By Bill Broich
I talked about concerns a couple weeks ago and about how some get smaller as we age and a new set of concerns develops and becomes larger.
As we age we become less worried about paying our mortgage, educating our children and accumulating enough for retirement.
Worries that come next are concerns over how long our retirement money will last, what happens if a spouse is lost and of course the 600 pound gorilla in the room: medical concerns. What happens in the event I need medical care not covered by Medicare?
I got a small taste of that this week. It was enough for me to become concerned about paying for health care as Phyllis and I age. Remember when we all thought Medicare and a supplemental policy was all we needed, I certainly thought so as I became eligible for Medicare 2 years ago.
My doctor retired 8 months ago and was replaced by a newer younger physician, one who stepped into his practice and assumed his role. Since I live part of the time in California, I hadn’t yet met my new doctor. I decided to schedule an appointment with him and to set my annual physical; an appointment was set in July.
A few days later, his office called me to go over a few points. Yes, I was qualified to have an annual physical and an hour of his time, EKG, blood work; a complete exam. Since I am a Medicare qualified patient they wanted me to know about the fees.
Fees! Wait….I have entitlement, I have Medicare!
What has happened according to the doctor’s business office is this: The cost of medical care has increased; the reimbursement of medical fees by Medicare has reduced.
My annual physical now costs $600 (plus labs) and now Medicare only reimburses $155. They wanted to know how I would be handling the shortage….credit card or check?
What has happened to me is something many in our age group will also be facing, the shrinkage of Medicare reimbursements. Recently, in a county next to where I live, the local medical clinic is closing based on a very simple issue. Their clientele is lower income and depends on assistance, with reimbursements shrinking and the costs escalating, there simply is not enough money to make everything work. They are shutting the doors, which of course means those in need will flood into the emergency room at the hospital, overpowering it.
My guess is this is not simply an isolated issue; it is a sign of what is coming, coming to us, our clients and our prospects. The need to calculate exactly how much money will be needed for health care is extremely difficult. Especially when the cost is increasing at such a rapid rate….what would be the future expense in 10 years of a physical costing $600 now?
If the annual increase was 10% then in 10 years a physical would cost $1,556.75.
What if it increases more than 10%? How will it be paid? Now consider the Baby Boomers, all 70 million of us, how will our medical care be paid for? Will Medicare stand up and deliver? My guess is no, we will need to become more active in our percentage of our medical care costs.
A little research into this topic of future medical costs will do nothing but confuse you; guesses are all over the place. A recent article in Forbes suggests that in the 20 years after age 65, we should plan to spend out of pocket at least $142,000 (each!). From that guess, it can soar as high as $250,000 with each future estimator throwing caution to the wind; the fact is no one knows.
What is in general agreement is this: the estimate of our contribution to our medical care after age 65 does NOT include any expenses for Long Term Care (Nursing Home). When those expenses are part of the financial planning, the sky can be the limit.
It is entirely possible that the Baby Boomer generation could actually break the bank, both federal and state. Just think of government as the “bank”, we could actually break the bank just caring for the needs of one single generation.
A recent report from the Health Care Cost Institute estimates the cost paid by Medicare (per) participant may well exceed $450,000 in a lifetime. With the estimated new worth of folks retiring at age 65 being only $192,000 it is clear to see that entitlements are going to be in a huge need, a need not only for living expenses, but a health care need that might NEVER be managed.
Here is a link to the 72 page report from the Health Care Cost Institute: http://www.healthcostinstitute.org/SOA-1-2013
The obvious question is what to do next? How do we prepare? What steps do we take to make sure we can have the retirement we always dreamed of? How do we make the “Golden Years” truly golden?
My answer: I haven’t a clue. What I do know is this, as we age safety, security and guarantees become more and more important. Having an income that will last a lifetime becomes essential. Making sure that dignity is part of our existence is a priority.
I would begin with both a financial checkup as well as a medical checkup. I would make sure my blood pressure was within correct limits, my weight was managed and my vital signs were vital. Next I would examine my financial risk tolerance and see if my assets were within limits. I would make sure my guaranteed income was in fact guaranteed and my investments reflected my inflationary concerns.
Next? I guess I would open a bottle of wine, admire my wife, play with my dog and count my blessings.