Expect to spend $2.6M on healthcare?

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refinedchain
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Expect to spend $2.6M on healthcare?

Post by refinedchain » Sun Aug 13, 2017 11:13 am

I came across this report while trying to find estimates for the cost of healthcare in retirement:

http://www.hvsfinancial.com/PublicFiles ... .13_V2.pdf

Key points:
  • A 65 year old couple today can expect to spend $404,253 on lifetime Medicare-related expenses, in today's dollars.
  • The expected rate of inflation for healthcare costs is 5.47%.
So when I turn 65 in 35 years, am I right in thinking that my retirement healthcare costs in 2051 dollars will be:

$404,253 * 1.0547^35 = $2.6M?

Doesn't that seem... excessive?

I suppose I can just go broke and be covered under Medicaid.

itstoomuch
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Re: Expect to spend $2.6M on healthcare?

Post by itstoomuch » Sun Aug 13, 2017 11:24 am

I am trying for that amount but I don't think I'll make it 8-) .
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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Tycoon
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Re: Expect to spend $2.6M on healthcare?

Post by Tycoon » Sun Aug 13, 2017 11:38 am

[quote=refinedchain post_id=3490905 time=1502640829 user_id=68862

Doesn't that seem... excessive?

[/quote]

Yes indeed that does seem excessive.
...I might be just beginning | I might be near the end. Enya | | C'est la vie

simas
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Re: Expect to spend $2.6M on healthcare?

Post by simas » Sun Aug 13, 2017 11:52 am

In the long run we are all dead.. (or expect to eventually pass away, as much as you may internally fight against the idea or willfully deny it). So spending some money on healthcare because you are living surely beats the alternative. as for how much, who knows? I personally pay little attention to anyone trying to do such long term projections given that all of this is very fluid (laws change, etc). Didn't they told us they fixed social security 'forever' last time about 30-35 years ago? or prior to it told it that by design it would not be taxed (same thing we are hearing about Roth IRAs right now)

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Re: Expect to spend $2.6M on healthcare?

Post by tibbitts » Sun Aug 13, 2017 11:54 am

refinedchain wrote:
Sun Aug 13, 2017 11:13 am
I came across this report while trying to find estimates for the cost of healthcare in retirement:

http://www.hvsfinancial.com/PublicFiles ... .13_V2.pdf

Key points:
  • A 65 year old couple today can expect to spend $404,253 on lifetime Medicare-related expenses, in today's dollars.
  • The expected rate of inflation for healthcare costs is 5.47%.
So when I turn 65 in 35 years, am I right in thinking that my retirement healthcare costs in 2051 dollars will be:

$404,253 * 1.0547^35 = $2.6M?

Doesn't that seem... excessive?

I suppose I can just go broke and be covered under Medicaid.
That estimate seems reasonable to me. And so is the result that more people will be covered by Medicaid and that related adjustments to tax policy will occur. Luckily for me I'm very unlikely to be alive in 35 years.

neilpilot
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Re: Expect to spend $2.6M on healthcare?

Post by neilpilot » Sun Aug 13, 2017 11:54 am

It's a good thing the total does not include the projected cost of long term care for that average 65 YO couple, or it might be a really big number :) Just focus on living a healthy lifestyle, since the payback is that you might just better the averages. That might deliver a larger % payback than your retirement investments over the same period.

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Whiggish Boffin
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Re: Expect to spend $2.6M on healthcare?

Post by Whiggish Boffin » Sun Aug 13, 2017 11:59 am

Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.

Spirit Rider
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Re: Expect to spend $2.6M on healthcare?

Post by Spirit Rider » Sun Aug 13, 2017 12:06 pm

Tycoon wrote:
Sun Aug 13, 2017 11:38 am
[quote=refinedchain post_id=3490905 time=1502640829 user_id=68862

Doesn't that seem... excessive?
Yes indeed that does seem excessive.[/quote]
Anytime you compute future values that far into the future it is going to be a substantial increase.

If you invested $400K in Vanguard 500 Index Fund Investor Class (VFINX) 35 years ago, you would have more than $21M today.

P.S. This is why you should invest in an HSA and pay all expenses OOP. Never mind this stealth IRA idea, you are going to need those funds for future retirement medical expenses
Last edited by Spirit Rider on Sun Aug 13, 2017 12:09 pm, edited 1 time in total.

neilpilot
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Re: Expect to spend $2.6M on healthcare?

Post by neilpilot » Sun Aug 13, 2017 12:07 pm

Whiggish Boffin wrote:
Sun Aug 13, 2017 11:59 am
Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.
Did you look at the article the OP linked? Their premise was that medical cost would continue to increase at historical levels, i.e. triple the overall inflation rate. 1.9% vs 5.47%. Whose to say that will happen, but wages generally don't keep up with MEDICAL inflation.

livesoft
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Re: Expect to spend $2.6M on healthcare?

Post by livesoft » Sun Aug 13, 2017 12:13 pm

I wouldn't worry about it. You will get an EOB with "Billed amount: $2,600,000" and "Allowed Charges: $192.15" and "What You Own: $0.00."
This signature message sponsored by sscritic: Learn to fish.

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sdsailing
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Re: Expect to spend $2.6M on healthcare?

Post by sdsailing » Sun Aug 13, 2017 12:16 pm

It simply makes no sense. MANY people live on Social Security with hardly any savings. This verifiable fact would seem to be in direct contradiction to the assertion of multiple millions.

Ron
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Re: Expect to spend $2.6M on healthcare?

Post by Ron » Sun Aug 13, 2017 12:44 pm

livesoft wrote:
Sun Aug 13, 2017 12:13 pm
I wouldn't worry about it. You will get an EOB with "Billed amount: $2,600,000" and "Allowed Charges: $192.15" and "What You Own: $0.00."
:thumbsup :mrgreen: ...

- Ron

Valuethinker
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Re: Expect to spend $2.6M on healthcare?

Post by Valuethinker » Sun Aug 13, 2017 1:02 pm

sdsailing wrote:
Sun Aug 13, 2017 12:16 pm
It simply makes no sense. MANY people live on Social Security with hardly any savings. This verifiable fact would seem to be in direct contradiction to the assertion of multiple millions.
? I understand that Medicare is the American programme that pays medical costs in retirement?

Social Security is just a general state (ie governmental) pension scheme?

So the comparison with Social Security is not useful, because it's a different scheme that actually pays the medical costs?

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Re: Expect to spend $2.6M on healthcare?

Post by Valuethinker » Sun Aug 13, 2017 1:09 pm

refinedchain wrote:
Sun Aug 13, 2017 11:13 am
I came across this report while trying to find estimates for the cost of healthcare in retirement:

http://www.hvsfinancial.com/PublicFiles ... .13_V2.pdf

Key points:
  • A 65 year old couple today can expect to spend $404,253 on lifetime Medicare-related expenses, in today's dollars.
  • The expected rate of inflation for healthcare costs is 5.47%.
So when I turn 65 in 35 years, am I right in thinking that my retirement healthcare costs in 2051 dollars will be:

$404,253 * 1.0547^35 = $2.6M?

Doesn't that seem... excessive?

I suppose I can just go broke and be covered under Medicaid.
OK

1. Medicare will cover a very significant percentage of these costs?

2. one really has to look at real rates of increase, not nominal.

3. If you project that 5.47% (nominal) into say, 3% real (ie inflation about 2.5% pa), then you get a doubling every 24 years in real terms. However:

a. GDP also grows. Say around 2% real pa. That means that it takes 72 years for healthcare to double in the US economy -- from say c. 20% now to 40%. That's certainly possible, over that time horizon and would match historical patterns.

b. what's more likely is that healthcare costs don't grow as fast relative to the economy as a whole as they have done. Technological breakthroughs in healthcare have tended to raise costs, not lower them. But that might not always be true-- the implications of Big Data on healthcare for example, artificial intelligence/ deep learning techniques, nano robots that act to reduce inflammation and clogging etc. etc.

4. your mathematics are not quite correct.

Your retirement costs in healthcare over your retirement period, are say $404,253 in today's money. But you will spend those over 30 years. Thus, the inflation factor would be different for earch chunk. Say it works out to $15k pa for each year in retirement, then you would inflate the first year by 1.0547^30, the second by 1.0547^31 etc.

Valuethinker
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Re: Expect to spend $2.6M on healthcare?

Post by Valuethinker » Sun Aug 13, 2017 1:10 pm

Spirit Rider wrote:
Sun Aug 13, 2017 12:06 pm
Tycoon wrote:
Sun Aug 13, 2017 11:38 am
[quote=refinedchain post_id=3490905 time=1502640829 user_id=68862

Doesn't that seem... excessive?
Yes indeed that does seem excessive.
Anytime you compute future values that far into the future it is going to be a substantial increase.

If you invested $400K in Vanguard 500 Index Fund Investor Class (VFINX) 35 years ago, you would have more than $21M today.[/quote]

Does that assume no taxes and no withdrawals?
P.S. This is why you should invest in an HSA and pay all expenses OOP. Never mind this stealth IRA idea, you are going to need those funds for future retirement medical expenses

Longdog
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Re: Expect to spend $2.6M on healthcare?

Post by Longdog » Sun Aug 13, 2017 1:17 pm

I don't think that's the right calculation, unless you run a tab on all your medical expenses with the intent to pay them all in one lump sum the day prior to your expiration date.
Steve

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Tycoon
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Re: Expect to spend $2.6M on healthcare?

Post by Tycoon » Sun Aug 13, 2017 1:18 pm

Valuethinker wrote:
Sun Aug 13, 2017 1:02 pm
sdsailing wrote:
Sun Aug 13, 2017 12:16 pm
It simply makes no sense. MANY people live on Social Security with hardly any savings. This verifiable fact would seem to be in direct contradiction to the assertion of multiple millions.
? I understand that Medicare is the American programme that pays medical costs in retirement?

Social Security is just a general state (ie governmental) pension scheme?

So the comparison with Social Security is not useful, because it's a different scheme that actually pays the medical costs?
I can't speak for sdsailing, but I believe the point is there are (and certainly will be) a large amount of 65 and older Americans who won't have $404,253 to spend on healthcare. Many will be living on Social Security and not much else. So if the premise is that a 65 year old couple will have to shell out $404,253 - in the vast amount of situations it won't be happening.
...I might be just beginning | I might be near the end. Enya | | C'est la vie

littlebird
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Re: Expect to spend $2.6M on healthcare?

Post by littlebird » Sun Aug 13, 2017 1:25 pm

Valuethinker wrote:
Sun Aug 13, 2017 1:02 pm
sdsailing wrote:
Sun Aug 13, 2017 12:16 pm
It simply makes no sense. MANY people live on Social Security with hardly any savings. This verifiable fact would seem to be in direct contradiction to the assertion of multiple millions.
? I understand that Medicare is the American programme that pays medical costs in retirement?

Social Security is just a general state (ie governmental) pension scheme?

So the comparison with Social Security is not useful, because it's a different scheme that actually pays the medical costs?
The point is that they're paying for the "Medicare-related expenses", or more accurately, the medical expenses that Medicare doesn't pay, out of their only income, Social Security. So they definitely have not paid out 2M+ during their retirement.

delamer
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Re: Expect to spend $2.6M on healthcare?

Post by delamer » Sun Aug 13, 2017 1:26 pm

I did not see details on how averages were calculated in the report. However, health care costs are highly skewed; a small percentage of the population accounts for a huge portion of costs in a given year. So the mean of costs is higher than the mode or median.

The point being that out of 5 people, if 4 spent $10,000 in a year and 1 spent $200,000 in a year the mean would be $48,000 but the median and mode would be $10,000. Two very different pictures, but all legitimate ways to calculate an average.

tibbitts
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Re: Expect to spend $2.6M on healthcare?

Post by tibbitts » Sun Aug 13, 2017 1:46 pm

neilpilot wrote:
Sun Aug 13, 2017 12:07 pm
Whiggish Boffin wrote:
Sun Aug 13, 2017 11:59 am
Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.
Did you look at the article the OP linked? Their premise was that medical cost would continue to increase at historical levels, i.e. triple the overall inflation rate. 1.9% vs 5.47%. Whose to say that will happen, but wages generally don't keep up with MEDICAL inflation.
In theory the medical cost inflation that has already happened shouldn't have occurred since it has far surpassed wages. So if it can happen for a decade or two, it can probably happen for at least the rest of our lifetimes.

visualguy
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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Sun Aug 13, 2017 1:54 pm

Tycoon wrote:
Sun Aug 13, 2017 1:18 pm
I can't speak for sdsailing, but I believe the point is there are (and certainly will be) a large amount of 65 and older Americans who won't have $404,253 to spend on healthcare. Many will be living on Social Security and not much else. So if the premise is that a 65 year old couple will have to shell out $404,253 - in the vast amount of situations it won't be happening.
Right, and these people who can't pay will have trouble getting proper health care, fall as a burden on their families, go bankrupt, etc. I don't know how it helps that many can't afford it. If you want to have good health care, you'll need to have the money.

In general, I find that many here underestimate the financial burden of health care and long-term care in their calculations of how much they need to retire. In the US, these costs are just insane, and also hard to predict, which makes retirement planning very difficult. As a result, the decision to retire is very difficult for anyone who isn't quite wealthy. It's a terrifying problem. Expensive to be covered even while you're healthy, and, more importantly, long expensive struggles with debilitating diseases are common for old people, not rare.

inbox788
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Re: Expect to spend $2.6M on healthcare?

Post by inbox788 » Sun Aug 13, 2017 1:54 pm

livesoft wrote:
Sun Aug 13, 2017 12:13 pm
I wouldn't worry about it. You will get an EOB with "Billed amount: $2,600,000" and "Allowed Charges: $192.15" and "What You Own: $0.00."
Funny, but in reality, I think the 400k today or 2.6M is the total amount billed and paid. This means that we're paying it all along as we're working now, and a minor portion is being paid in retirement as premiums and copays. Now how the total bill being paid is divided and sustained is and will be the challenge and outside the scope of this discussion and forum.

For someone retiring today, they've probably paid a vast majority of that $400k into the system over their working lifetime and expect to pull out what they need in their retirement. Afaik, the premiums run about $2k a year so around $60k for a 30 year retirement. Additionally, copays depend on whether you're a high user or low user of services and whether you have some sort of gap insurance. The point is based on how things work today, not every senior retiring today needs to have a bank account with $400k deposited into it, but it's a patchwork of financing.

BTW, if you assume $10k/day hospitalization expenses and a long hospital stay or several shorter stays, it's not hard to spend that $400k. And a lot of seniors can expect to need hospital services during a 30 year planned retirement. Routine doctor visits appear cheap compared to the major expenses, and overfocus on saving small amounts may be a foolish course.

neilpilot
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Re: Expect to spend $2.6M on healthcare?

Post by neilpilot » Sun Aug 13, 2017 2:12 pm

inbox788 wrote:
Sun Aug 13, 2017 1:54 pm


in reality, I think the 400k today or 2.6M is the total amount billed and paid. This means that we're paying it all along as we're working now, and a minor portion is being paid in retirement as premiums and copays.
You may be correct, but as I read the OP's link that 400k is the cost of medicare premiums and out of pocket medical expenses for the period 65 to death, not including any LTC expenses.

Valuethinker
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Re: Expect to spend $2.6M on healthcare?

Post by Valuethinker » Sun Aug 13, 2017 3:40 pm

tibbitts wrote:
Sun Aug 13, 2017 1:46 pm
neilpilot wrote:
Sun Aug 13, 2017 12:07 pm
Whiggish Boffin wrote:
Sun Aug 13, 2017 11:59 am
Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.
Did you look at the article the OP linked? Their premise was that medical cost would continue to increase at historical levels, i.e. triple the overall inflation rate. 1.9% vs 5.47%. Whose to say that will happen, but wages generally don't keep up with MEDICAL inflation.
In theory the medical cost inflation that has already happened shouldn't have occurred since it has far surpassed wages. So if it can happen for a decade or two, it can probably happen for at least the rest of our lifetimes.
Things like food have become a much smaller portion of The average household budget so that partly explains how The rise was funded.

In Very 'recent years health care inflation has been much lower. Since about 2008 from memory. That May not be sustained of course.

inbox788
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Re: Expect to spend $2.6M on healthcare?

Post by inbox788 » Sun Aug 13, 2017 4:21 pm

neilpilot wrote:
Sun Aug 13, 2017 2:12 pm
inbox788 wrote:
Sun Aug 13, 2017 1:54 pm


in reality, I think the 400k today or 2.6M is the total amount billed and paid. This means that we're paying it all along as we're working now, and a minor portion is being paid in retirement as premiums and copays.
You may be correct, but as I read the OP's link that 400k is the cost of medicare premiums and out of pocket medical expenses for the period 65 to death, not including any LTC expenses.
I admit, I hadn't looked at the link, but looking at it now, it does appear to be just the retirees contribution. It doesn't seem to include hospitalization (Medicare part A) which I always believed was the majority of the cost. It does include dental and vision which add up to about 15% of the projections if I'm reading the graphs correctly.

How much is the hospitalization benefit acquired over the lifetime? If it is in fact more than half the Medicare benefits, then you might be looking at a total over $10M per couple in future dollars or nearly $1M today's. This number just doesn't seem to be correct or sustainable.

neilpilot
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Re: Expect to spend $2.6M on healthcare?

Post by neilpilot » Sun Aug 13, 2017 4:48 pm

inbox788 wrote:
Sun Aug 13, 2017 4:21 pm
neilpilot wrote:
Sun Aug 13, 2017 2:12 pm
inbox788 wrote:
Sun Aug 13, 2017 1:54 pm


in reality, I think the 400k today or 2.6M is the total amount billed and paid. This means that we're paying it all along as we're working now, and a minor portion is being paid in retirement as premiums and copays.
You may be correct, but as I read the OP's link that 400k is the cost of medicare premiums and out of pocket medical expenses for the period 65 to death, not including any LTC expenses.
I admit, I hadn't looked at the link, but looking at it now, it does appear to be just the retirees contribution. It doesn't seem to include hospitalization (Medicare part A) which I always believed was the majority of the cost. It does include dental and vision which add up to about 15% of the projections if I'm reading the graphs correctly.

How much is the hospitalization benefit acquired over the lifetime? If it is in fact more than half the Medicare benefits, then you might be looking at a total over $10M per couple in future dollars or nearly $1M today's. This number just doesn't seem to be correct or sustainable.
Medicare A had no premium, so of course it isn't included. However the out of pocket for hospitalization not covered by part A is included.

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ClevrChico
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Re: Expect to spend $2.6M on healthcare?

Post by ClevrChico » Sun Aug 13, 2017 4:59 pm

I expect technology to come to the rescue, but I could be wrong.

blueberry
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Re: Expect to spend $2.6M on healthcare?

Post by blueberry » Sun Aug 13, 2017 5:08 pm

I expect legalization of assisted suicide to come to the rescue, but I could be wrong :wink:

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Watty
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Re: Expect to spend $2.6M on healthcare?

Post by Watty » Sun Aug 13, 2017 5:34 pm

You will get some absurd looking numbers when you start trying to do calculations like that in inflation adjusted numbers.
refinedchain wrote:
Sun Aug 13, 2017 11:13 am
A 65 year old couple today can expect to spend $404,253 on lifetime Medicare-related expenses, in today's dollars.
As a back of the envelope calculation;

At 65 a good medicare supplement, the Medicare part B premium, and Medicare part D drug coverage can easily run $400 a month for each person. If you add it some things like deductibles and drug co-pays $500 a month each is not an unrealistic figure.

That would be roughly $12,000 a year. If you multiply that by any reasonable guess at their life expectancy then you could easily get to be around $400K in today's dollars.

Just looking it roughly that number looks real plausible.

That does not mean that the couple needs to have $400K in the bank to pay for it though. The reason is that the same couple might easily be getting $24,000 or more in Social Security so that the "Medicare-related expenses" (which is an odd phrase) might take a significant part of their Social Security check but it would cover that and then some.
Last edited by Watty on Sun Aug 13, 2017 5:37 pm, edited 1 time in total.

visualguy
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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Sun Aug 13, 2017 5:36 pm

I don't expect anything to come to the rescue other than trying to make sure I have enough money for realistic health care and long-term care expenses. It's too easy to be in denial about this because it's so crazy and so out of whack with what's going on in the rest of the world. It means working many additional years and saving and investing a lot more money for this purpose. The 25X or 30X of regular annual expenses is just part of what you need for retirement.

There isn't much hope of radical reductions in US health care costs in my lifetime. It's too much of a mess to be fixed in a time frame that's relevant to me. The whole thing needs to be done differently, and that would be a huge shock to the system. I would expect things to get a lot worse before there's enough pressure and willingness to fix things properly.

adamthesmythe
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Re: Expect to spend $2.6M on healthcare?

Post by adamthesmythe » Sun Aug 13, 2017 5:45 pm

tibbitts wrote:
Sun Aug 13, 2017 1:46 pm
neilpilot wrote:
Sun Aug 13, 2017 12:07 pm
Whiggish Boffin wrote:
Sun Aug 13, 2017 11:59 am
Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.
Did you look at the article the OP linked? Their premise was that medical cost would continue to increase at historical levels, i.e. triple the overall inflation rate. 1.9% vs 5.47%. Whose to say that will happen, but wages generally don't keep up with MEDICAL inflation.
In theory the medical cost inflation that has already happened shouldn't have occurred since it has far surpassed wages. So if it can happen for a decade or two, it can probably happen for at least the rest of our lifetimes.
Nope, can't be, because eventually medical costs would consume all an average person's income. Something has to give before we reach that point.

What's happening is health care is growing to consume a steadily larger fraction of the GDP. At some point that has to stop. But it can't stop abruptly because a large fraction of the workforce will be in the heath care business.

I'm betting on a gradual adjustment to an equilibrium where health care is less than the total economy. The choice is between expensive health care rationed by cost or less expensive health care rationed by resources.

visualguy
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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Sun Aug 13, 2017 5:57 pm

Watty wrote:
Sun Aug 13, 2017 5:34 pm
At 65 a good medicare supplement, the Medicare part B premium, and Medicare part D drug coverage can easily run $400 a month for each person. If you add it some things like deductibles and drug co-pays $500 a month each is not an unrealistic figure.

That would be roughly $12,000 a year. If you multiply that by any reasonable guess at their life expectancy then you could easily get to be around $400K in today's dollars.

Just looking it roughly that number looks real plausible.

That does not mean that the couple needs to have $400K in the bank to pay for it though. The reason is that the same couple might easily be getting $24,000 or more in Social Security so that the "Medicare-related expenses" (which is an odd phrase) might take a significant part of their Social Security check but it would cover that and then some.
It's even more expensive if you get a Medicare Advantage (Part C) PPO plan. I think many people don't realize that they still need to spend a lot of money for good coverage even when they're eligible for Medicare.

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Re: Expect to spend $2.6M on healthcare?

Post by Grt2bOutdoors » Sun Aug 13, 2017 6:02 pm

refinedchain wrote:
Sun Aug 13, 2017 11:13 am


$404,253 * 1.0547^35 = $2.6M?

Doesn't that seem... excessive?
Not if you are in Zimbabwe. :P
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Re: Expect to spend $2.6M on healthcare?

Post by Bigbonds » Sun Aug 13, 2017 6:03 pm

I read these topics and articles and just laugh every time. I often wonder how many people here take this stuff seriously and are putting off early retirement or retirement in general because of this. You have to be declared indigent before Medicaid starts to pick up the tab on your nursing home bill. I only wish I could know how many people are going to read this and continue wasting years of their prime, healthy years working jobs they hate and in the end only giving all their money away to the healthcare industry anyway.

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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Sun Aug 13, 2017 6:09 pm

adamthesmythe wrote:
Sun Aug 13, 2017 5:45 pm
Nope, can't be, because eventually medical costs would consume all an average person's income. Something has to give before we reach that point.

What's happening is health care is growing to consume a steadily larger fraction of the GDP. At some point that has to stop. But it can't stop abruptly because a large fraction of the workforce will be in the heath care business.

I'm betting on a gradual adjustment to an equilibrium where health care is less than the total economy. The choice is between expensive health care rationed by cost or less expensive health care rationed by resources.
Even now, it's not affordable for the "average person", and it's still getting only worse. At some point, radical changes will need to be made, but if you're middle aged or close to retirement now, I wouldn't bet on it happening in your lifetime. Maybe younger people will see a more cost-effective system in their lifetime.

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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Sun Aug 13, 2017 6:18 pm

Bigbonds wrote:
Sun Aug 13, 2017 6:03 pm
I read these topics and articles and just laugh every time. I often wonder how many people here take this stuff seriously and are putting off early retirement or retirement in general because of this. You have to be declared indigent before Medicaid starts to pick up the tab on your nursing home bill. I only wish I could know how many people are going to read this and continue wasting years of their prime, healthy years working jobs they hate and in the end only giving all their money away to the healthcare industry anyway.
Indigence and Medicaid aren't the answer. Medicaid doesn't take good care of you, and you don't want to be limited to the kind of facilities and care that you can cover with Medicaid. Indigence is obviously not a good place to be in for other reasons as well. People work and save longer so that they don't face horrible choices for themselves and their families when the need comes, and it does come for most people.

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Re: Expect to spend $2.6M on healthcare?

Post by finite_difference » Sun Aug 13, 2017 6:18 pm

"Medical expenses will grow at a rate of 5-6% every year."

Corollary: "Health care mutual funds will grow at a rate of 5-6% per year."
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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Re: Expect to spend $2.6M on healthcare?

Post by inbox788 » Sun Aug 13, 2017 6:31 pm

neilpilot wrote:
Sun Aug 13, 2017 4:48 pm
Medicare A had no premium, so of course it isn't included. However the out of pocket for hospitalization not covered by part A is included.
I was mistaken about the part A which I thought included the payments during our working years, which may amount to around average of $60k, but not in constant dollars, so need to be adjusted for year and inflation. Also the amount paid and timing is different than the spending and subsidy or excess. If the numbers of this article are in the ballpark and adjusted for inflation, it appears the part A and worktime payments only account for about 1/3 of retirement medical expenses, not the >50% that I had assumed.

https://www.forbes.com/sites/chrisconov ... 385b406bdd

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Re: Expect to spend $2.6M on healthcare?

Post by OnTrack » Sun Aug 13, 2017 6:39 pm

Part of the "problem" with health care inflation is that costs go up because there are more remedies available each year. So the healthcare we get today is more advanced than the healthcare we received in the past. One of many examples is artificial joints which didn't exist several decades ago.

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Re: Expect to spend $2.6M on healthcare?

Post by willthrill81 » Sun Aug 13, 2017 7:10 pm

adamthesmythe wrote:
Sun Aug 13, 2017 5:45 pm
tibbitts wrote:
Sun Aug 13, 2017 1:46 pm
neilpilot wrote:
Sun Aug 13, 2017 12:07 pm
Whiggish Boffin wrote:
Sun Aug 13, 2017 11:59 am
Your inflation factor amounts to a x 6.44 increase in price. Lots of things would seem expensive, but if wages keep pace, they won't be in real terms.
Bananas now cost $0.50/lb, inflates to $3.16/lb.
Gallon of milk now costs $2.69, inflates to $17.35.
Modest house in Austin, TX now costs $300k, inflates to $1.93M.
Modest house in Scarsdale, NY now costs $750k, inflates to $4.84M
-- But --
Rookie engineer now makes $80k/year, inflates to $516k/yr.
Did you look at the article the OP linked? Their premise was that medical cost would continue to increase at historical levels, i.e. triple the overall inflation rate. 1.9% vs 5.47%. Whose to say that will happen, but wages generally don't keep up with MEDICAL inflation.
In theory the medical cost inflation that has already happened shouldn't have occurred since it has far surpassed wages. So if it can happen for a decade or two, it can probably happen for at least the rest of our lifetimes.
Nope, can't be, because eventually medical costs would consume all an average person's income. Something has to give before we reach that point.

What's happening is health care is growing to consume a steadily larger fraction of the GDP. At some point that has to stop. But it can't stop abruptly because a large fraction of the workforce will be in the heath care business.

I'm betting on a gradual adjustment to an equilibrium where health care is less than the total economy. The choice is between expensive health care rationed by cost or less expensive health care rationed by resources.
+1

Above inflation growth in prices cannot continue indefinitely in any sector. The topic here is healthcare, but the same applies to higher education.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Expect to spend $2.6M on healthcare?

Post by HIinvestor » Sun Aug 13, 2017 8:11 pm

It depends on many factors. Some folks are fortunate to have lifetime insurance coverage with former employer -- they pay a portion of premiums and employer pays other portion. Their insurer may have annual cap in out of pocket expenses and pay 100% over said amount--that cap could be 4 figures or 5.

For folks who don't have such an insurance plan from employer, they can get a Medicare supplemental or MediGap plan and look for one that has an annual out of pocket cap that is affordable.

H and I could pay our share of Medicare and insurance premiums plus our annual out of pocket cap every year and not approach the number you indicated. Of course, we are paying now, not 35 years in the future. We DO have some well-managed health conditions. Fortunately, most years we have not even hit our out of pocket maximum.

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Re: Expect to spend $2.6M on healthcare?

Post by JBTX » Sun Aug 13, 2017 9:28 pm

refinedchain wrote:
Sun Aug 13, 2017 11:13 am
I came across this report while trying to find estimates for the cost of healthcare in retirement:

http://www.hvsfinancial.com/PublicFiles ... .13_V2.pdf

Key points:
  • A 65 year old couple today can expect to spend $404,253 on lifetime Medicare-related expenses, in today's dollars.
  • The expected rate of inflation for healthcare costs is 5.47%.
So when I turn 65 in 35 years, am I right in thinking that my retirement healthcare costs in 2051 dollars will be:

$404,253 * 1.0547^35 = $2.6M?

Doesn't that seem... excessive?

I suppose I can just go broke and be covered under Medicaid.
While your math is correct that probably isn't the way it will play out.

First by definition 2051'dollars going to be a big number because of 35 years of inflation. Using 35 years of CPI at 2.5% will get you to $1 million. So in today's dollars the 2.6 million is about $1 million

Second the sort of long term medical inflation rate is likely unsustainable. It is probable that medical inflation will exceed CPI but probably won't grow faster than GDP per capita. At some point when it gets high enough political pressure will demand change. Probably single payer or some variant of that.

But it is probably reasonable to assume that in the future those who have income and savings will pay more than they do now after adjusting for inflation.

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Re: Expect to spend $2.6M on healthcare?

Post by Sheepdog » Sun Aug 13, 2017 9:43 pm

I wrote this earlier this year. I have copied it here as it shows an 18 year retired couple's actual out of pocket medical costs through 2016.

Medical cost in retirement.

This is not our estimated health care costs in retirement. (I retired at 65.) This is our actual cost over 18 years.

Medical, dental, sight and hearing expenses, out-of-pocket, over 18 years for this couple (1999-2016) $63,577 or $3,532 per year.

Medical insurance, Medigap and/or Advantage premiums (not including annual Medicare premiums which comes out off Social Security) for this couple $68,876 or $3,826 per year.

Note that Medicare premiums taken out of Social Security is presently $104.90 per month for each of us, or $2,517.60 total per year for the couple..


Total married couple's 18 years expenses = $132,453 or $7,477 per year PLUS the noted present $2517.60 annual Medicare premiums.


Note that Medigap premiums increase with age and increase dramatically as you pass 75 years of age. (The major reason I changed to an Advantage plan 4 years ago and my wife last year.)

Note: Long term care insurance is not included in this data.
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RetiredMule
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Re: Expect to spend $2.6M on healthcare?

Post by RetiredMule » Mon Aug 14, 2017 1:35 am

Thanks to Sheepdog for putting out some real #s, though they're very specific to the couple and are from the past years.

Others have commented on the extrapolation to this $2.6M number, so, no additional comments from me on that specific number.

In general though, I think the financial investment outfits (read: money managers, mutual fund companies, wealth management folks) have been trying to generate this scare about general population "not having saved enough" for retirement, and now-a-days, insufficient savings for health care expenses during retirement; IMO, these scare stories are, to some extent, aimed at fattening the investment industries' bottom lines too; (i.e., self-serving to the industry as they get to make additional $$s in annual fees/expenses for managing these retirement/health care savings).

There were numerous such scare articles published earlier on retirement savings where the "replacement income" needed during retirement was projected to be anywhere from 80% of one's income while working to over 100% :shock: Such scare articles were completely ignoring a lot of the expenses that get reduced/eliminated altogether in retirement for most people - expenses like retirement contributions, taxes, possibly mortgage if the house is paid off, etc. etc. - and additional income sources like SS (and possibly pension for some lucky folks) cushion the need for having unrealistically huge retirement savings.

So, while I don't want to be oblivious to the rising cost of healthcare, I'd not worry too much about saving-the-heck for it either; "exit to upstairs" (natural death, I mean) will be my saving grace/strategy if I can't come up with such outrageous savings :sharebeer

Save as much as you can in general, but, no point losing sleep over what's not possible :D

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Re: Expect to spend $2.6M on healthcare?

Post by adamthesmythe » Mon Aug 14, 2017 10:31 am

finite_difference wrote:
Sun Aug 13, 2017 6:18 pm
"Medical expenses will grow at a rate of 5-6% every year."

Corollary: "Health care mutual funds will grow at a rate of 5-6% per year."
It doesn't follow. More likely would be a decrease in profits (and stock prices) due to a squeeze by insurance companies and political pressure.

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Re: Expect to spend $2.6M on healthcare?

Post by refinedchain » Mon Aug 14, 2017 12:00 pm

Lots of food for thought here. The company that wrote the article does seem to run a side business of referring individuals to financial advisors.

One poster pointed out that you don't hand over a lump sum $400k today when you retire and I think that's a key detail. The article and other posters suggest that average Medicare costs this year will be around $11k. Maybe I could do some kind of liability matching:
  • Earmark $11k/year of my investments for Medicare starting now, maybe in my VEBA.
  • Increase future contributions with realized medical inflation.
Assuming I can invest to keep up with medical inflation, then in 35 years, I should have 35 years of average Medicare expenses covered. What do you think?

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Re: Expect to spend $2.6M on healthcare?

Post by Mitchell777 » Mon Aug 14, 2017 12:55 pm

visualguy wrote:
Sun Aug 13, 2017 6:18 pm
Bigbonds wrote:
Sun Aug 13, 2017 6:03 pm
I read these topics and articles and just laugh every time. I often wonder how many people here take this stuff seriously and are putting off early retirement or retirement in general because of this. You have to be declared indigent before Medicaid starts to pick up the tab on your nursing home bill. I only wish I could know how many people are going to read this and continue wasting years of their prime, healthy years working jobs they hate and in the end only giving all their money away to the healthcare industry anyway.
Indigence and Medicaid aren't the answer. Medicaid doesn't take good care of you, and you don't want to be limited to the kind of facilities and care that you can cover with Medicaid. Indigence is obviously not a good place to be in for other reasons as well. People work and save longer so that they don't face horrible choices for themselves and their families when the need comes, and it does come for most people.
If you need nursing home care (not assisted living), and you choose a facility that accepts Medicaid, you need enough money to private pay for 2 or 3 years to get into a "decent" facility. That can be $8K to $12K per month. That number can differ slightly depending on area of the country. After that Medicaid would kick in (after much paper work), although most people by then either go home or die (mostly the latter). Although I've heard stories of the facility kicking you out of your room and moving you to a sub par area of the facility, I've never seen it happen. I respect the opinions about pushing your expenses onto others, but personally I was not willing to work years longer so I could, if needed, pay private pay a nursing home for 5 to 10 years, especially since it's a low probability (I did not say zero) of needing care for that long.

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Re: Expect to spend $2.6M on healthcare?

Post by adamthesmythe » Mon Aug 14, 2017 1:12 pm

refinedchain wrote:
Mon Aug 14, 2017 12:00 pm
Lots of food for thought here. The company that wrote the article does seem to run a side business of referring individuals to financial advisors.

One poster pointed out that you don't hand over a lump sum $400k today when you retire and I think that's a key detail. The article and other posters suggest that average Medicare costs this year will be around $11k. Maybe I could do some kind of liability matching:
  • Earmark $11k/year of my investments for Medicare starting now, maybe in my VEBA.
  • Increase future contributions with realized medical inflation.
Assuming I can invest to keep up with medical inflation, then in 35 years, I should have 35 years of average Medicare expenses covered. What do you think?
Despite being a quantitative kind of guy, I never attempted to make predictions and set retirement savings according to the predictions. Maybe it's because there are way more assumptions and guesses needed than in any physical system I have tried to understand.

My approach, to put it simply, was to save the max tax-deferred for most of my career. I figured that this would put me well above average when it came time to retire. Based on what I read I managed that. I also acquired useful paid-off assets (i.e., a house). I am retired now, and again, without trying to make projections, I feel good.

My suggestion would be to save appreciably more than the average and expect that your problems in retirement, if any, will be appreciably less than average.

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Re: Expect to spend $2.6M on healthcare?

Post by Bigbonds » Mon Aug 14, 2017 1:13 pm

visualguy wrote:
Sun Aug 13, 2017 6:18 pm
Bigbonds wrote:
Sun Aug 13, 2017 6:03 pm
I read these topics and articles and just laugh every time. I often wonder how many people here take this stuff seriously and are putting off early retirement or retirement in general because of this. You have to be declared indigent before Medicaid starts to pick up the tab on your nursing home bill. I only wish I could know how many people are going to read this and continue wasting years of their prime, healthy years working jobs they hate and in the end only giving all their money away to the healthcare industry anyway.
Indigence and Medicaid aren't the answer. Medicaid doesn't take good care of you, and you don't want to be limited to the kind of facilities and care that you can cover with Medicaid. Indigence is obviously not a good place to be in for other reasons as well. People work and save longer so that they don't face horrible choices for themselves and their families when the need comes, and it does come for most people.
I don't think so. Most people in this country haven't saved enough to last even a couple of years in retirement much less anything close to 2.6 million for healthcare.

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Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Mon Aug 14, 2017 3:11 pm

Bigbonds wrote:
Mon Aug 14, 2017 1:13 pm
visualguy wrote:
Sun Aug 13, 2017 6:18 pm
Bigbonds wrote:
Sun Aug 13, 2017 6:03 pm
I read these topics and articles and just laugh every time. I often wonder how many people here take this stuff seriously and are putting off early retirement or retirement in general because of this. You have to be declared indigent before Medicaid starts to pick up the tab on your nursing home bill. I only wish I could know how many people are going to read this and continue wasting years of their prime, healthy years working jobs they hate and in the end only giving all their money away to the healthcare industry anyway.
Indigence and Medicaid aren't the answer. Medicaid doesn't take good care of you, and you don't want to be limited to the kind of facilities and care that you can cover with Medicaid. Indigence is obviously not a good place to be in for other reasons as well. People work and save longer so that they don't face horrible choices for themselves and their families when the need comes, and it does come for most people.
I don't think so. Most people in this country haven't saved enough to last even a couple of years in retirement much less anything close to 2.6 million for healthcare.
True, but why would you want to be in their shoes? It's not a good situation to be in.

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