Expect to spend $2.6M on healthcare?

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

Post by visualguy » Mon Aug 14, 2017 3:17 pm

Mitchell777 wrote:
Mon Aug 14, 2017 12:55 pm
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.
It's still a lot of money even if you assume less than 5 years, and you need to plan for it... Also, both husband and wife may need to go to a nursing home, either at the same time, or one first and then the other. The one who goes later may go many years later, and you don't want a situation where the first to go eats up the money needed by the second to go. Again, all this needs to be taken into account.

Assisted living is of course another possibility which requires significant resources.

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

Post by inbox788 » Mon Aug 14, 2017 3:46 pm

OnTrack wrote:
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.
There's also the ironic benefit of finding cures for diseases winding up causing more problems down the road. An example is the recent cost of treating Hepatitis C, which is shifting from a burden of disease to a burden of cure. Unlucky folks used to get the disease and get sick and die early, but their financial problems went away. Now they are cured and get a big bill (or the insurance or the program), which eventually needs to be paid one way or another. And the lucky patient gets to live longer, needing more healthcare than expected or planned. When HIV/AIDS was a death sentence a lot of people spent down their life savings quickly because of short expectation of survival, only to discover that there was now a treatment and they would live much longer than they thought.

BTW, have the FIRE folks really considered these types of numbers in their plans (i.e. $400k at retirement at 5% growth and total of $2.6M in health spending?)? And add to that the years between retirement and medicare needing additional healthcare dollars. For the nominal $2M required in retirement for a 4%SWR or $80k/year, is that supposed to cover these health cares expenses? Or is this in addition and extra?
Last edited by inbox788 on Mon Aug 14, 2017 3:49 pm, edited 1 time in total.

mur44
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Re: Expect to spend $2.6M on healthcare?

Post by mur44 » Mon Aug 14, 2017 3:48 pm

If one has Medicare, your Our-Of-Pocket (OOP) expenses
would be limited. Typically, you would be responsible for
20% of outpatient expenses.

A Medicare supplement plan (Medigap) would reduce your OOP expenses,
but incur monthly premiums.

Three factors to consider: Your health, wealth and
amount of risk.

Fidelity estimated that a couple would need $250,000
for health care related expenses over their lifetimes.

Custodial care expenses are NOT covered by Medicare
and you can buy LTC (Long Term Care) insurance.

Disclosure: I am a Certified Volunteer Medicare Counselor from NJ

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

Post by finite_difference » Mon Aug 14, 2017 8:52 pm

adamthesmythe wrote:
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.
Yes but then medical expenses would not grow at 5-6%?
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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willthrill81
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Re: Expect to spend $2.6M on healthcare?

Post by willthrill81 » Mon Aug 14, 2017 9:24 pm

If you really thought that the medical costs would continue to increase at 5-6% annually for the 'foreseeable' future, investing HSA funds in the healthcare sector might be an interesting way to capture some of that increase. I would presume that if healthcare costs increased at a significantly faster pace than inflation, then returns in the healthcare sector would keep pace, more or less. This might be completely bogus though, and I don't think that healthcare costs will continue to outpace inflation indefinitely, so I'm wouldn't do this personally.
“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

david99
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Re: Expect to spend $2.6M on healthcare?

Post by david99 » Mon Aug 14, 2017 9:41 pm

Sheepdog wrote:
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.
Thanks Sheepdog for giving us some real data to work with.

I agree that some financial firms are trying to scare us in to saving more so that they can have more assets under management.

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

Post by Bigbonds » Tue Aug 15, 2017 12:55 am

visualguy wrote:
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.
Is working an extra decade of your healthy years when you have the money to pull of early retirement a "good situation to be in" just because you have an irrational fear of what the last few unhealthy ones might be like? Guess what, even if you end up indigent in a nursing home 99% of the country will be there with you in the exact same boat, only difference is you will have a decades worth of memories of not going to work and doing stuff you enjoyed with people you cared about. Last survey I saw something like 70% of the country hates their job. You only get one life, if you want to spend all of it hoping the last few years won't suck cause you have a private room at the old folks home have fun. I'm willing to bet those last few years when you're crapping your pants will suck anyway. ;)

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

Post by visualguy » Tue Aug 15, 2017 2:16 am

Bigbonds wrote:
Tue Aug 15, 2017 12:55 am
Is working an extra decade of your healthy years when you have the money to pull of early retirement a "good situation to be in" just because you have an irrational fear of what the last few unhealthy ones might be like? Guess what, even if you end up indigent in a nursing home 99% of the country will be there with you in the exact same boat, only difference is you will have a decades worth of memories of not going to work and doing stuff you enjoyed with people you cared about. Last survey I saw something like 70% of the country hates their job. You only get one life, if you want to spend all of it hoping the last few years won't suck cause you have a private room at the old folks home have fun. I'm willing to bet those last few years when you're crapping your pants will suck anyway. ;)
If you reach indigence, what happens to your spouse if he/she outlives you? Have you thought this through? What ends up happening following your approach is that you and/or your spouse fall as a burden on the family. I've seen it happen. In fact, my neighbors are in that exact situation having to foot the bill for a parent in a nursing home. It's not fair and not the right thing to do to your family.

Mitchell777
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Re: Expect to spend $2.6M on healthcare?

Post by Mitchell777 » Tue Aug 15, 2017 6:03 am

visualguy wrote:
Mon Aug 14, 2017 3:17 pm
Mitchell777 wrote:
Mon Aug 14, 2017 12:55 pm
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.
It's still a lot of money even if you assume less than 5 years, and you need to plan for it... Also, both husband and wife may need to go to a nursing home, either at the same time, or one first and then the other. The one who goes later may go many years later, and you don't want a situation where the first to go eats up the money needed by the second to go. Again, all this needs to be taken into account.

Assisted living is of course another possibility which requires significant resources.
I did not say you don't need to plan for it. I suggested you do not need to plan for 5 to 10 years of it. First few people will be able to save enough for even 2 or 3 years. For those of us on this site, the question is how many years in a nursing home do you plan for. If someone wants to save enough for 5 to 10 years, I respect that. Go for it. I'm not working into my 70's to try to save $500K to $1M additional (per person) to set aside for 5 to 10 years of private pay in a nursing home when I only need enough for 2 or 3 years to receive the same care. Saving enough for 3 years is responsible enough for me since most people will pay little to no private pay

Da5id
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Re: Expect to spend $2.6M on healthcare?

Post by Da5id » Tue Aug 15, 2017 7:09 am

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.
  • The expected rate of inflation for healthcare costs is 5.47%.
There is an old saying that anything that can't go on for ever won't. Healthcare costs can't as a practical matter exceed (or even reasonably approach) 100% of GDP, which is growing much more slowly than 5.47%. Therefore the growth rate will, by rationing, cost containment, innovation, or other means, be slowed at some point. When/how that will happen is anyone's guess.

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

Post by visualguy » Tue Aug 15, 2017 1:09 pm

Mitchell777 wrote:
Tue Aug 15, 2017 6:03 am
I did not say you don't need to plan for it. I suggested you do not need to plan for 5 to 10 years of it. First few people will be able to save enough for even 2 or 3 years. For those of us on this site, the question is how many years in a nursing home do you plan for. If someone wants to save enough for 5 to 10 years, I respect that. Go for it. I'm not working into my 70's to try to save $500K to $1M additional (per person) to set aside for 5 to 10 years of private pay in a nursing home when I only need enough for 2 or 3 years to receive the same care. Saving enough for 3 years is responsible enough for me since most people will pay little to no private pay
Even 3 years per person is over $400K per person in today's dollars. At least for the first person to go, this should be taken into account as extra needed money in retirement savings. The surviving spouse may be able to rely on the remaining assets.

In general, my issue with the 25X or 30X calculation is that it's only part of the picture. More money needs to be added for potential out of the ordinary health care expenses, long-term care, significant home renovations/repairs (can be big bucks), etc.

Bigbonds
Posts: 94
Joined: Wed Jun 07, 2017 11:51 am

Re: Expect to spend $2.6M on healthcare?

Post by Bigbonds » Tue Aug 15, 2017 2:13 pm

visualguy wrote:
Tue Aug 15, 2017 2:16 am
Bigbonds wrote:
Tue Aug 15, 2017 12:55 am
Is working an extra decade of your healthy years when you have the money to pull of early retirement a "good situation to be in" just because you have an irrational fear of what the last few unhealthy ones might be like? Guess what, even if you end up indigent in a nursing home 99% of the country will be there with you in the exact same boat, only difference is you will have a decades worth of memories of not going to work and doing stuff you enjoyed with people you cared about. Last survey I saw something like 70% of the country hates their job. You only get one life, if you want to spend all of it hoping the last few years won't suck cause you have a private room at the old folks home have fun. I'm willing to bet those last few years when you're crapping your pants will suck anyway. ;)
If you reach indigence, what happens to your spouse if he/she outlives you? Have you thought this through? What ends up happening following your approach is that you and/or your spouse fall as a burden on the family. I've seen it happen. In fact, my neighbors are in that exact situation having to foot the bill for a parent in a nursing home. It's not fair and not the right thing to do to your family.
No kids, together but not married for various legal reasons including a situation such as this. Her money is protected in tax sheltered accounts that the Supreme Court has said are protected even if she had to file bankruptcy. There are tons of strategies for becoming indigent while still protecting some assets and there was even an article in the New York Times recently if you want a broad overview. I've thought it through. Its something everyone should think about. Like I said, when you consider that 99% of the country lives this way it's not worth worrying about. Enjoy your healthy years, live them to the fullest. Don't slave away your life worried about the last 3, they will suck no matter what for most.

bantam222
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Re: Expect to spend $2.6M on healthcare?

Post by bantam222 » Tue Aug 15, 2017 2:22 pm

You can grow the cost of anything for "inflation" over the next 35 years and have it be a scary number. The whole idea of inflation is that wages and everything else will keep up with it.

Your health care example:
$404,253 * 1.0547^35 = $2.6M?

Honda Accord (E-XL model) - decent car but not ridiculous:
$30,000 * 1.0547^35 = 193,479

Average house in HCOL city:
$750,000 * 1.0547^35 = 4.83 Million

If you are going to look at it like this, heath care is the least of my concerns.

P.S. you could also back test this to 35 years ago. Your grandparents were sitting in this exact same spot (how am I going to afford anything 35 years from now after all this inflation!?!)

neilpilot
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Location: Memphis area

Re: Expect to spend $2.6M on healthcare?

Post by neilpilot » Tue Aug 15, 2017 2:33 pm

bantam222 wrote:
Tue Aug 15, 2017 2:22 pm
You can grow the cost of anything for "inflation" over the next 35 years and have it be a scary number. The whole idea of inflation is that wages and everything else will keep up with it.

Your health care example:
$404,253 * 1.0547^35 = $2.6M?

Honda Accord (E-XL model) - decent car but not ridiculous:
$30,000 * 1.0547^35 = 193,479

Average house in HCOL city:
$750,000 * 1.0547^35 = 4.83 Million

If you are going to look at it like this, heath care is the least of my concerns.

P.S. you could also back test this to 35 years ago. Your grandparents were sitting in this exact same spot (how am I going to afford anything 35 years from now after all this inflation!?!)
Sure, but a key premise of the article the OP linked was that medical cost would continue to increase at much higher then overall COL, i.e. triple the overall inflation rate. 1.9% vs 5.47%. While this is just their speculation, that would leave the Accord at "only" $58k and the HCOL house at "only" $1,450,000 in 35 years, but health care at $2.6M.

Of course we can speculate any way we want. I prefer to plan on medical costs DEFLATING relative to other items. Doesn't mean it's so.

visualguy
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Joined: Thu Jan 30, 2014 1:32 am

Re: Expect to spend $2.6M on healthcare?

Post by visualguy » Tue Aug 15, 2017 3:15 pm

Bigbonds wrote:
Tue Aug 15, 2017 2:13 pm
No kids, together but not married for various legal reasons including a situation such as this. Her money is protected in tax sheltered accounts that the Supreme Court has said are protected even if she had to file bankruptcy. There are tons of strategies for becoming indigent while still protecting some assets and there was even an article in the New York Times recently if you want a broad overview. I've thought it through. Its something everyone should think about. Like I said, when you consider that 99% of the country lives this way it's not worth worrying about. Enjoy your healthy years, live them to the fullest. Don't slave away your life worried about the last 3, they will suck no matter what for most.
This seems contradictory: you worried about it enough to do elaborate Medicaid planning, and you say it's something everyone should think about. On the other hand, you say that it's not worth worrying about because 99% of the country doesn't.

Yes, Medicaid planning (indigence strategies) can help somewhat, although it's a complicated game, and can backfire depending on the circumstances. Also, who knows what Medicaid will look like in the future, and what it will actually get you. It is under attack and will continue to be so.

I would rather work a few more years to improve the last few years for me, my wife, and my family. Being sick and weak is horrible enough. Combining that with a lack of resources is just thoroughly devastating. I don't see how it helps that many others end up in that situation. Having said that, I do agree with you that Medicaid planning is something to consider regardless.

bantam222
Posts: 84
Joined: Sun Nov 23, 2014 5:57 pm

Re: Expect to spend $2.6M on healthcare?

Post by bantam222 » Tue Aug 15, 2017 5:41 pm

neilpilot wrote:
Tue Aug 15, 2017 2:33 pm
bantam222 wrote:
Tue Aug 15, 2017 2:22 pm
You can grow the cost of anything for "inflation" over the next 35 years and have it be a scary number. The whole idea of inflation is that wages and everything else will keep up with it.

Your health care example:
$404,253 * 1.0547^35 = $2.6M?

Honda Accord (E-XL model) - decent car but not ridiculous:
$30,000 * 1.0547^35 = 193,479

Average house in HCOL city:
$750,000 * 1.0547^35 = 4.83 Million

If you are going to look at it like this, heath care is the least of my concerns.

P.S. you could also back test this to 35 years ago. Your grandparents were sitting in this exact same spot (how am I going to afford anything 35 years from now after all this inflation!?!)
Sure, but a key premise of the article the OP linked was that medical cost would continue to increase at much higher then overall COL, i.e. triple the overall inflation rate. 1.9% vs 5.47%. While this is just their speculation, that would leave the Accord at "only" $58k and the HCOL house at "only" $1,450,000 in 35 years, but health care at $2.6M.

Of course we can speculate any way we want. I prefer to plan on medical costs DEFLATING relative to other items. Doesn't mean it's so.
Sorry, did not read the article. I thought he was just saying inflation would be 5.47%, not the growth of health care costs. In that case you are correct.

finite_difference
Posts: 916
Joined: Thu Jul 09, 2015 7:00 pm

Re: Expect to spend $2.6M on healthcare?

Post by finite_difference » Wed Aug 16, 2017 10:37 am

bantam222 wrote:
Tue Aug 15, 2017 5:41 pm
neilpilot wrote:
Tue Aug 15, 2017 2:33 pm
bantam222 wrote:
Tue Aug 15, 2017 2:22 pm
You can grow the cost of anything for "inflation" over the next 35 years and have it be a scary number. The whole idea of inflation is that wages and everything else will keep up with it.

Your health care example:
$404,253 * 1.0547^35 = $2.6M?

Honda Accord (E-XL model) - decent car but not ridiculous:
$30,000 * 1.0547^35 = 193,479

Average house in HCOL city:
$750,000 * 1.0547^35 = 4.83 Million

If you are going to look at it like this, heath care is the least of my concerns.

P.S. you could also back test this to 35 years ago. Your grandparents were sitting in this exact same spot (how am I going to afford anything 35 years from now after all this inflation!?!)
Sure, but a key premise of the article the OP linked was that medical cost would continue to increase at much higher then overall COL, i.e. triple the overall inflation rate. 1.9% vs 5.47%. While this is just their speculation, that would leave the Accord at "only" $58k and the HCOL house at "only" $1,450,000 in 35 years, but health care at $2.6M.

Of course we can speculate any way we want. I prefer to plan on medical costs DEFLATING relative to other items. Doesn't mean it's so.
Sorry, did not read the article. I thought he was just saying inflation would be 5.47%, not the growth of health care costs. In that case you are correct.
You bring up a good point that you should use real growth and not inflated growth. Thus if inflation is 2% and medical expenses grow at 5.5%, the real growth is 3.5%.

Thus if you need $400k today in 2017 dollars, you will need $400k*1.035^35 = $400k*3.33 = $1.33 million dollars. That's assuming medical expenses grow 3.5% real over the next 35 years, and there are no series of technological advances or political changes to help bring the cost of healthcare down.

Personally I think $400k out of pocket expenses for today's seniors on Medicare seems high.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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