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Escalating Health Care Costs in Retirement
Old 03-29-2009, 10:26 PM   #1
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Escalating Health Care Costs in Retirement

I had been calculating health care costs to increase at about 5% in my retirement planning. According to the latest numbers by Fidelity that is too low...

planadviser - IMHO: The Mean-ing Of Average

For those with employer benefits if you have to cover premiums you still need a sizable amount set aside.

DD
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Old 03-30-2009, 12:20 AM   #2
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Quote:
Originally Posted by DblDoc View Post
I had been calculating health care costs to increase at about 5% in my retirement planning. According to the latest numbers by Fidelity that is too low...

planadviser - IMHO: The Mean-ing Of Average

For those with employer benefits if you have to cover premiums you still need a sizable amount set aside.

DD

Haven't you heard that deflation is taking hold? Soon we'll be paying prices from 10 years ago.

Either that, or medical care will suck up every dollar in the economy, we'll be forced to stop eating, driving, drinking, smoking, ski-ing and every other thing other than going to the doctor and getting tests. This will vastly improve mortality and morbidity statistics, and doctors will start getting layoffs.

Ha
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Old 03-30-2009, 04:58 AM   #3
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The bottom line is that those of us who bust their balls to stay in shape and remain healthy will continue to pay through the nose for the medical care of the vast majority of who choose to remain unhealthy. Kind of like the commercial where the guy says he's not willing to give up taste for the healthful consumption of fiber!! Gotta love it!
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Old 03-30-2009, 07:40 AM   #4
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Originally Posted by DblDoc View Post
I had been calculating health care costs to increase at about 5% in my retirement planning. According to the latest numbers by Fidelity that is too low...
Anything could change, but I recall 10-11% per year being more typical. It will be really difficult to estimate given the probable escalating pace of reform, but I'd plan more than 5% per year at least for the next 4 years.
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As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 03-30-2009, 11:14 AM   #5
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What I see happening, under the present system, is that more and more people become uninsured because they don't have jobs and can't afford the cost of private insurance. As a result health care providers have a smaller % of paying customers (cash and insured). The costs of providing health care falls more and more on the cash and insured user, concentrating the cost on a smaller and smaller portion of the population.

If those who are paying for care can't continue to carry the cost for the remainder of the population, health care providers can't provide the service without appropriate compensation our 'great' health care system will implode.
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Old 03-30-2009, 12:57 PM   #6
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Originally Posted by DblDoc View Post
I had been calculating health care costs to increase at about 5% in my retirement planning. According to the latest numbers by Fidelity that is too low...

planadviser - IMHO: The Mean-ing Of Average

For those with employer benefits if you have to cover premiums you still need a sizable amount set aside.

DD
I went through this drill with the Fidelity Retirement Planner. They assumed a 2.43% inflation rate and a 7% medical cost rise (before inflation) annually. That sounded reasonable...

After 40 years of retirement, that put my annual medical insurance cost over 200,000 2008 dollars annually, or over 500,000 inflate-O-bucks.

I thought those results were well worth ignoring. I'll go with the Medicare/Soylent Green plan instead.
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Old 03-30-2009, 01:08 PM   #7
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At this point it's hard for me to even plan for health care costs in retirement because I have a feeling the system will look a LOT different in 10-20 years from now with respect to retirees in their 50s and early 60s.

The one thing I am proactively doing is maxing out my HSA, and other than that it's pretty hard for me to plan at this point.
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Old 03-30-2009, 07:13 PM   #8
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Anything could change, but I recall 10-11% per year being more typical. It will be really difficult to estimate given the probable escalating pace of reform, but I'd plan more than 5% per year at least for the next 4 years.
Yes, last year mine went up 10%. This year it will go up 43%. Something must have changed in BCBS pricing model as this appears to be the standard pricing they are quoting for new policy holders also.
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Old 03-31-2009, 08:25 AM   #9
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Our health insurance premiums went up 20% last year in Oregon, despite no changes to our age group or health status (which is excellent).

Since retiring 4 years ago, our premiums have gone from $ 170/mo to $ 300/mo pp for a plan with a large deductible -- a compounded rate of about 15%/year.

Part of this is increase is because we "graduated" into the 50-54 year old group during this time, but given the alternatives, I hope that increasing age will continue to increase our health insurance premiums. This increase in the cost of health insurance as you age is something that I don't think most projections (or most budgeters) take into account.
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Old 03-31-2009, 05:55 PM   #10
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Well, going On Medicare soon and I used a 4% Inflation and Double that for Health Care (8%)
Expecting about 9% of my Retirement income for it.. and growing at 1% apy..and I also have VA Coverage as well.. for Meds, etc.. but pay a $25 co pay for 90 day supply of Brand name meds, etc.. and $50 Dr. & Lab Fees..Any other Meds is thru Wal marts $10 for 90 days Generic's

I saved an extra $100k just to be invested for Health Care..hope it keeps making about 7% apy in bonds, etc.. and we'll be fine.. But Keeping Fingers Crossed anyway
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Old 03-31-2009, 07:00 PM   #11
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Originally Posted by sander06 View Post
The bottom line is that those of us who bust their balls to stay in shape and remain healthy will continue to pay through the nose for the medical care of the vast majority of who choose to remain unhealthy. Kind of like the commercial where the guy says he's not willing to give up taste for the healthful consumption of fiber!! Gotta love it!
Hope it doesn't happen to you, but I've known plenty of clean living, healthy lifestyle people who get diabetes, cancer, MS, etc. Back in the (really really) old days this was the kind of hubris that drew the attention of the gods.

And then there was George Burns. My personal lifestyle hero.
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Old 03-31-2009, 08:45 PM   #12
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Health care costs can't grow faster than GDP forever . . . so a 7%-10% annual growth rate in perpetuity is not a reasonable assumption.

But if you're only paying $300 / month, you can pretty well guarantee that your rate will continue skyward at least until it reaches the average cost of medical care in the U.S., which Kaiser estimates is $7,400 per person each year.
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Old 03-31-2009, 08:59 PM   #13
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When it gets too much I wont pay for the ****. Ill just party on my remaining dollars.
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Old 04-01-2009, 09:15 AM   #14
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Health care costs can't grow faster than GDP forever . . . so a 7%-10% annual growth rate in perpetuity is not a reasonable assumption.

But if you're only paying $300 / month, you can pretty well guarantee that your rate will continue skyward at least until it reaches the average cost of medical care in the U.S., which Kaiser estimates is $7,400 per person each year.
Three things in response:

1. Maybe health care costs can't grow faster than GDP in perpetuity, but they can rise faster for a very, very long time (and they have). See the link below for a chart that shows that health care spending outpaced inflation by over 3% per year between 1960 and 2000. Another source I just read reported that in 1980, health care expenditures in the US were 8.8% of the GDP, and in 2000, they were 13.2% of the GDP. I doubt if these numbers have leveled out since 2000, though I haven't looked up the data.

http://content.healthaffairs.org/con...Altman_Ex1.gif

So 7-10% annual cost increases do reflect the aggregate history of the last 50 years. Given this history, it doesn't seem like such an unreasonable assumption to me.

2. These aggregate costs fail to fully reflect cost increases to individual early retirees. The cost to individual retirees grow faster than these averages because individuals age (hopefully, anyway -- it does beat the alternative). This pushes them into higher premium categories. The cost of health insurance rises by about 5% per year on our current private insurer's rate sheet between the ages of 49 and 64 via ~30% increases at age 50, 55, and 60.

3. Like taxes, health insurance rates vary dramatically from state to state. Some states have guaranteed issue laws which require insurers to accept every applicant regardless of preexisting conditions. In those states, health insurance rates are much higher for everybody, as insurers must take those in poor health into their pool. Oregon does not have such a requirement, and insurers have the right to reject applicants based on their medical history (and they do -- my wife was rejected by BCBS for weighing too little at 5'6"/113). I'm not arguing the superiority of one system over the other, just saying that U.S. averages are kind of meaningless when from state to state, the same person can experience a 2x or 3x difference in the premiums.
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Old 04-01-2009, 09:44 AM   #15
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Whether you bust your balls, or are a couch potatoe, from visiting nursing homes several times a week has made me realize that there is no perfect answer.

We all die, and from what I see, the bulk of expenditure is at the end of life, whether one ate vegys and ran 5 miles each day, or layed on the couch and ate big macs.

If you die quickly, the expenditure is low, if you took care of yourself, but went well into old age, and had a bad fall, ended up in nursing care, the amount of money expendited to warehouse you is way up there.

There is no real answer, most chronic diseases from our sloth like lives and diets are usually taken care of with meds, being inexpensive compared to the massive layouts of end of life care for one whether he lived healthy or unhealthy.

It's those massive layouts for massive effort to keep one housed and alive near the end that eats up the bulk of money spent.

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Old 04-01-2009, 06:01 PM   #16
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Maybe health care costs can't grow faster than GDP in perpetuity, but they can rise faster for a very, very long time (and they have). . . . In 1980, health care expenditures in the US were 8.8% of the GDP, and in 2000, they were 13.2% of the GDP.
I agree.

But there is a big difference between going from 5% of GDP (1960) to 14% of GDP (2005) over the last 45 years and going from 14% to 42% over the next 45.

Clearly the historic rate of growth can't continue.
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Old 04-01-2009, 09:30 PM   #17
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This year I turn 60. What sort of increase in my health insurance should I be prepared for? Anyone know?
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Old 04-01-2009, 09:44 PM   #18
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This year I turn 60. What sort of increase in my health insurance should I be prepared for? Anyone know?
Based on my experience from a couple of years ago, 18-20%.
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Old 04-02-2009, 04:07 PM   #19
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I just added a thread in the Health forum about this. My premium is up 15% in 2009.

NJ: Health insurance premium up by 15%
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