Planned Medical Expenses

[smjsl]

Well, medical costs are of course the big unknown for ER planning; so I wonder what do people do in this area? Please share your thoughts and considerations. I appreciate any responses. If you can break it down for a newbie, that would be great! (The more details, the more we can appreciate on how believable the estimates are.)

How much do you plan to (or already) spend in ER on your medical expenses? If you can, please include ALL expenses including premiums, out-of-pocket costs, drug costs, catastrophic coverage, dental, eyes, LTC (if any) etc. Also do you have a number in mind for both average and maximum amounts? Do you have a worst-case scenario cap (e.g. after $100k my plan will pay 100%)?

What do you assume for inflation for your medical expenses?

How do you account for worsening health as you age?

Please also indicate number of covered people and whether you are in US. I would be very interested about the same questions for Canada (there are dental/eye/misc medical expenses there too).

According to test-driving-retirement-plans: Personal Finance News from Yahoo! Finance, one plan estimated yearly costs of 13k@7% inflation while another 11k@2.6% inflation for 2 people ~60yo... (which for example means 30 years from now one plan assumes YEARLY cost of ~100k and the other ~24k). And it's unclear if those figures included everything and whether they had max caps on those plans.

I read some earlier related threads here and I see folks here with ranges of $500-1000-1500 per month with 5k-10k deductable plans but it's not clear to me what would be the total average expenses (including all those other items), and whether there is any max that you are budgeting for these (not to mention inflation/worsening health considerations)...

Also, if you are in a plan and you get cancer for example, is the company required to keep insuring you forever and cannot single you out for increasing your premiums? What if it goes out of business? Then I guess you are out of luck, right? (well, maybe state's high-risk pool is where you end up... what are the costs there? any maximum out-of-pocket for services and drugs?)

BTW, for LTC, I figure I don't need it because when I need the coverage, I'll just spend whatever I have left at that point (no children / dependents for me... so far) and then will have to go on gov program if still alive... but let me know if you think this might be a wrong approach.

On the other hand, something like a cancer where I might still live for decades makes me nervous about not having some max protection but I have no idea what it would cost to have such protection (obviously not limited to cancer but to ALL costly medical problems where you still can live for a while).

Final thought: I think for planning purposes it's useful to assume that Obamacare will fail - if it succeeds, then (a) plans would have to be adjusted anyway when it's more clear what is available, and (b) it can always be reversed by next presidency.... so just trying to get a handle on this under existing rules.

 

[FIREd]

I am budgeting $15K (2009$) per year for 2 people and I am assuming CPI+2% inflation for healthcare expenses (in the US). The maximum we would consider paying for healthcare expenses would be $20K (2009$) per year or 1/3 of our planned retirement budget. If our healthcare expenses were to go any higher than that, we would consider ourselves priced out of the US and moving abroad would become an attractive option.

I used what may look like a surprisingly low inflation number (CPI+2%) but, quite frankly, if healthcare inflation continues to far outpace CPI, nobody but the rich will be able to afford health care in this country in 10-20 years. So I think that, one way or another, things will have to change.

 

[bizlady]

We will be able to continue a reasonably decent medical/dental/vision plan once DH retires at 55 with reduced premiums from what we would find on the market. We are budgeted to pay (today's dollars) 9k per year with a 3.5% increase for the two of us until age 65. After that, we are budgeted for $5000 per year for supplemental coverage. We wonder though if 5k may be too low an amount. FIRE in 18 months.

 

[fisherman]

We pay $500 for Ins premiums on a private policy for us. we have a $5150 deductible total for all then insurance is suppose to pay 100%. We fully fund the HSA every year and assume 15% increases in premiums since experience has been 12% premium increase. This does not include vision or dental. We are able to barter that for now and also have an amount that we budget for it.

 

[Rich_by_the_Bay]

If predictability is a high priority, you should obtain the broadest and deepest insurance policy you can get, with low co-pays, low deductibles, and a prescription plan. Your premiums (at some high rate of increase yearly) plus a couple thousand would be a reasonable planning guess.

But you will save money over the long run (if you are healthy) with a high deductible policy plus a health savings account. In a given hear, your expenses may vary by thousands but you will come out ahead in the end barring serious and unpredicted health problems. Then there's governmental reform to guess about...

It's a bit like trying to guess how the market will do over the next 5 or 10 years.

 

[youbet]

After that, we are budgeted for $5000 per year for supplemental coverage. We wonder though if 5k may be too low an amount. FIRE in 18 months.

OK, $5k for supplemental. But how much are you budgeting for Medicare premiums? Medicare is far from free and likely to be increasing for those who can afford to pay.

I've pencilled in $12k/yr for DW and myself to have Medicare and a supplemental policy and haven't decided on an inflation factor yet.

 

[charlie]

DW and I pay a total of $384.15/month for supplemental insurance
through United Health Care sponsored by AARP (one of the good
perks of being a member). This is the Texas rate, which is the
same for all ages for "type F" insurance. I am very pleased with this
policy as it has saved my financial bacon more than once since being
retired.

Cheers,

charlie

 

[youbet]

DW and I pay a total of $384.15/month for supplemental insurance
through United Health Care sponsored by AARP (one of the good
perks of being a member). This is the Texas rate, which is the
same for all ages for "type F" insurance. I am very pleased with this
policy as it has saved my financial bacon more than once since being
retired.

Cheers,

charlie

Thanks for that info charlie.

What is your total bill for the supplemental policy plus Medicare premiums?

 

[Katsmeow]

I think this is a great uncertainty especially for people retiring before medicare kicks in and who have no retiree health insurance through employment. I think it is prudent to assume you won't find some great low cost policy. I have looked at the Texas health insurance pool cost as perhaps an idea of what coverage costs. For example for me it would cost about $9500 a year for a $5000 deductible policy. I could pay a little more and get a $3000 deductible HSA policy which would seem worthwhile. Of course, if I retired now we still have children insured through us so if DH and I both retired (he would have retiree coverage through work but we wouldn't) I priced that cost for the kids and me. It would be about $20k a year with $3000 deductibles on each of us with HSA.

 

[charlie]

Youbet

Our SS checks automatically deduct the Medicare premiums and I don't
recall the exact amout .... around $90/month if memory serves for each
person on SS. I am sure you could find the exact amount on the SS
website.

Cheers,

charlie

 

[teejayevans]

It's a bit like trying to guess how the market will do over the next 5 or 10 years.

Not quite, I can guarantee that health expenses aren't going down, I
wish I could say that about the stock market.
TJ

 

[Bikerdude]

There was a study done recently that predicted a 65 y.o. retiree would spend $250,000 in out of pocket medical expenses (insurance premiums, deductibles and co-pays) in a retirement lasting 35 yrs.

 

[tmm99]

There was a study done recently that predicted a 65 y.o. retiree would spend $250,000 in out of pocket medical expenses (insurance premiums, deductibles and co-pays) in a retirement lasting 35 yrs.

Does this mean people in the study lived to be 100 years old??

 

[RonBoyd]

Does this mean people in the study lived to be 100 years old??

Why not? When making a prediction, people can live to any age because... well, see my signature lines.

 

[walkinwood]

We (me & DW) pay $370/month each. I project CPI+2%. If you project much more, it becomes unrealistic very quickly. Our annual out of pocket Medical has been about $1200 for both of us. I don't plan to get LTC insurance any time soon - we both in our late 40s. We chose not to have dental insurance, but see the dentist regularly and pay for the service.

We're only in our 2nd year of ER, so take that into account.

This is all the planning I've done for medical expenses. Given the flux of the situation right now, it is impossible to model the future with any accuracy. If you have time before you ER, wait for a couple of years before spending too much time on this task.

I believe that ER is a leap of faith - you can't model everything and even if you can, its still a model & physics it is not.

 

[smjsl]

Thank you for all the replies. To summarize, the picture I am getting so far is the following for 2 people medical expenses (I used half of deductible to estimate expenses for folks that did not post actual expenses):

Expenses range 9k-12k per year with "outliers" from 5600 on one end to 15k on the other.

Inflation estimates for medical expenses range from 3.5% to cpi+2% to 15%

There is also an interesting related post at 2million Personal Finance Blog, My Journey to Financial Freedom on this, which gives me an estimate of going from 5k to 12k for ages 40 to 65 respectively (for someone with high-risk situation, plan B in that table). This highlights the double-inflation problem - your expenses increase because of both regular price-increase inflation AND your age going higher and thus you being the higher-risk to insurance company.

Wonder what people have for their maximums. If you needed at million dollar treatment, how much would you end up paying?

 

[walkinwood]

Inflation estimates for medical expenses range from 3.5% to cpi+2% to 15%
.....
Wonder what people have for their maximums. If you needed at million dollar treatment, how much would you end up paying?

Our premiums increased 15% from 2008 to 2009, which was the max allowed for my plan by the state (NJ).

The plan has no upper limit on reimbursement. Out of pocket max is $5000 / person. The no-cap is very important to us, since the main reason we need the insurance is to prevent getting bankrupted by an illness.

 

[REWahoo]

Well, medical costs are of course the big unknown for ER planning; so I wonder what do people do in this area? Please share your thoughts and considerations. I appreciate any responses. If you can break it down for a newbie, that would be great! (The more details, the more we can appreciate on how believable the estimates are.)

How much do you plan to (or already) spend in ER on your medical expenses? If you can, please include ALL expenses including premiums, out-of-pocket costs, drug costs, catastrophic coverage, dental, eyes, LTC (if any) etc. Also do you have a number in mind for both average and maximum amounts? Do you have a worst-case scenario cap (e.g. after $100k my plan will pay 100%)?

What do you assume for inflation for your medical expenses?

How do you account for worsening health as you age?

I'm a little late to this thread but it seems what you are attempting to do is to "know the unknowable". I suspect there are far too many individual variables to get meaningful information on total medical costs in this way. Information on premiums might be a little more helpful but still much will be anecdotal.

FWIW, our combined annual health insurance premiums ($5,000 deductible, beginning at ages 57 and 58, one in the state high risk pool, the other in the open market) began at $6,400 and have increased to $10,100 in a period of three years - an average of more than 16% per year.

 

[Independent]

You asked about high risk pools. Every state is different, here are premiums for my state (Iowa): HIPIowa: Download Forms
For comparison, this site has sample premiums for underwritten standard Blue Cross in iowa: Wellmark Blue Cross and Blue Shield | Compare All Iowa SimplyBlue Plans

BUT, if you are more than a few years from retirement, this is something that you can only guess at. The costs for individuals will be driven by political decisions more than economics. Under current rules, changes in health status and employment situation can have a huge impact on your costs. IMO, we're going toward a system with less variation, but higher average costs for higher income people.

 

[smjsl]

The plan has no upper limit on reimbursement. Out of pocket max is $5000 / person. The no-cap is very important to us, since the main reason we need the insurance is to prevent getting bankrupted by an illness.

With respect to ensuring that you don't get bankrupt by an illness... Does the 5k limit include drugs? If not, do you have a different upper limit on drugs?

Also, if God forbid, you get into a long-lasting expensive major illness, what provisions do you have for your plan NOT to
(a) kick you out,
(b) increase your premiums to something beyond their "standard"
(c) changing the plan to get rid of their no-cap provision for you or increasing/eliminating your max out of pocket

Thank you

@REWahoo: just trying to get a feel for overall medical expenses, not just plan expenses but ALL of them, including appointments, drugs, dental and vision. Of course variation will be wide, but I have to start somewhere Thanks for the info.

@Independent: thanks for links. I will check them out when I get a chance. I agree politics will affect things but if whatever laws are passed are repealed by a future administration, I still want to get a feel for what it would cost.

 

[DeborahB]

I'm planning to retire at 62 in June. I can get COBRA coverage for the first 18 months. What I'm worried about is the 18 months before Medicare kicks in.

Does anyone have experience with getting insurance when you have pre-existing conditions (as we pretty much all do by this age)?

My current plan is to wait until April or May, apply for private heatlh insurance, and see if I get accepted or denied. That might affect my ability to retire. We have a high -risk pool but I heard it is really expensive ($800 a month) and has a huge deductible. It's really to avoid bankruptcy.

In answer to other questions, I'm budgeting around $12,000 a year in medical expenses including insurance for the years until I turn 65 and go on Medicare. I hope I'm way high on that one.

One reason I'm waiting is to see if they actually pass some sort of insurance reform that affects me. I've had continuous coverage so that may help. And no hospitalizations or really expensive treatments for 13+ years. But insurance can be hard to get...

 

[REWahoo]

Does anyone have experience with getting insurance when you have pre-existing conditions (as we pretty much all do by this age)?

Yes. DW's only option was the state high risk pool (not all states have them). Her premium is 2X mine (no pre-existing) for essentially the same coverage.

If you haven't already seen this thread you might want to check it out: http://www.early-retirement.org/forums/f47/faq-archive-buying-private-health-insurance-30756.html