How to figure out how much health care will cost?

[Retch The Grate]

So, one of my big questions marks for my FI planning is health care costs. Between insurance premiums and out of pocket payments it seems like I need to expect a huge number that gets even larger after I retire.

I'm skeptical that Medicare will persist in being sufficient coverages, so I'm assuming I need to fund my own care for my entire life, and my horizon is out far enough that the years of outsized rate increases seem to imply it will cost more than anybody can afford... Clearly there is some point where it simply isn't affordable.

Anyhow, that leaves me juggling things like estimating $5000 a year for paying all of a high deductible + an additional $3000 a year in premiums, to figuring I need $1500 a month to cover out of pocket expenses as well as massively inflated premiums (my perception of insurance costs for older folks is more in the $400-500 a month range already with plenty of inflation to occur before I am at FIRE stage).

Anybody have thoughts or suggestions for the long term look at medical expenses, and how to figure out what is reasonable to budget for? If I use my low estimate of $8k, and the 4% SWR it needs $200,000 to fund that portion of FIRE (not including the fact that I have to pay taxes on the income which means it needs even more supporting it), but if I take the upper number and a the paranoid SWR of 3% it turns into $600,000 which is a big jump in portfolio size to have to reach...

 

[kevink]

Seems to me this is something one can only plan for very imperfectly. Unless you're going to be covered by a pension or be filthy rich I think you have to have a Plan B, and probably a Plan C as well.

The U.S. system is broken and our fearless leaders continue to be in denial about entitlement programs (while our citizenry is never reminded that this is a non-issue in any other first world - and many third-world - countries due to single payer).

My (admittedly hazy) crystal ball says premiums will spike greatly between now and 2014 when the new health care rules take full effect. After that, those of us living off of assets with modest taxable incomes will be eligible for substantial subsidies (my wife and I would actually qualify for Medicaid). This calculator is interesting to look at:

Health Reform Subsidy Calculator

Now with doctors who accept Medicaid patients rare as hen's teeth and the program itself in dubious shape for the long term how much this coverage is worth is worthy of debate, but at the least it's hospital/ER coverage.

Our plan B's include getting most or all of our care in Mexico or Thailand (something we already have much experience with). Depending on your age and marital status, marrying someone from the EU or Canada might be another worthy strategy .

 

[ls99]

My current PA shall issue policy is $ 650.- per month for self. Does not cover ambulance services, has a truck load deductibles.

 

[Retch The Grate]

Our plan B's include getting most or all of our care in Mexico or Thailand (something we already have much experience with). Depending on your age and marital status, marrying someone from the EU or Canada might be another worthy strategy .

I've actually got dual-citizenship, so I guess theoretically I could try and get my care in Ireland, but somehow that seems pretty hard to schedule, plane flights aren't cheap. I do love Thailand and the medical care seems great (and shockingly affordable even for a farang, my uncle's annual health insurance is under $2k, despite his age and medical conditions), so it is one of the things in favor of my "game studio on the beach" retirement fantasies...

 

[Retch The Grate]

My current PA shall issue policy is $ 650.- per month for self. Does not cover ambulance services, has a truck load deductibles.

yeah, that's the sort of number that makes me think the $1500 a month estimate isn't unreasonable at all (but OMG how will most people ever afford health care at that rate??).

 

[kevink]

Yep, saw a bumper sticker the other day that sums the situation up perfectly:

"America's Health Care Plan:

Don't Get Sick

Don't Get Old"

We love living in the U.S., but having just returned from 18 months of living in Mexico, where we paid $20 for dental cleanings using better equipment than most dentists here have, and 150 pesos (~$12) to see a U.S.-trained MD with 40 year's experience dealing with the insurance and health care system here is surreal. We met many people living there who described themselves as "health care refugees," typically spending less on food and rent combined than they spent on insurance premiums alone in the U.S.

I suspect at some point far down the road we will capitulate and do single payer, but it looks like a very ugly journey to get there. Time to polish up our Thai and Spanish.

 

[Retch The Grate]

I suspect at some point far down the road we will capitulate and do single payer, but it looks like a very ugly journey to get there. Time to polish up our Thai and Spanish.

I've been impressed by how little Thai one needs to get around in Thailand. You can negotiate prices on a calculator, and enough brands are visually the same that I can successfully shop at a Tesco/Lotus (seriously?), Makro, or the local small town supermarket for most household products.

As much as I love Thailand I'm not sure I'd be able to give up my social network here in California and move there even with family and friends (both Thai and ex-pats) there already. But it does help towards making that particular FI path seem interesting...

 

[wanaberetiree]

(my wife and I would actually qualify for Medicaid).

How do you come to this conclusion? What are the assumptions?

 

[dex]

Anyhow, that leaves me juggling things like estimating $5000 a year for paying all of a high deductible + an additional $3000 a year in premiums, to figuring I need $1500 a month to cover out of pocket expenses as well as massively inflated premiums (my perception of insurance costs for older folks is more in the $400-500 a month range already with plenty of inflation to occur before I am at FIRE stage).

Anybody have thoughts or suggestions for the long term look at medical expenses, and how to figure out what is reasonable to budget for? If I use my low estimate of $8k, and the 4% SWR it needs $200,000 to fund that portion of FIRE (not including the fact that I have to pay taxes on the income which means it needs even more supporting it), but if I take the upper number and a the paranoid SWR of 3% it turns into $600,000 which is a big jump in portfolio size to have to reach...

Estimating health ins costs become more difficult the longer you go out. I just changed my inflation rate to 15% for health ins. I don't think you should be planning on spending 5k/yr for the deductible every year.

BCBS of Georgia - you can go to their site and see the plan options.

I just got an increase from 160/mo to 202/mo for turning 55 (55-60 age group)
Smartsense 5,000
3 dr visits w/tests for $35 copay
5,000 deductible 70/30 split - I think
8,000 max out of pocket
generic medicines
Emergency room 70/30 split

Again you can save $ by switching plans - there is a similar plan to the above that has a different Emergency room plan and doctors included. Let's say the above plan has 98% of all doctors the other plan has 95% - the other plan has my Dr. ans Hospital so no issue. It was about $160/mo
Note
Asking for a Rollback is asking for a review of your plan and it dies not cover existing conditions - for 18 months, I think. I don't have any.
Also, going to a new plan - existing conditions may not be covered.
Obamma care might have changed that. Maybe that is why I couldn't get a rollback when I asked about it.

The deductible depends upon your condition and medical history - what is likely to happen.

Let's say you raise your deductible to $5,000 and generic medicine - est. save 200/month or 2400/yr it would take about 1 year to cover the increase from 2,700 to 5,000 if you needed it or 2 years to cover the total 5K

Another way of thinking about the deductible is that if you are using $5K something serious happened and you will need time to recuperate. So, you will not be using other money in your budget - eating out or traveling.

Let me know if you have any other questions.

 

[kevink]

How do you come to this conclusion? What are the assumptions?

In our case I go to the Kaiser calculator I provided the link to and enter, say, 20K for our probably family income and it comes back saying Medicaid. I don't know if you're already retired but if not the decrease in tax rates when you are living solely off of investments with no earned income is dramatic, and all the more so if all of your investments are invested with tax efficiency in mind.

 

[wanaberetiree]

In our case I go to the Kaiser calculator I provided the link to and enter, say, 20K for our probably family income and it comes back saying Medicaid. I don't know if you're already retired but if not the decrease in tax rates when you are living solely off of investments with no earned income is dramatic, and all the more so if all of your investments are invested with tax efficiency in mind.

I did hear this explanation several times; this is what I tried as well (not retired yet, but dreaming for 2014). One thing I can't get - so it actually does not matter the size of the portfolio you live off (say $1, 2 M), the only what matters is your annual income to be eligible for Medicaid. Odd, but I will take it

 

[Dennis]

Well, been retired for 10 yrs now..
Health care? Is a Joke.. They really don't know.. It's all a Sham ..
Been better off just letting Nature take it's course vs spending Not just $, but going thru alot of Stress and aniexity...

The Med. Profession is like leeches.. Their 1st goal is to Make $.. They have too, to support Both (a) their Families and (b) Their Way of thinking to Try to Help Everyone, no matter what the cost.

One Hospital Group on Cable ..said they had to pay out over $340 Million in Care to Uninsured people just Last Yr Alone..and As a Whole? over $60 BILLION was Spent on the Uninsured.. by all US Hospital Groups..Just in 2008 alone..

Too many Minorities having too many Kids,created more poverty and Crime.. But, When you suggest Family Planning or Birth Control? God Forbid! But the rest of us Do it, just Simple Math , If it takes $5k to support each Child, you have as many as you can afford..and that's it.. Get the Tubes Tide..or whatever..

We go to oour Dr.'s and Hospitals, only to be Delayed by an extra Hour or longer, because of Emergencies taking care of those people.. and they say over 33% of our Premiums are paying for it..

You best plan on needing at least 33% if not 50% of your $ in the future..

And I think we need to allow those Illegals to come here, but they either the Men have to serve 4 yrs in our Military & the Girls In our Nursing Homes..or until they can pass our citizenship test..Otherwise Don't come here.. There is No Free Lunch!

 

[fisherman]

Family of four here. Monthly premium now at $500, bare bones policy, with a $7000 deductible. 15% - 25% increases every year since ESR.

For us 2014 per the calculator will see our costs drop dramatically and for a policy with more coverage. The question is will the law stand until then?

 

[BigNick]

I've been impressed by how little Thai one needs to get around in Thailand. You can negotiate prices on a calculator, and enough brands are visually the same that I can successfully shop at a Tesco/Lotus (seriously?), Makro, or the local small town supermarket for most household products.

As much as I love Thailand I'm not sure I'd be able to give up my social network here in California and move there even with family and friends (both Thai and ex-pats) there already. But it does help towards making that particular FI path seem interesting...

My daughter has a college friend who is from Thailand. His mother is Thai and his father is American. They have lived together in Bangkok for 22 years.

And yet, during this time, neither his father nor his mother has learned each other's language. They seem to get along just fine knowing perhaps 50 words of English and Thai respectively. When they need to communicate about something complex, the son - who of course is perfectly bilingual - gets called in.

I find that story to be surprising, funny, shocking, and charming, in roughly equal measure.

 

[Retch The Grate]

My daughter has a college friend who is from Thailand. His mother is Thai and his father is American. They have lived together in Bangkok for 22 years.

And yet, during this time, neither his father nor his mother has learned each other's language. They seem to get along just fine knowing perhaps 50 words of English and Thai respectively. When they need to communicate about something complex, the son - who of course is perfectly bilingual - gets called in.

I find that story to be surprising, funny, shocking, and charming, in roughly equal measure.

That's pretty amusing. All my Thai friends have pretty good english, the ones married to farangs do have better English than their partners' Thai, but many people in that situation seemed to be actively working on that. I'd love to learn the language someday myself, but that would probably take spending an extended period of time in Thailand as the podcasts I've tried learning from have demonstrated.

 

[wanaberetiree]

In our case I go to the Kaiser calculator I provided the link to and enter, say, 20K for our probably family income and it comes back saying Medicaid. I don't know if you're already retired but if not the decrease in tax rates when you are living solely off of investments with no earned income is dramatic, and all the more so if all of your investments are invested with tax efficiency in mind.

Here is the quote from Are You Eligible? Medicaid Eligibility

"Many groups of people are covered by Medicaid. Even within these groups, though, certain requirements must be met. These may include your age, whether you are pregnant, disabled, blind, or aged; your income and resources (like bank accounts, real property, or other items that can be sold for cash); and whether you are a U.S. citizen or a lawfully admitted immigrant. The rules for counting your income and resources vary from state to state and from group to group. There are special rules for those who live in nursing homes and for disabled children living at home."

It does seem that no income is not enough to qualify as of today.

Will this qualification requirement change in 2014?

 

[kevink]

That's a general Medicaid info site you linked to, and doesn't apply to the expansion of Medicaid coverage under the Obama plan. Here's a link to a paper from the Kaiser site that clearly states (2nd paragraph) that qualifying for a subsidy depends on income, and there is not asset test:

http://www.kff.org/healthreform/upload/7952-03.pdf

There's been some discussion of this over on the Raddr forum as well. One poster pointed out that there are just too few of us (ER'd people living off of assets only with low taxable incomes and no or poor health insurance) to be singled out.

Of course, by the time 2014 rolls around and all this kicks in (assuming there are no major changes between now and then - by no means a sure thing) whether there will still be any doctors around accepting Medicaid patients may also be an open question. I don't think there's any real way to plan, given how screwed up things are, except to take the best possible care of yourself and save a bundle.

 

[Retch The Grate]

Estimating health ins costs become more difficult the longer you go out. I just changed my inflation rate to 15% for health ins. I don't think you should be planning on spending 5k/yr for the deductible every year.

My thought on that part is that in years where I am not sick, that 5k a year can be saved for real emergencies, or spent on fun stuff like travel, with the assumption that if I hit a point where I am paying out thousands of dollars a year for actual care, I probably am too sick to be doing tons of fun travel... I just feel like if I only budget $100 a month for it because I could get a high deductible plan at that rate, that I'm massively raising my risk that my plan will fall apart.

 

[dgoldenz]

Family of four here. Monthly premium now at $500, bare bones policy, with a $7000 deductible. 15% - 25% increases every year since ESR.

For us 2014 per the calculator will see our costs drop dramatically and for a policy with more coverage. The question is will the law stand until then?

And your taxes will increase accordingly.

 

[fisherman]

And your taxes will increase accordingly.

I posted useful factual information response to the original posters question. My info included an actual calculation from the published law.

You stated a politically motivated falsehood that is not backed by actual facts. Since we would qualify for the subsidy then you know what our taxes would be and they are not likely to rise 50% as you stated.

This has been a great board for many years but unfortunately some people like you have to post your politically motivated opinions instead of useful facts. You must live a really boring life to need to spend time posting such cr*p.

Here is an opinion for you in return, Health Insurance brokers like you will not be needed in 2014 and that is what really has you upset. I hope you find a more profitable use of your time than beating a "dead horse" as you have been.

Stick to posting useful informative information as I have and we will all benefit!

 

[dgoldenz]

I posted useful factual information response to the original posters question. My info included an actual calculation from the published law.

You stated a politically motivated falsehood that is not backed by actual facts. Since we would qualify for the subsidy then you know what our taxes would be and they are not likely to rise 50% as you stated.

This has been a great board for many years but unfortunately some people like you have to post your politically motivated opinions instead of useful facts. You must live a really boring life to need to spend time posting such cr*p.

Here is an opinion for you in return, Health Insurance brokers like you will not be needed in 2014 and that is what really has you upset. I hope you find a more profitable use of your time than beating a "dead horse" as you have been.

Stick to posting useful informative information as I have and we will all benefit!

I'm not upset that they're pushing health brokers off the cliff, I could care less. I can sell life insurance or disability instead and keep making what I make. I'm more angry about the law itself, but this isn't the politics forum so I won't post 4 paragraphs about it. Just remember that nothing in life is free.