Since 1999 in the United States, the rate at which senior citizens declare bankruptcy has more than doubled. Astronomical health care costs are the primary cause of this trend.
It doesn’t have to be this way. But we must understand the problem and its impact before we can fix it. Everybody gets old eventually, but not everybody gets to enjoy their retirement with peace-of-mind. It’s imperative that young and middle-aged people today understand what they need to do in order to prepare for health care expenses in old age.
1. Prescription Drugs
Americans pay the highest prices for prescription drugs anywhere in the world. In many cases, it’s retirees and seniors who feel the harshest sting from the U.S. drug market. Even after becoming eligible for Medicare coverage, many seniors still face out-of-pocket costs for medications, including Medicare Part D premiums.
Medicare Part D helps pay for prescription drugs, and premiums range in price from $20 to $84 per month, which is 11% higher today than in 2015. On top of this, most Medicare Part D plans charge the maximum deductible of $405 before paying for patient medications. Every proposed and successful cut to Medicare and Medicaid adds further uncertainty to the lives of retirees.
2. Unplanned Health Expenses
In a recent poll of American adults, 70% admitted they are concerned about being able to pay for unplanned health care expenses after retirement. Two-thirds of respondents in the same poll said they were “terrified” about the overall impact of health care spending on their retirement savings.
Unplanned health care expenses include things like slip-and-falls and other accidents, unexpected illnesses and visits to specialist doctors.
A healthy 65-year-old couple will need to come up with more than $387,000 from the day they retire until the day they die to cover their medical costs. This includes out-of-pocket expenses like deductibles and premiums as well as dental, hearing, and other services not covered by Medicare.
3. Private Health Insurance
As mentioned earlier, Medicare Part D doesn’t pay for all prescription drug expenses. Additionally, Medicare Parts A and B don’t cover every procedure or type of care that might become necessary. Some of the omissions include dentures and most other types of dental care, long-term care, most eye exams, hearing aids, and more.
For these and everything else not covered by Medicare, there’s private health insurance. Many seniors continue paying for private insurance into retirement, if they are able, to cover the gaps. Whereas the premium for Medicare Part B is $135.50 per month, supplementary private health plans vary in cost just like those offered by employers or state health insurance exchanges. The average cost of plans for retirees is $600 per month.
4. Long-Term Care
In 2018, the average annual cost to stay in an assisted living facility reached $48,000, or more than $4,000 per month. These costs have been rising steadily for years. The situation now is such that most middle-class retirees won’t be able to afford the cost of long-term assisted living within the next decade.
As an example, for Ms. Gretchen Harris, whose combined income from Social Security and private pension payments is $4,600, the cost is almost completely outside her budget. She calls it the “middle-class bind” — where one is too “well off” to qualify for subsidized housing or Medicaid but not well-off enough to absorb the cost of assisted living without, well, assistance.
It should also be noted that only around 13% of Americans today can count on a private pension after retirement, which puts this type of health care even further out of reach. There’s an estimated 70% chance that a 65-year-old retiree will require long-term care in their lives. Regrettably, many seniors find themselves unprepared for that reality.
5. Dental and Hearing Expenses
It’s estimated that 37 million Medicare recipients don’t have dental insurance at all. This means many seniors are on the hook for the cost of procedures like crown replacements and root canals, which can easily reach into the thousands of dollars.
The same problem exists for hearing coverage. Again, Medicare doesn’t cover the cost of hearing aids. Medicaid coverage for hearing aids varies by state, and private insurers vary for hearing coverage too. What this means is that senior citizens who need two hearing aids usually have to pay around $2,400 out-of-pocket for them.
The Importance of Understanding Health Care Costs
The reality for everybody in America, including seniors, is that the cost of health care has been on an unbroken upward trajectory for decades. Costs are rising faster than inflation and retirees everywhere are feeling the uncertainty in their twilight years. Like it or not, it’s important to be realistic and start preparing for those costs now. Every young person must appreciate what they’re up against where health care costs are concerned and start saving and budgeting today.
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