Estimating Healthcare Costs in America

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M
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Estimating Healthcare Costs in America

Post by M » Fri Feb 08, 2019 4:17 pm

So I'm stuck in analysis paralysis land.

I live in a Medicaid expansion state with a wife and three young kids. Early thirties, everyone is fairly healthy. I just finished adding up our spending for last year and it totaled ~$20,600. This is for everything EXCLUDING healthcare. We own our own house and have no plans of having more children, moving, or otherwise increasing expenses intentionally. We have no debt of any kind.

We have $720,000 in invested assets, excluding the price of our primary residence. $450,000 of this is in taxable investments, with about $20,000 of dividends per year. $270,000 is in a combination of 401k and IRA.

According to the 4% rule this gives us $28,800 /year...However this does not include healthcare. Since we would be under 40k income we would all qualify for medicaid. I don't have much experience with medicaid, but from what I hear it is free...

My question is this: How much money should I budget for healthcare? Should I just assume that the ACA will be there, and if not I will go back to work?

If you live in America, in the land of the people who are owned by their doctors, how much are you budgeting for healthcare?

Thanks,

Scott 2
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Re: Estimating Healthcare Costs in America

Post by Scott 2 » Fri Feb 08, 2019 6:24 pm

My hope is to fall under ACA and spend a few hundred a month for my wife and I.

My plan recognizes that could fall through and I might need to afford $15k a year.

Things get very tight if that happens. I'd definitely be counting on social security in that scenario.

Medicaid does restrict your access to certain more expensive drugs. It's not just as good as "normal" insurance.

classical_Liberal
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Re: Estimating Healthcare Costs in America

Post by classical_Liberal » Fri Feb 08, 2019 8:28 pm

Some states also have limits on investment income or assets. All states will recapture any LTC costs, some states recapture other costs after a certain age. Recapture is from estate after death, so I'm not sure how much this matters to you. Make sure you know all the rules for your state.

The other option is to convert enough pretax $ in Roth conversions each year to get you just over the medicaid threshold in MAGI, but maxing out on ACA subsidies. This is the option I prefer in my plan to avoid the medicaid rabbit hole of bureaucracy.

Laura Ingalls
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Re: Estimating Healthcare Costs in America

Post by Laura Ingalls » Fri Feb 08, 2019 11:13 pm

I’d start by figuring out if your current providers would take you if you were on Medicaid.

People get bent out of shape about others choice to use Medicaid but in reality its total all in cost is less than a silver ACA plan at 150% of poverty.

IlliniDave
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Re: Estimating Healthcare Costs in America

Post by IlliniDave » Sat Feb 09, 2019 5:51 am

I am planning based on the cost of a Bronze ACA plan plus paying the full out of pocket max each year. Roughly speaking, for a single person that's about $20,000 per year, although the data I have is a few years old. It's unlikely that I would hit the OOP max often (especially for a lot of years in a row) but that's what I have laid into my planned budget. I'll have about 9 years of that before I switch over to Medicare. Based on anecdotal evidence from my older relatives I don't expect costs to be as high once on Medicare. So roughly speaking the upper bound should be on the order of $180K to get to Medicare. For you and your spouse you can count on about 2x the cost of a single person for ACA premiums. Not sure what the cost delta is when you get into the family plan realm, nor how the OOP max changes as people are added.

Medicaid typically places limits on assets which would need to be spent down. In other words, I don't think any state would give you medicaid while you have around a half a million dollars "in the bank" irrespective of income. Not sure how they look at retirement accounts. It is free, but typically they put up safeguards to prevent people who really can pay for their medical care from using the program. However it is likely you would qualify for ACA premium subsidies and possibly ~"payment assistance" (not sure what the correct term for that is). A little time invested on Google should get you a calculator (on ACA.gov, IIRC) where you can look into that.

Medical expenses is a difficult thing to plan for. Likely it will be much less than what planning for worst-case will lead you to, just a matter of how much risk you want to take on.

7Wannabe5
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Re: Estimating Healthcare Costs in America

Post by 7Wannabe5 » Sat Feb 09, 2019 7:11 am

In my state Medicaid is an intrusive bureaucratic nightmare compared to the federal plan. I have had no difficulty thus far with simply estimating that my income will be in the qualifying range for subsidies. Previously I purchased very high deductible catastrophic coverage only. I only make use of medical services for true emergencies and barter for asthma inhalers, so in the last 5 years I have never exceeded my deductible and have spent far less on medical than coffee.

Every yearly routine physical is a sales opportunity for big pharm, and possible beginning of a vicious cycle from which you may not emerge with financial freedom intact.

Paula
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Re: Estimating Healthcare Costs in America

Post by Paula » Sat Feb 09, 2019 8:00 am

classical_Liberal wrote:
Fri Feb 08, 2019 8:28 pm
Some states also have limits on investment income or assets.
There are no asset limits for those using the ACA MAGI calculation to qualify for Medicaid.

George the original one
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Re: Estimating Healthcare Costs in America

Post by George the original one » Sat Feb 09, 2019 8:27 am

classical_Liberal wrote:
Fri Feb 08, 2019 8:28 pm
The other option is to convert enough pretax $ in Roth conversions each year to get you just over the medicaid threshold in MAGI, but maxing out on ACA subsidies. This is the option I prefer in my plan to avoid the medicaid rabbit hole of bureaucracy.
This is what I'm doing for 2018, 2019, & 2020 tax years (provided ACA subsidies still exist) and for the same reason. My former employer's pension will start being my income in late 2020, so that's why I'll stop with Roth conversions. If alone, I'd probably choose bronze plan, but considering my wife, we're on a silver plan.

Scott 2
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Re: Estimating Healthcare Costs in America

Post by Scott 2 » Sat Feb 09, 2019 9:01 am

IlliniDave wrote:
Sat Feb 09, 2019 5:51 am
I am planning based on the cost of a Bronze ACA plan plus paying the full out of pocket max each year. Roughly speaking, for a single person that's about $20,000 per year
I thought my $15k per year for a couple was conservative. I figure there's a practical upper bound to what the population as a whole can afford. If ACA fails and the subsidy money disappears, market forces could drive prices back down. I suspect the strongest challenge to the subsidies has passed and mostly view my high end healthcare budget as a buffer for unknown unknowns.

Unless you are in a situation where FIRE income will exceed subsidy levels. That definitely changes the picture and would skew my number upwards

Paula
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Re: Estimating Healthcare Costs in America

Post by Paula » Sat Feb 09, 2019 9:31 am

Does anyone have any first hand experience that Medicaid is somehow more bureaucratic than the ACA plans?

Scott 2
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Re: Estimating Healthcare Costs in America

Post by Scott 2 » Sat Feb 09, 2019 9:48 am

My wife was told multiple times by her doctor that I have to keep working, because the doctor has Medicaid (and even Medicare) patients who cannot get approved for the prescription my wife takes.

When for whatever reason someone would switch their medicine, the doctor's office used to collect the left overs for patients who cannot be approved. They're not allowed to do that anymore.

In her case, it is a class of biologic medicine used to treat arthritis. It's the difference between constant severe pain and a moderate annoyance. The drug that is working retails at $1000 per weekly dose.

With my employer provided insurance - the drug company assists us in paying our deductible, then it is entirely paid by insurance. They even deliver it to our door in a cooler. We come out ahead financially from the prescription. I believe we could buy similar coverage on the exchange, because pre-existing conditions are not excluded.

If you're on Medicaid, your best hope in such a situation is to apply to a big pharma sponsored assistance program, hoping for free medicine, annually. They have significant charity programs, in an effort to protect their pricing strategy from regulation.

Wealthier retirees buy a med supp. plan to protect themselves from holes like this in Medicare.

Paula
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Re: Estimating Healthcare Costs in America

Post by Paula » Sat Feb 09, 2019 10:15 am

Scott, that is a good example but you are insured by your employer not an ACA plan. If you were on a silver or gold ACA plan what would your premium plus deductible plus copay be? Medicaid is paying for biosimilars for biologics.

Scott 2
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Re: Estimating Healthcare Costs in America

Post by Scott 2 » Sat Feb 09, 2019 10:52 am

I agree, I am on a top of the line employer funded plan right now. I don't think it's possible to buy better insurance.

I have not tried to find the specific ACA plan that will best cover her medicine. I believe insurers use a flow chart of treatments to qualify someone for an expensive biologic. Getting at which company does that best for us appears a nontrivial moving target. Especially with changing regulation, I will not do that investigation until the last minute.

My exit strategy is to leave work in the middle of a year, pay for cobra and have time to figure it out for the next year. In the worst case of no option, I'd have cobra for the full 18 month period and have to find new work. The medicine is that important.

I think biosimilars are part of the reason for the big pharma charity programs. When she was on Humira, there was a substantially less expensive biosimilar, but it wasn't available for purchase in the US. The blocker was a protection for drug company revenue.

Humira didn't work well for her. She was moved to a different drug, which costs about twice as much. We later learned it tends to work better, but insurance requires you to fail out of Humira first. Nobody told us that. She spent a year trying to make the "inferior" drug work, under the misconception that it was a health driven treatment plan.

Your point that this could have been much harder with the wrong ACA plan is very true. I am assuming there is a comparable option available and could be wrong. That treatment plan could vary by product in addition to insurer.

Paula
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Re: Estimating Healthcare Costs in America

Post by Paula » Sat Feb 09, 2019 1:20 pm

Scott 2 wrote:
Sat Feb 09, 2019 10:52 am
Getting at which company does that best for us appears a nontrivial moving target. Especially with changing regulation, I will not do that investigation until the last minute.
When you decide to begin your investigation you may find this list of Medicaid drug exclusions helpful.

https://www.medicaid.gov/medicaid/presc ... index.html

IlliniDave
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Re: Estimating Healthcare Costs in America

Post by IlliniDave » Sat Feb 09, 2019 3:15 pm

Scott 2 wrote:
Sat Feb 09, 2019 9:01 am
I thought my $15k per year for a couple was conservative. I figure there's a practical upper bound to what the population as a whole can afford. If ACA fails and the subsidy money disappears, market forces could drive prices back down. I suspect the strongest challenge to the subsidies has passed and mostly view my high end healthcare budget as a buffer for unknown unknowns.

Unless you are in a situation where FIRE income will exceed subsidy levels. That definitely changes the picture and would skew my number upwards
That might be reasonably conservative (assuming the drug you mentioned is fully covered). For the two of you ACA subsidies will be about $12K less subsidies, and assuming no additional chronic conditions appear, the difference cover's a lot of day/day occasional stuff. There was a thread within the last year or two where a good bit of data is linked that gives averages for people who retire at different ages, and I want to remember it works out to about $10K/person/year out-of-pocket, with most of that typically coming at the end.

Scott 2
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Re: Estimating Healthcare Costs in America

Post by Scott 2 » Sat Feb 09, 2019 4:46 pm

My searches suggest it is possible to get some biologics on medicaid, including enbrel, which is my wife's current drug of choice. Her doctor was drawing on clinical experience, so there must be roadblocks along the way. Interesting to note the list on medicaid.gov varies by state as well. Moving states based on healthcare coverage is always an option to consider. Adding to the difficulty of projecting this all - the drug that works can change over time. It's not like if we sourced an unlimited supply of free enbrel, it would be problem solved.

We're in our late 30's. Age is another big consideration in the projection. As IlliniDave alludes, healthcare costs go up as we get older. That means money ear marked for healthcare has more time to grow. Using an even amount every year makes the projection overly conservative. But then of course, healthcare costs are rising much faster than inflation. How long will that continue?

It's not an easy cost to predict. Healthcare is without a question the single biggest risk to my retirement planning. Part of my perspective has been - if we run out of money and die, we die. I'd rather have 5 of our strongest years to do whatever we want and take some old age risk, than burn the best part of our health span working. Wouldn't it suck to grind away those great years, and then die with a million dollars in the bank.

Laura Ingalls
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Re: Estimating Healthcare Costs in America

Post by Laura Ingalls » Sat Feb 09, 2019 8:51 pm

We have used Medicaid for health insurance for ~four years. I have no problems to report with regard to coverage. We have mostly been low users of healthcare with the noteable exception of a nearly ruptured appendix and subsequent seven day inpatient stay (at a hospital not in our Medicaid MCO).

The only uncovered items have been glasses (for adults it would pay for kids) and I opted for a dental extraction on my own dime (my dentist would/could have done it and Medicaid would have paid/long boring story.). I may get an implanted tooth. It won’t pay for that but either would private dental insurance.

I have been covered by health from a governmental source most of my life. First from one of my parents’ employers then from my own. The last job I had with employee coverage cost my employer $13,000, me $2500, and had a deductible $6500(per year). Medicaid all in cost is way less both out of the pocket of the tax payer and my own.

M
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Re: Estimating Healthcare Costs in America

Post by M » Sun Feb 10, 2019 3:14 pm

Hello Everyone!

A lot of very good replies here. It looks like I'm not the only one who has thought about this question for a while.

I'm beginning to think of my budget for healthcare in the same way I think about the early retirement goal itself, just on different scales. This is just another risk in life - and how much money you save and budget for it determines how likely you will be at successfully mitigating this risk.

For example - I can budget nothing for healthcare, sign up for medicaid and wing it. All of the doctors we currently see would accept the medicaid managed care plan I am looking at. The local hospitals also accept it. It looks like there may be some prescriptions drugs that may not be covered, based on the responses here. However - as stated previously - we are all healthy and rarely ever even use healthcare. None of us use any sort of drugs, prescription or otherwise, and I haven't seen a doctor or been to a hospital in 17 years. We have been very lucky/fortunate in this regard. Either that or eating vegetables, exercising, and maintaining normal BMI levels has been good for our health.

I could do Roth conversions and show 41k in income every year. I have enough sitting in capital gains in taxable accounts, plus pre-tax accounts, that I can easily show this amount of income until all the kids are grown. In which case I would be above the threshold simply based on 4 percent rule. Looking at Healthcare.gov I could get a plan for $250 /month with $1,400 family OOP max. In this scenario I would budget 5k or so for healthcare per year, and I would imagine this would have a higher probability of success.

Or I can budget about 18k /year for health insurance. Or another quarter of a million dollars from where I'm currently at, so I might as well round up and call it a cool million dollars in invested assets for early retirement. With nearly half of the dollars dedicated just to the healthcare budget. I would imagine this would give me the higher odds of success.

Anyway - thanks for your replies everyone! This has been a very fruitful discussion I think. :D

FRx
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Re: Estimating Healthcare Costs in America

Post by FRx » Tue Mar 05, 2019 12:17 am

In the land of the people who are owned by their doctors... I don't own anyone but if I did then I would everyone to eat a little better and exercise more.

As for getting medications approved on Medicaid - it seems cumbersome but once you push for it hard enough, it's doable. Most initial requests are denied and if your doctor is willing to step up and push, they can often approve it. If you end up on very pricey medications then the drug manufacturer will often offer the medicine for free for those who ask. Most don't so there is plenty of free stuff to go around.

As for healthcare I would figure out your legit risk factors for disease which is rather predictable. Consider a mix of healthcare for some family members and not for others. Get short-term health insurance which is much better than you might expect and rather cheap.

One of the best options is Direct Care services such as Direct Primary Care. Your family medicine doctor would charge you a fee every month similar to an insurance and pretty much do everything in their power to keep you healthy. It's great for those who eat off the soil, not so good for those who eat out of packages.

Even some of the worst case scenarios which people try to scare you of like getting hit by a car or getting cancer are often rather clear cut. You can negotiate cash payments on a lot of hospital bills and it's often the initial trauma bill which can be rather hefty but again negotiable especially if you have a DPA and a living will and other documents to guide your care. I can get into gory details.

An adult could find a DPC doc for $100 a month and as a competent family medicine doctor I could do a lot to keep my patients free of chronic disease, out of the hospital, and away from traditional western medical care which comes with more side effects than cures. I can get an MRI for patient for $300 rather than the $1,500 their insurance will get billed. I can get a blood test for $4 instead of $150. Should they need medications then instead of shitty lipitor which only has more advertising dollars behind it I could put them on simvastatin. I can order the pills in bulk for my patients - 1,000 pills for like $30 and never need to upsell.

Paula
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Re: Estimating Healthcare Costs in America

Post by Paula » Wed Mar 06, 2019 7:14 am

FRx wrote:
Tue Mar 05, 2019 12:17 am

As for getting medications approved on Medicaid - it seems cumbersome but once you push for it hard enough, it's doable. Most initial requests are denied and if your doctor is willing to step up and push, they can often approve it.
FRx wrote:
Tue Mar 05, 2019 12:17 am
One of the best options is Direct Care services such as Direct Primary Care. Your family medicine doctor would charge you a fee every month similar to an insurance and pretty much do everything in their power to keep you healthy.
Thank you for your insight on this. A few questions come to mind.

*Assuming you have no health problems are FI and can qualify for Medicaid, would you in any way be reluctant to do so?

*If your Medicaid assigned primary physician was unwilling to advocate for you could a Direct Care physician be the one to push Medicaid and/or you primary?

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