Out-of-Pocket Medical Costs in Retirement

[Ego]

http://www.bloomberg.com/news/articles/ ... more-money

$220,000: This was Fidelity's estimate of what a 65-year-old couple retiring in 2014 would need, on average, to cover out-of-pocket medical costs over the course of their retirement. It assumed the couple did not have retiree health-care insurance through a former employer but had traditional Medicare insurance coverage.1 Fidelity's estimate for 2015 costs is due out later this year.

$17,000: That's the annual jump in cost for every year that the couple is in retirement before age 65. So over four years, the couple could incur an extra $68,000 in medical costs.2

[bradley]

17k a year? What exactly are they basing that on? Continued prescription medication and monthly or twice-monthly doctor visits?

[George the original one]

Annual insurance is $10k/yr at that age for a silver plan, so it's not a stretch for those not getting the Obamacare subsidy to "need" $17k/yr to meet out-of-pocket expenses.

[jacob]

Be super careful about averages on anything that doesn't involve a symmetric distribution such as a Bell curve. A minority of people consume the majority of heath related costs; just like a minority of Americans own the majority of the wealth. It would be better to look at the median.

Or just do a sanity check. The average US lifespan is 78 years. That leaves 13 years from 65. The median person has practically nothing saved. Then $220k/13 = $16900/year in out of pocket costs or $1400/month. Now compare that to the average SS payout ... because again, the average person has no pension to speak off. Sanity check failed.

[Ego]

I thought you'd enjoy the fear mongering taking place there. At least they are using it for a good purpose, to show the financial benefits of health in retirement. In a world where we see a doctor for every conceivable problem, it is easy to forget that some people have $0 out of pocket year after year.

http://www.theatlantic.com/business/arc ... ng/251402/

When it comes to America's spiraling health care costs, the country's problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country's medical spending.

Of course, health care has its own 1% crisis. In 2009, the top 1% of patients accounted for 21.8% of expenditures.

[Dragline]

Talk about your lies, damn lies and statistics!

Some very large percentage of overall health care costs (like 40%) are the costs of keeping dying people alive for a few more months.

The most recent Freakonomics podcast touches on these topics: http://freakonomics.com/2015/08/27/are- ... o-episode/ The difference between the German doctor and the American one is telling. Also read this for more on the emotional/ethical side of this (this is a really good book, especially if you have parents who are getting up there):
http://www.amazon.com/dp/0805095152/?ta ... yzdqmlbi_b

Almost nobody lives in the aggregate -- especially when it comes to health care. Either you have chronic, expensive health issues or you don't. Some of its good/bad luck of the DNA and some of its good/bad maintenance. And life ain't fair on this either.

[jennypenny]

I agree with dragline that end-of-life costs are typically pretty high and a cost most people here would choose to avoid assuming they were over 65. I can see people opting for more heroic efforts if they are younger than that.

I suppose I'm a one percenter as Ego mentioned when it comes to this stuff. I have a 90% HDHP. A quick calculation shows my personal costs have run @$13K OOP on average since I've been on that kind of plan (they were higher before on a Cadillac plan). That makes my OOP twice what the official OOP is for my plan, to give you a ballpark figure. My son's are much higher, but a lot of that has to do with therapy costs that wouldn't be needed by a senior. I think mine are probably pretty close to what a sickly senior might spend.

One snag I see for healthier-than-normal people like EREs is that medicare decides what they are going to cover. They might not pay for certain procedures because a person is over the cutoff age. That makes sense for the average person, but a healthier person would benefit from it. Would you choose to pay for that stuff yourself? The other cost that might be higher for EREs is assisted living/LTC. Were they including nursing home care in that figure? Many of you are child-free which eliminates the usual (free) caregivers. Your move to an assisted living situation might happen earlier than average and therefore cost more.

[Ego]

One snag I see for healthier-than-normal people like EREs is that medicare decides what they are going to cover. They might not pay for certain procedures because a person is over the cutoff age. That makes sense for the average person, but a healthier person would benefit from it. Would you choose to pay for that stuff yourself? The other cost that might be higher for EREs is assisted living/LTC. Were they including nursing home care in that figure? Many of you are child-free which eliminates the usual (free) caregivers. Your move to an assisted living situation might happen earlier than average and therefore cost more.

I guess I got to see this up-close and personally at Soylent Towers and again with the EMT nursing home shuttle service. I realized that 1) the social motivations that caused kids to become free caregivers is disappearing at a breathtaking rate 2) a lot of the cutoff age stuff can be arbitraged like Brits and Canadians do now (you have to be healthy enough, limber and unafraid to move) 3) assisted living can be arbitraged very successfully.

Every morning I pass Bill, a retired lawyer 80-something gay San Franciscan, as he walks along the rice paddies. He has rented a cottage for a decade and the family cares for him. While he is physically fragile he still has a his mental spark and seems to me to be very happy. I shudder to think about how he would be if he were in assisted living at home.

[susswein]

I think taking the 220K total and inferring a 17K/year average is totally misleading. Even if you believe the 220K number, most of that is going to be incurred in the last year of life, not averaged over a lifetime, so if you're living off a 4% SWR you're not going to be on the hook for anything close to $17K/year for most of your life. So while the amount you leave to your heirs might be substantially impacted, your annual living costs won't.

As a first-hand example, I'm 55, qualify for obamacare subsidies, and my total medical expenses are well under $1000/year.

[jim234]

The average person on Medicare probably spends $300 something a month (Part B $104.90, Part D $45.00, Medigap $168.00). So say $350x12x15 years = $63,000. They are probably counting nursing home expenses in the number. Most people run out of money eventually and Medicaid pays till they die.