For better or worse the national media is focused on healthcare during retirement and what they are calling “the failed healthcare bill.” Of course this refers to the vote to repeal the Affordable Care Act or “Obamacare.” The government knows that it faces challenges in the healthcare space and struggles to find an agreeable solution. For anyone trying to plan his or her retirement, healthcare is an essential element of planning.
Some questions you may be asking yourself are:
- How will you pay for healthcare in retirement?
- How can you control Medicare premiums?
- Do you need a Medicare supplement?
- What is going to happen to Medicare in the future?
- How are healthcare and Medicare going to change over the next 20 to 30 years?
These are all valid questions and important to consider when it comes to the planning process. Unfortunately, the answers are not simple and the future of healthcare is incredibly uncertain.
Larry and I often joke that Social Security would be easy to fix by delaying when people can start payments to the age of 70 and not paying Social Security to individuals with income over $250,000 during retirement. We may not like this solution, but it would work.
Fixing Medicare is much more complicated. Medicare requires fundamental changes to be viable over a long period of time. Some of the changes suggested include increasing premiums substantially, rewarding procedures and providers based on the efficacy of the treatments, reducing fraud, adjusting costs and eligibility for at-risk individuals and bringing public and private partnerships into improving patient health. This list does not include all of the possible solutions and no single item will instantly make Medicare a sustainable program.
I had a client recently ask me about Medicaid. We believe that Medicaid may face even more significant challenges. Providing healthcare to those who cannot afford care is a moral decision and one we believe will continue indefinitely. However, the Medicaid system is wrought with fraud. It is taken advantage of by individuals who could otherwise afford care and is inefficient when delivering and paying for treatment. In short, it’s simply a mess.
The Future Of Healthcare
In addition to the uncertainty of healthcare costs for retirees, many believe that the healthcare industry will change drastically over the coming years. Last week I attended a presentation by Salim Ismail who is the lead author of Exponential Organizations. He spoke about the rapid change in healthcare technology, specifically how treatments will soon be personalized to the patient’s DNA. It is possible that revolutionary technology will make healthcare both more effective and lower in cost in the future.
So What Can You Expect?
For those of you who are already on Medicare or very close to qualifying for Medicare, we believe that you will see cost increases over time. We do not expect sweeping reforms that will hurt you financially. Families with high incomes in retirement may see more significant cost increases in Medicare payments. For those who are still several years away from qualifying for Medicare, we expect that the government will push back the age when you are eligible and you may see much greater cost increases and dramatic changes to the program over the coming years. We are hopeful that technology improvements will begin to offset these cost increases five to 10 years from now.
Unfortunately, these are complex issues and our thinking will continue to evolve. The best advice that we can give is this:
1) Do not believe anyone who tells you they know what healthcare will cost you years into the future. No one knows.
2) Have a buffer in your retirement plan. Never take the absolute maximum that you can and always have additional savings or assets to back up your normal monthly retirement spending.
Bottom Line: Everything cannot be planned for and even the most careful planners cannot predict the future with certainty. Having a buffer or a back up is key. Healthcare in retirement is one area where this is particularly true.
From the desk of Kris CarrollHealthcare, Retirement Income, Social Security