Average Health Care Costs in Retirement

[youbet]

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Originally Posted by nun I can't see a reciprocal health care agreement being implemented between the US and EU countries because the organizing philosophies and implementations are so radically different. The freedom of movement and employment within the EU also requires reciprocal health care agreements.

I agree with that. In the case of the USA, there is no real reason to have reciprocal agreements. And if reciprocal arrangements would result in any extra costs to the USA system, that alone would rule them out. As many are pointing out in this thread, USA healthcare costs are already far, far too high and absolutely unsustainable. In the future there can be no outflow of healthcare dollars whether through direct payments or through subsidized drug or medical technology sales. I think we'll be finding it's more than enough struggle to provide healthcare for ourselves.

[youbet]

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Originally Posted by nun Thanks for the correction, I didn't know about the Medicare exception to the FICA/SS income limit.

No problem. Glad to help out.

When you said, (Bold mine)

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Jus another note on how Medicare and the NHS are funded. Medicare FICA taxes stop at around $100k income whereas because the NHS is funded from general taxation everyone contributes to it from all their income, so the rich pay more for it than the poor and there's no cap on what they pay. Obviously the NHS also covers all UK residents Shea's Medicare only covers US retirees.

I was very surprised because of the tone of confidence I was reading into your discussion of the subject. It reminded me that with all the posturing coming out of Washington, the media frenzy to sensationalize it all and the extreme polarization between all factions, getting even the basic facts straight is tough. In this environment, doing what it takes to get our health care costs down (way, way down) is going to be one heck of a challenge.

One other thing, the Medicare Health Insurance Tax rates and lack of income cap are NOT an exception to the FICA/SS rates and income limit, as you put it. The Medicare Health Insurance Tax stands on its own and it's rates and income caps (or lack of an income limit as is the case) stand on their own.

[explanade]

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Originally Posted by nun I'd never claim that healthcare is free and if I neglected to say things like "free at point of service" or "no out of pocket costs or premiums" I'm sorry. UK healthcare will cost the average person half that of the average US person and there's never a worry about being covered. The thing that saddens me is that many Americans with health insurance aren't more outraged that they pay twice as much as people in other countries for poorer coverage.

Just don't get Americans scorning or casting aspersions at other systems when the US one is such a mess.

Of course some of this is repeating the talking points from those who want to preserve the current system, because it's lucrative for certain parties, even if it's bad overall for the country.

I believe Canada went through the same scare tactics and disinformation campaign when it went to a national health care system that it has today. In fact the US AMA went up there to try to block the change, including spreading the claim that there would be a mass exodus of Canadian doctors to the US.

[Free_at_49]

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Originally Posted by M Paquette They probably know how talk like that gets the Yanks all stirred up. ;-) The fact is, though, that our collection of ad hoc processes and procedures that we've cobbled together for healthcare is more expensive per person than just about anywhere else in the world. Many of the rent seekers that have their fingers in the healthcare pie feel entitled to their cut, and won't want to let go. This makes any reform attempts messy, for hundreds of millions of lobbying dollars worth of messy. List of countries by total health expenditure (PPP) per capita - Wikipedia, the free encyclopedia

Thank for the link. Per capita cost doesn’t tell the whole story. Having experienced the EU, Canadian and US system, I find in the US an intolerable arrogance among those working in the healthcare fields. That includes doctors, nurses, assistants, hospital administrators, even the paper-pushes and receptionists have an attitude. It was much better when I lived in MA, but it’s particularly bad if you happen to live in a beach town in the dirty South.

[Free_at_49]

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Originally Posted by youbet I agree with that. In the case of the USA, there is no real reason to have reciprocal agreements. And if reciprocal arrangements would result in any extra costs to the USA system, that alone would rule them out. As many are pointing out in this thread, USA healthcare costs are already far, far too high and absolutely unsustainable. In the future there can be no outflow of healthcare dollars whether through direct payments or through subsidized drug or medical technology sales. I think we'll be finding it's more than enough struggle to provide healthcare for ourselves.

The EU will never accept reciprocal agreement with such large country that has a vastly inferior health care system. There’d be millions of uninsured americans flooding the EU. The US does not even guarantee equal treatment within its own borders, if I happen to be in another state I’d be “out of network” and my costs will double.

[nun]

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Originally Posted by youbet I was very surprised because of the tone of confidence I was reading into your discussion of the subject. .........

Yes it was a dooohh moment!

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One other thing, the Medicare Health Insurance Tax rates and lack of income cap are NOT an exception to the FICA/SS rates and income limit, as you put it. The Medicare Health Insurance Tax stands on its own and it's rates and income caps (or lack of an income limit as is the case) stand on their own.

Yes that's what I was inartfully trying to convey and it highlights the excessive cost and complexity of US healthcare. The US resident has to buy health insurance during their working life at significant cost and with worries about the level of coverage and continuation of coverage with changes in employment and illness. On top of that they pay a payroll tax for Medicare. Once they retire they still have significant premiums and out of pocket costs for Medicare and have to negotiate the maze of Part A, Part B, MediGap, Medicare Advantage and drug coverages. It's completely archaic and must surely collapse under it's own weight and cost at some time.

The NHS is in trouble with funding too, but it's on a different scale than the US and there is still general consensus among UK residents that a national health service funded from general taxation is what they want. That is definitely under attack, but open talk of changing the funding mechanism is still a "third rail" topic in the UK. The simplicity of the NHS for the patient is one big plus. UK residents simply don't think about health care insurance coverage......the do, however, think about how much it costs the government and the standard of services it provides.........but nobody ever worries about being able to pay if they need treatment or has to delay going to the doctor because they carn't afford it, or worries about pre-existing conditions, or changes in coverage if they change jobs.

Insurance, in my book, is supposed to make you feel safe that in an emergency you can rely on it. The UK, other EU and Canadian systems do that, the US system of insurance often fails to meet that minimum requirement even though it costs twice as much.

[Bestwifeever]

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Originally Posted by Free_at_49 Thank for the link. Per capita cost doesn’t tell the whole story. Having experienced the EU, Canadian and US system, I find in the US an intolerable arrogance among those working in the healthcare fields. That includes doctors, nurses, assistants, hospital administrators, even the paper-pushes and receptionists have an attitude. It was much better when I lived in MA, but it’s particularly bad if you happen to live in a beach town in the dirty South.

You must be really strong to be able to pick up a brush big enough to tar all those people with.

[REWahoo]

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Originally Posted by Free_at_49 It was much better when I lived in MA, but it’s particularly bad if you happen to live in a beach town in the dirty South.

Why are southern MA beach towns so dirty? Is it due to the medical profession?

[Free_at_49]

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Originally Posted by Bestwifeever You must be really strong to be able to pick up a brush big enough to tar all those people with.

The tar themselves mostly, by working in a corrupt system and seeking to preserve it, ...and many years of unearned income & privileges. There are 5 doctors in my immediate family, they are the ones with the biggest brushes.

[Free_at_49]

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Originally Posted by youbet I don't think there are a significant number of poor Americans crossing the border to receive free, ongoing Canadian health care. I don't think the Canadians have provisions for providing free, ongoing care for non-citizens and I think they know how to handle those issues better than the USA. Do you have something, an article or whatever, you can point me to?

No articles, just personal experience. Canadian healthcare used to be on the honor system, you could walk into any hospital or doctor's office and receive world class health care. They had health ID cards, that you could get by filing an application by mail, and many americans had gotten those illegally. Now ID cards also include photo, but it's not for citizens only, landed immigrants qualify as well.

[NW-Bound]

The info that Canadian health care system welcomes anybody with open arms is interesting, but contradicts what I have read.

I have not lived in Canada, have no friends nor relatives living there. But while following the blog of a Canadian woman RV'er who relocated from Quebec to the province of Yukon, where she worked in a campground, I learned some interesting about the Canadian bureaucracy.

On Aug 25, 2009, this woman wrote in her blog:

My request for Yukon healthcare was rejected because I did not provide sufficient proof of my Canadian nationality. I submitted a copy of my passport as proof that I am Canadian and was told that’s not good enough. They want a birth certificate! What??!!!

But that’s not what takes the cake. I promptly submitted my birth certificate and was equally promptly told that it does not prove my Canadian nationality as the certificate was issued by Quebec. What??!!!

A year later, on Aug 3, 2010, she declared in a post entitled "A Yukoner at last" that she finally got her health card. She wrote:

It took a couple of attempts to get satisfactory proof of Canadian citizenship, but I have health insurance! And I’m officially a Yukoner!!! Yup, I finally got my health card!

While I was still technically insured in Quebec, my sun card would have been useless out here seeing as Quebec does not participate in the reciprocal agreement with the other provinces. In other words, I would have had to pay out of pocket had I needed to go to the ER last fall and then attempted to get reimbursed by Quebec with no guarantee of being paid back.

So, it appears that the Canadian system is provincial and is very parochial. Indeed, in response to a comment from a blog reader, she wrote

Martha, health insurance varies from province to province. There is no universal ‘Canadian’ health coverage. After my last experience at an ER, I have no interest in ever going to one ever again, no matter how much I’m bleeding.

References:

2009 August | Travels With Miranda - Part 2

A Yukoner At Last!!! | Travels With Miranda


On the other hand, while searching for RV'er blogs, I also found the saga of an American woman, who has not worked for years, and lives on very meager financial aids. She was disabled with multiple immunity diseases, which required very expensive treatments. Although she wandered from state to state and had to reapply at each new residence, she got her treatments. But I have to save this for another post.

[nun]

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Originally Posted by Tekward "Fidelity Investments ... released a study saying that an average 65-year-old couple retiring in 2012 would need to have saved up $240,000 to pay for out-of-pocket health-care costs in retirement." Also in the article: Dan Keady, the director of financial planning for TIAA-CREF, recommends people planning for retirement budget a line item of $5,000 per year per person for out-of-pocket health-care costs. Health-Care Bill in Retirement: $240,000 - Yahoo! Finance I am curious about the amount that others have planned for these costs.

Getting back to the original question and contrasting the cost with the UK is interesting.

If you're an average single employee in the US you'll pay 1.45% in Medicare tax and lets say $5k/year in premiums and you'll need a contingency of $5k for out of pocket costs (that's obviously a gross simplification, some employers will pay some of the premiums, so the number paid by the employee might be less, maybe $2k). If you get an average salary of $55k that comes to an annual cost of $5.8k (or maybe $2.8k if you have a good plan). If you get sick that could quickly approach $10k with co-pays and deductibles.

Once you retire the Medicare tax goes away as you don't have earned income, and your premiums and out of pocket costs might be $5k and you'll also still need to keep a $5k contingency if you get seriously ill or need specialized drugs or services.

In the UK the average salary is $42k and the tax and national insurance on that for a single person who saves 10% into a pension is $8.6k. As the UK spends 17% of it's budget on health care that makes the average UK worker's cost for healthcare $1.5k a year. As there are no out of pocket costs there's no need to keep a contingency fund. If you are retired (over 65) there's no national insurance and so on $42k income you'd pay $5.3k tax and be contributing $5.3k*0.17=$900/year for your healthcare. There would be no out of pocket costs so $900 would be your total cost.

However, you also have to add in other taxes like VAT too, so it's not an easy calculation, but even with VAT the cost of living in the UK is similar to that in the US with some things being more expensive and some less so the average individual is better off. The US system has the advantage that you can directly see how much you are paying for healthcare where the UK system has it buried in general taxation. If you just take the NHS budget of 100B pounds and divide by the UK population of 60M that gives a cost per capita of 1.7k pounds or $2.7k/year.

So maybe we can say that as a retiree you'll pay about half as much in the UK for your healthcare as in the US and you won't have to worry about out of pocket costs or keeping a contingency fund.

[Sirka]

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Originally Posted by nun The thing that saddens me is that many Americans with health insurance aren't more outraged that they pay twice as much as people in other countries for poorer coverage.

+1
As long as most people receive 'almost free' health insurance through their employer they will not see the problem we are facing in retirement. Some people go back to work for 'free' insurance when their spouse gets sick.
I am outraged that we spent Billions of $ around the globe and at home we ask the retirees to pay more or "fair share' for basic health care.

[Free_at_49]

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Originally Posted by nun Getting back to the original question and contrasting the cost with the UK is interesting. If you're an average single employee in the US you'll pay 1.45% in Medicare tax and lets say $5k/year in premiums and you'll need a contingency of $5k for out of pocket costs (that's obviously a gross simplification, some employers will pay some of the premiums, so the number paid by the employee might be less, maybe $2k). If you get an average salary of $55k that comes to an annual cost of $5.8k (or maybe $2.8k if you have a good plan). If you get sick that could quickly approach $10k with co-pays and deductibles. Once you retire the Medicare tax goes away as you don't have earned income, and your premiums and out of pocket costs might be $5k and you'll also still need to keep a $5k contingency if you get seriously ill or need specialized drugs or services. In the UK the average salary is $42k and the tax and national insurance on that for a single person who saves 10% into a pension is $8.6k. As the UK spends 17% of it's budget on health care that makes the average UK worker's cost for healthcare $1.5k a year. As there are no out of pocket costs there's no need to keep a contingency fund. If you are retired (over 65) there's no national insurance and so on $42k income you'd pay $5.3k tax and be contributing $5.3k*0.17=$900/year for your healthcare. There would be no out of pocket costs so $900 would be your total cost. However, you also have to add in other taxes like VAT too, so it's not an easy calculation, but even with VAT the cost of living in the UK is similar to that in the US with some things being more expensive and some less so the average individual is better off. The US system has the advantage that you can directly see how much you are paying for healthcare where the UK system has it buried in general taxation. If you just take the NHS budget of 100B pounds and divide by the UK population of 60M that gives a cost per capita of 1.7k pounds or $2.7k/year. So maybe we can say that as a retiree you'll pay about half as much in the UK for your healthcare as in the US and you won't have to worry about out of pocket costs or keeping a contingency fund.

If you go live in UK won’t you be subject to income tax there too as a permanent resident? VAT is tricky though. When I’m in EU for a few months, living off my US after-tax income, I feel double-taxed because VAT is a consumption tax on your disposable income. So driving through France, Italy and Greece with gas at 1.5euro/liter it gets expensive . . .

[Alan]

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Originally Posted by Free_at_49 If you go live in UK won’t you be subject to income tax there too as a permanent resident? VAT is tricky though. When I’m in EU for a few months, living off my US after-tax income, I feel double-taxed because VAT is a consumption tax on your disposable income. So driving through France, Italy and Greece with gas at 1.5euro/liter it gets expensive . . .

Yes, as a retired resident in the UK you will pay income tax but no National Insurance Tax (equivalent to FICA and Medicare tax).

That is why nun allowed for this cost when he said:

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If you are retired (over 65) there's no national insurance and so on $42k income you'd pay $5.3k tax and be contributing $5.3k*0.17=$900/year for your healthcare. There would be no out of pocket costs so $900 would be your total cost.

[Alan]

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Originally Posted by Free_at_49 I feel double-taxed because VAT is a consumption tax on your disposable income. So driving through France, Italy and Greece with gas at 1.5euro/liter it gets expensive . . .

High taxes on gas in Europe are meant to encourage car-pooling for work and use of public transportation. We spent 7 months in the UK last year and managed quite nicely on public transportation, including a trip to Dublin and Cork, and also to Madeira.

When I used to work in the UK I car-pooled to work with 3 other guys.

[nun]

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Originally Posted by Free_at_49 If you go live in UK won’t you be subject to income tax there too as a permanent resident? VAT is tricky though. When I’m in EU for a few months, living off my US after-tax income, I feel double-taxed because VAT is a consumption tax on your disposable income. So driving through France, Italy and Greece with gas at 1.5euro/liter it gets expensive . . .

Yes as a UK resident I'd have to pay UK income tax, and as a US citizen I'd be liable for US tax too, but my UK tax would be used as a foreign tax credit and that generally covers any US tax due.....so practical upshot is usually zero US tax due.

...also as an estimate of the total cost of healthcare for the average UK person it turns out that national insurance and income tax are 50% of UK government funding, so at most the cost of healthcare would be twice the amount I calculated using just income tax and national insurance tax.

So for someone earning the UK average wage of $42k that would be $3k and for a retiree with the same income it would be $1.8k. Half would come out of income and NI taxes and the other half would come from VAT, real estate taxes, tax on gasoline etc etc.......Thats a bit of an exaggeration as I'm not accounting for taxes like corporation tax that the individual doesn't pay.

[Free_at_49]

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Originally Posted by nun Yes as a UK resident I'd have to pay UK income tax, and as a US citizen I'd be liable for US tax too, but my UK tax would be used as a foreign tax credit and that generally covers any US tax due.....so practical upshot is usually zero US tax due.

If you calculate everything in a “selfish” way, it’s always cheaper to live in a socialist EU country.

For me just the thought that TWO countries want to tax my income is very disturbing. Canada doesn’t, but the US will tax you for life even if you never come back, you’re like an indentured slave. And if you get out of line they’ll extradite you from Britain straight into a US jail. Funny thing is I got my US citizenship just to please my wife, the application fee was ~80 bucks, I wouldn’t do it again.

[Free_at_49]

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Originally Posted by Alan High taxes on gas in Europe are meant to encourage car-pooling for work and use of public transportation. We spent 7 months in the UK last year and managed quite nicely on public transportation, including a trip to Dublin and Cork, and also to Madeira. When I used to work in the UK I car-pooled to work with 3 other guys.

You went to Portugal with public transit?!! Let me guess, TGV to southern France, then train to Spain (gosh that rhymes), then bus to Madeira?

[nun]

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Originally Posted by Free_at_49 If you calculate everything in a “selfish” way, it’s always cheaper to live in a socialist EU country. For me just the thought that TWO countries want to tax my income is very disturbing. Canada doesn’t, but the US will tax you for life even if you never come back, you’re like an indentured slave. And if you get out of line they’ll extradite you from Britain straight into a US jail. Funny thing is I got my US citizenship just to please my wife, the application fee was ~80 bucks, I wouldn’t do it again.

US taxation on citizenship is bizarre, but tax treaties mean that a US citizen end up paying the greater of the tax in the US or the country or residence. many people can be taxed in two, or more, places because or combinations of citizenship, residency and location of source income.