As published in the Baker City Herald
and the La Grande Observer
INVEST-I-VISION
Will Staying Healthy Reduce Health Care Costs?
Medical and long-term care costs represent a substantial risk for most people. In fact, medical debt is one of the top causes of bankruptcy in America. Purchasing health insurance is a common-sense decision and a key component of financial planning. It should be a top priority for everyone. But the healthier you are the less you will have to spend on health care. Right? Yes and no. Short term the answer is yes, but longer term it may not be so simple. A brief, by The Center for Retirement Research at Boston College, titled: “Does Staying Healthy Reduce Your Lifetime Health Care Costs?” shows that current health care costs of healthy retirees are lower than those of the unhealthy; the healthy actually face higher total health care costs over their remaining lifetime.
Why is this?
The researchers cite three reasons: First: people in good health can live a lot longer. At age 80, people in healthy households have a remaining life expectancy that is 29% longer than people in unhealthy households. Statistics tell us the healthy are therefore at greater risk of incurring health costs over more years. It makes sense when you think about it. Second: health can change at any time. And third: people in healthy households actually face a higher lifetime risk of requiring extensive help with daily living activities as their age advances.
A 65-year-old couple with one or both having one or more chronic conditions can be expected to pay about $220,000 in lifetime healthcare expenses. The expenses include Medicare premiums, supplemental insurance, copayments for covered doctor visits and medications, along with payments for what is not covered by Medicare, such as dental care, vision care and the biggest risk, long term care. How does this compare for a couple with no chronic conditions? The data tells us their tab will be $40,000 more or $260,000. These numbers are averages so they can vary quite a bit.
The big variable is the possible need for long term care because neither Medicare, nor Medicare supplemental coverage, also known as Medigap insurance, nor standard health insurance covers long-term care. And it can be very expensive.
As published in the Baker City Herald
and the La Grande Observer
The Center for Retirement Research’s conclusion:
“When deciding how much to save for retirement, and how rapidly to draw down their wealth during retirement, households need to consider what risk they are prepared to accept of having their assets substantially depleted by health care, whether they are above or below the average risk of incurring exceptionally high costs, and whether they should insure against health care costs by purchasing long-term care insurance.”
The LTC industry tells us the earlier you buy a policy the less expensive it is. As a general rule the best age to buy long-term care insurance is age 60, because you are less likely to file a claim before that age. Statistically, 90% of long-term care claims are filed for people over age 70 and 67% of all LTC benefits are paid for care received by women. Long-term care is an issue of special importance to women for two reasons: 1. Women tend to live longer and 2. They are often the primary care provider for a spouse and ultimately recipients of care. Health care costs, and particularly long term care costs are major source of worry for many, both men and women. Insurance can provide a lot of peace of mind in addition to being a sound financial decision. Often when people think of long-term care they think of a nursing home. Policies provide many options on receiving care in addition to nursing homes including assisted living and your own home. Most people tell me their two top priorities are not being a burden to their families and the desire to stay in their own home.
Long-term Care Insurance isn’t for everyone and it is not a decision to be made lightly. If you can pay for long-term care without significantly impacting your assets, you may not need LTC Insurance. On the other hand, if your only source of income is Social Security income, you probably shouldn’t purchase LTC insurance. If you have assets to protect and it is a priority to preserve those assets, consider it!
Looking out for your financial future,
Marcy Haines, CFP®
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual