Interesting albeit sobering study on Health Care Costs

[kevink]

Like many on this board I subscribe to Paul Merriman's newsletters and articles, and he recently featured this study:

http://www.hvsfinancial.com/PublicFiles/Income_Replacement_Ratios.pdf

It's a lengthy piece but IMHO probably worth a read (or at least a skim) for anyone who isn't quite wealthy and perhaps a few who are.

Merriman's take aways include:

*6-7% annual increases in health care costs for at least the next 10-20 years are very likely, with being on Medicare no exception.

*Internal rates of return (IRRs) in almost all SWR models use 2.5-3.0% CPI inflation and don't account for soaring health care costs.

*Within 20 years and quite possibly sooner many could see their entire SS payment consumed by health care costs.

Maybe pigs will fly and we'll see single payer or Medicare for all before all this completely comes to pass.

 

[youbet]

*Within 20 years and quite possibly sooner many could see their entire SS payment consumed by health care costs.

It happens somewhat frequently now. All of DW's SS is seized to pay for her Medicare and, in addition, she is sent a monthly bill to cover what her SS doesn't. Her monthly SS is a negative number!

Thanks to IRMAA, increasing premiums for my Part B supplemental policy and uninsured dental costs, my SS is substantially, but not completely, eliminated too.

No need to wait 20 years! I wonder what Merriman is thinking when he says that?

Maybe pigs will fly and we'll see single payer or Medicare for all before all this completely comes to pass.

While it might help (or not), a single payer system doesn't necessarily guarantee the arrest of growing healthcare costs. Look at Medicare. We need to control the drivers such as end of life medical costs for our aging population.

 

[lemming]

Is that because of WEP or GPO?

 

[Bamaman]

What's so bad is that there are many institutions in the U.S., like Cleveland Clinic, that know what it would take to have a viable healthcare system. There are individuals within the U.S. government that also know what to do.

But nobody within the government does anything about it because it might affect "The Voters." They're not doing us any favors by not making changes.

To be continued. . . . . . . . .

 

[Mulligan]

20% of the population consume about 80% of the healthcare costs, with most of that being the very young and very old. So if we just get rid of those people we would have low healthcare costs, ha!
I am still with hope that maybe we can reach a bend point at some time. Technology has basically decreased costs of business in all areas but healthcare, which it apparently is doing the exact opposite in this field (ie, fixing things that used to not be fixable and expensive equipment, etc.). A few months ago I heard an interesting interview on this subject from a technology guru. He said inflation was most problematic in areas of medical care and education and work is now being done to zero in on these areas from a technological sense to drive down costs in the future. I hope he is correct...


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[harley]

20% of the population consume about 80% of the healthcare costs, with most of that being the very young and very old. So if we just get rid of those people we would have low healthcare costs, ha!

The problem with that is that you can't get rid of the very young, or there won't be anybody left. And as far as the very old, well, that's a moving number that's hard to define, but that always seems a bit older than I am.

 

[MBSC]

The article states out-of-pocket costs are unlimited under Medicare. While true for Parts A/B/D, this is slightly misleading since that section included Medigap which essentially caps medical (not drug) OOP.

The article states the rate of growth in Part D premiums is expected to slow. This appears to omit increases to cover closing the donut hole.

The 2016 standard, non-grandfathered Part B premium was set at $159.30 and deductible at $223. Congress took action to set the premium at $121.80 and deductible at $166. The article ignores the possibility of future similar action.

When projecting future costs for 45 and 55 year olds, the article fails to consider the Medicare trust fund will be at 80% after 2028 under current law.

The article states IRMAA income thresholds are not expected to adjust for inflation. Inflation adjustments are scheduled to resume after 2020 unless the law is changed before then. IRMAA Code of Federal Regulations: https://www.ssa.gov/OP_Home/cfr20/418/418-1105.htm

(c) Starting on January 1, 2020, the threshold amounts will resume adjustment for inflation as required by section 1839(i)(5) of the Act. In each year thereafter, CMS will set all modified adjusted gross income threshold amounts for the following year by increasing the preceding year's threshold amounts by any percentage increase in the Consumer Price Index rounded to the nearest $1,000.

 

[Alan]

Is that because of WEP or GPO?

He said it is because of IRMAA.

https://www.ssa.gov/pubs/EN-05-10536.pdf

https://www.medicare.gov/forms-help-and-resources/mail-about-medicare/irmaa-determination.html

As your income increases so does your Medicare Premium.

 

[Totoro]

Technology has basically decreased costs of business in all areas but healthcare, which it apparently is doing the exact opposite in this field (ie, fixing things that used to not be fixable and expensive equipment, etc.).

Basically this is the problem as I understood it. We can do so much more as technology marches on. And unlike food, or entertainment, there is no natural "enough is ok" limit to healthcare. Most people want that lifesaving or extending cure, or treatment, regardless of the cost.

We can now cure many types of cancer, keep newborns alive from 20 weeks onwards and keep many elder and severely injured people alive indefinitely with a very poor quality life (including braindead).

I'm not too optimistic on healthcare costs dropping anytime soon, although in the US specifically improving on the price/performance seems very doable.

 

[JoeWras]

I'm OMY (actually, 20 months).

Articles like this encourage me to extend my OMY.

 

[REWahoo]

I'm OMY (actually, 20 months).

Articles like this encourage me to extend my OMY.

I can see why that might be the case. However, another way to look at this is healthcare may become too expensive for us to afford, so I'd rather spend whatever healthy years I have left enjoying retirement, not working.

It's all a matter of perspective.

 

[Mulligan]

I can see why that might be the case. However, another way to look at this is healthcare may become too expensive for us to afford, so I'd rather spend whatever healthy years I have left enjoying retirement, not working.

It's all a matter of perspective.

The next step down the rabbit hole for me if costs escalates is doing what others on Obamacare are already doing...Using it long enough to "fix things" then drop it. Of course when done by the masses this just further exacerbates the premium problem.


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[Marc]

Thanks for posting the article. I can figure a way around $170K MAGI until it eventually does get indexed; however, the scary part to me, was the impact on the survivor when my wife or i die; $85K is a very low limit. As for single payer; I think that would just create more fraud than we have now; either illegal Medicare fraud or "legal" as in a previous post (i.e., gaming obamacare to make someone else pay for your medial costs).

Marc

 

[Golden sunsets]

It happens somewhat frequently now. All of DW's SS is seized to pay for her Medicare and, in addition, she is sent a monthly bill to cover what her SS doesn't. Her monthly SS is a negative number!

Thanks to IRMAA, increasing premiums for my Part B supplemental policy and uninsured dental costs, my SS is substantially, but not completely, eliminated too.

No need to wait 20 years! I wonder what Merriman is thinking when he says that?



While it might help (or not), a single payer system doesn't necessarily guarantee the arrest of growing healthcare costs. Look at Medicare. We need to control the drivers such as end of life medical costs for our aging population.

Perhaps a tad off topic but I thought that Medicare could never exceed SS. Or is it just Medicare increases will never exceed the annual Cola of SS?

 

[Big_Hitter]

Like many on this board I subscribe to Paul Merriman's newsletters and articles, and he recently featured this study:

http://www.hvsfinancial.com/PublicFiles/Income_Replacement_Ratios.pdf

It's a lengthy piece but IMHO probably worth a read (or at least a skim) for anyone who isn't quite wealthy and perhaps a few who are.

Merriman's take aways include:

*6-7% annual increases in health care costs for at least the next 10-20 years are very likely, with being on Medicare no exception.

*Internal rates of return (IRRs) in almost all SWR models use 2.5-3.0% CPI inflation and don't account for soaring health care costs.

*Within 20 years and quite possibly sooner many could see their entire SS payment consumed by health care costs.

Maybe pigs will fly and we'll see single payer or Medicare for all before all this completely comes to pass.

2.5 to 3% isn't that bad, however it should grade up to that over a ten year period (starting with 1.5% or so). The medical/rx trend of 6-7 is pretty high. Maybe start at 6 or so then grade down to 5 over the next 70 years is more reasonable imo.

 

[MBSC]

Perhaps a tad off topic but I thought that Medicare could never exceed SS. Or is it just Medicare increases will never exceed the annual Cola of SS?

If you are not subject to IRMAA, the annual Medicare Part B premium increase can not exceed your annual SS COLA. The SS COLA does not restrict your Part D (drug) premium and Medigap premium increases.

 

[Sunset]

Consumer Reports Magazine this month has an excellent article on a big driver of medical costs.
Which is the cost of medications.
It turns out even old medicines are being jacked up in price by the pharma companies, (example Valent) which is legal and the increases are huge to the point where retired people cannot afford it.

 

[Totoro]

That kind of confuses me though. If the medicine is off patent, how can the price be jacked up so much?

 

[bclover]

That kind of confuses me though. If the medicine is off patent, how can the price be jacked up so much?

One of the problems is that even if a medicine is off patent only one company makes it. No competition, no need to be competitive.

Remember Martin Shkreli? dude who raised the medicine 5000% from 9/pill to 750 bucks a pill?? that drug was 65 years old.

 

[musher]

The hand wringing over medical costs perplexes me. If you consider other areas of the economy where prices are outstripping inflation, they have a major factor in common with medical care:

Significant portions of the costs are paid with other people's money.

(e.g. College)

Disconnect the consumer of a resource from the cost of the resource and you guarantee increased consumption unmoderated by price.

The only sectors of the medical care market that are marked by both improvements in technology and prices in line with or below inflation are those that are not covered by most insurance (e.g. plastic surgery, lazik, ...)

Eliminate comprehensive insurance, ask individuals to pay for their own health care and watch health care track inflation.

When's the last time you heard people worrying about excess consumption and its negative effect on the economy in the market for bread and butter?

 

[audreyh1]

*Within 20 years and quite possibly sooner many could see their entire SS payment consumed by health care costs.

That's pretty much what I'm expecting - after taxes incurred by the additional SS and the various Medicare coverages - very, very little left over. We're pretty much expecting SS to only take of Medicare expenses for us when we are covered.

 

[dixonge]

Or you could make your money last longer

Many U.S. citizens choosing Mexico for affordable health care again - Borderzine

 

[DEC-1982]

Or you could make your money last longer

Many U.S. citizens choosing Mexico for affordable health care again - Borderzine

+1

And not just for health care.

As long as one is not expecting a duplicate of the US elsewhere, and one goes with a positive attitude, there are a lot of cheaper choices in the world. I recently bought and have been reading Tim Leffel's book, "A Better Life for Half the Price". An eye-opener.

 

[JoeWras]

I can see why that might be the case. However, another way to look at this is healthcare may become too expensive for us to afford, so I'd rather spend whatever healthy years I have left enjoying retirement, not working.

It's all a matter of perspective.

VERY good point. Thanks REWahoo, you got me back on plan.

I'm already breaking down and afraid in 20 mos. I won't be able to do what I want. I'll really be screwed adding 5 years onto that. So, I won't. Back to plan.

 

[Sunset]

Medicare is not allowed to negotiate drug prices with the pharma companies. Unlike other countries where the gov't buys huge amounts of drugs and does negotiate with those exact same pharma companies.
It's one sided free enterprise and does not lead to lower drug costs, in fact encourages higher drug costs.