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Protect Yourself from Unexpectedly High Retirement Health Care Costs


More than 40% of retirees encounter health care costs that are greater than they had anticipated or planned for. That’s according to a new study from the LIMRA Secure Retirement Institute.

Here are LIMRA’s key findings:
• Retirees spend 13% of their income on health and long-term care expenses, on average.
• 43% of those with retirement plans still underestimate health care expenses in their golden years.

Furthermore, seniors should plan for continued increases in health care costs, over and above the effects of inflation. According to HealthView Services’ 2017 Retirement Health Care Costs Data Report, health care costs are projected to rise by 5.47% per year for the foreseeable future – more than twice the anticipated Social Security COLA increases.

Translated into dollar terms, those retiring today can expect $404,253 in medical expenses during their retirement, including cost-sharing payments like deductibles and copays, and the cost of vision and dental care.

Other findings in HealthView Services’ report include:
• Medicare supplement insurance premiums will rise by 7.12% per year.
• Social Security COLA adjustments are projected to be 2.9%.
• A 66-year-old retired couple will likely need 59% of their Social Security benefits just to cover health care costs.

Medicare limitations
Medicare does not protect you from all medical costs in retirement. For example:
• There is a deductible of $1,316 for each benefit period under Part A. After 60 days’ hospitalization, you pay a coinsurance of $329 per day. After day 90, your deductible goes to $658 for up to 60 days.
• Medicare Part B only pays 80% of physicians’ charges, lab fees and durable medical equipment. You must pay the other 20% out of pocket. This is on top of your premiums and a $183 deductible per year.
• Basic Medicare does not cover prescription drugs. To get coverage, you must purchase a Part D plan or a Medicare Advantage plan that includes prescription drug coverage.
• Medicare does not generally cover long-term care.

The solution
Seniors can protect themselves from unexpectedly high out-of-pocket costs by owning Medicare supplement insurance (Medigap) or a Medicare Part C (Medicare Advantage).

Depending on the plan you select, each can help you with deductibles and copays and help you avoid financial shocks because of medical events.