Research shows 70% of us will need either short and long term care at some point.
True, you can buy a long term insurance policy, but they are quite expensive, and usually have a waiting period before payments start. They are dependent on the insurance company staying in the long term care business, not a sure thing as costs outstrip their ability to generate sufficient return on their investments.
A report from last September in USA Today provides a sobering look at our concerns. More than half of us fear Alzheimer's or dementia more than any other health issue, even cancer, heart issues, stokes, or arthritis. Another study tells us that the majority of retirees fear medical debts may overwhelm their finances, with up to a quarter of us already in trouble due to medical bills.
So, why am I detailing these scary numbers and scenarios? Because being prepared and facing reality are our best weapons. To have a satisfying retirement denial is not going to work. Facing the financial possibilities of health costs down the road now will help you if, and when, it occurs.
Obviously, we must do our part to stay as healthy as we can as long as possible. Medicare or Advantage plans offer plenty of free or deeply discounted ways to stay on top of our health and take steps to short-circuit problems.
From a financial standpoint, a line item in our budget must include reasonable projections for future medical costs. Forgoing some present pleasures may be necessary to help with future expenses. The health care center won't offer much sympathy when you tell them you can't pay their bills because you took a month-long cruise down the Amazon.
The health care system in the United States is unlike any other developed country. We have a for-profit approach to health care. While that provides for the best medical care possible, it has the very real potential for financial hardships or even ruin if someone isn't prepared.
After a full year of Medicare, a Medigap policy, and drug coverage I am very happy with the large reduction in my medical costs compared to previous years. But, I am aware of what may lie ahead and am doing my best to protect Betty and me from a rocky future.
I'd rather spend the money on something else, but health care savings have become part of our life. That is our responsibility.