At any age, health care is a pri­or­i­ty.  But when you retire, you should prob­a­bly focus more on health care than ever before.  This is espe­cial­ly true for women.  Women live longer, devel­op cer­tain chron­ic con­di­tions at a high­er rate than men, and are more apt to expe­ri­ence med­ical lim­i­ta­tions that direct­ly affect their dai­ly activ­i­ties.  That’s why it’s par­tic­u­lar­ly impor­tant for women to fac­tor in the cost of health care, includ­ing long-term care, as part of their retire­ment plan.

Healthy Wealthy and Wise womenHow much you will spend on health care dur­ing retire­ment gen­er­al­ly depends on a num­ber of vari­ables includ­ing when you retire, how long you live, your rel­a­tive health, and the cost of med­ical care in your area.  A 2010 study esti­mates that out-of-pock­et health care expense for a 65-year-old cou­ple retir­ing in 2010 and liv­ing for 20 years will range from $250,000 to $430,000.  That could mean an annu­al health-care expense of almost $21,500.  Accord­ing to the Bureau of Labor Sta­tis­tics, the aver­age long-term infla­tion rate for health­care has been 5.53% per year.  

Anoth­er impor­tant fac­tor to con­sid­er is the avail­abil­i­ty of Medicare.  In gen­er­al, you will be eli­gi­ble at the age of 65.  But what if you retire at a younger age?  There are a num­ber of ways you can make sure you get health care cov­er­age until Medicare kicks in such as hav­ing a long-term care plan.  Your employ­er may offer health insur­ance cov­er­age to its retir­ing employ­ees, but this is the excep­tion rather than the rule.  If your employ­er doesn’t extend health ben­e­fits, you may be able to get insur­ance cov­er­age through your spouse’s plan.  If that’s not an option, you may need to buy a pri­vate health insur­ance pol­i­cy (which could be cost­ly) or extend your employ­er-spon­sored cov­er­age through COBRA. 

 

Medicare

As men­tioned, most Amer­i­cans auto­mat­i­cal­ly become enti­tled to Medicare when they turn 65.  In fact, if you are already receiv­ing Social Secu­ri­ty ben­e­fits when you are 65, you won’t even have to apply—you will be auto­mat­i­cal­ly enrolled in Medicare.  How­ev­er, you will have to decide whether you need only Part A cov­er­age (which is pre­mi­um free for most retirees) or if you want to also pur­chase Part B cov­er­age.  

Part A, com­mon­ly referred to as the hos­pi­tal insur­ance por­tion of Medicare, can help pay for your inpa­tient hos­pi­tal care, plus home health care and hos­pice care.  Part B helps cov­er oth­er med­ical care such as physi­cian ser­vices, lab­o­ra­to­ry tests, and phys­i­cal ther­a­py.  You may also choose to enroll in a man­aged care plan or pri­vate fee-for-ser­vice plan under Medicare Part C (Medicare Advan­tage) if you want to pay few­er out-of-pock­et health-care costs.  And if you don’t already have ade­quate pre­scrip­tion drug cov­er­age or belong to a Medicare Advan­tage Plan, you should con­sid­er join­ing a Medicare pre­scrip­tion drug plan offered in your area by a pri­vate com­pa­ny or insur­er that has been approved by Medicare. 

Unfor­tu­nate­ly, Medicare won’t cov­er all your health-relat­ed expens­es.  For some types of care, you’ll have to sat­is­fy a deductible and make co-pay­ments.  That’s why many retirees pur­chase a Medi­gap pol­i­cy. 

 

Medigap

Unless you can afford to pay out of pock­et for the things that Medicare doesn’t cov­er, includ­ing the annu­al co-pay­ments and deductibles that apply to cer­tain types of ser­vices, you may want to buy tome type of Medi­gap pol­i­cy when you sign up for Medicare Part B.  In most states, there are 10 stan­dard Medi­gap poli­cies avail­able.  Each of these poli­cies offers cer­tain basic core ben­e­fits, and all but the most basic pol­i­cy (Plan A) offer var­i­ous com­bi­na­tions of addi­tion­al ben­e­fits designed to cov­er what Medicare does not.  Although not all Medi­gap plans are avail­able in every state, you should be able to find a plan that best meets your needs and bud­get. 

When you first enroll in Medicare Part B at age 65 or old­er, you have a six-month Medi­gap open enroll­ment peri­od.  Dur­ing that time, you have a right to buy the Medi­gap pol­i­cy of your choice from a pri­vate insur­ance com­pa­ny, regard­less of any health prob­lems you may have.  The com­pa­ny can­not refuse you a pol­i­cy or charge you more than oth­er open enroll­ment appli­cants. 

 

Long-Term Care

Because women tend to live longer than men, they are at a high­er risk of need­ing long-term care.  And on aver­age, women need care over a longer time (3.7 years) than men (2.2 years).  With a longer life expectan­cy and a greater like­li­hood of need­ing long-term care, women often must con­front their long-term care needs with­out the help of their spouse or pos­si­bly oth­er fam­i­ly mem­bers.  Long-term care can be expen­sive.  An impor­tant part of plan­ning is decid­ing how to pay for these ser­vices. 

Buy­ing long-term care (LTC) insur­ance is an option.  While pre­mi­ums may be cost­ly, hav­ing LTC insur­ance may allow you to elect where you receive your care, the type of care you receive, and who pro­vides care to you.  Many LTC insur­ance poli­cies pay for the cost of care pro­vid­ed in a nurs­ing home, assist­ed-liv­ing facil­i­ty, or at home, but the cost of cov­er­age gen­er­al­ly depends on your age and the pol­i­cy ben­e­fits and options you pur­chase.  And pre­mi­ums can increase if the insur­er rais­es its over­all rates.  Even with LTC insur­ance, you still may have some expens­es not cov­ered by LTC insur­ance.  For exam­ple, 

  • Not all poli­cies pro­vide cov­er­age for care in your home, even though that’s where most care is actu­al­ly pro­vid­ed.  While the cost of in-home care may be less than the cost of care pro­vid­ed in a nurs­ing home, it can still be quite expen­sive. 
  • Most poli­cies allow for the selec­tion of an elim­i­na­tion peri­od of between 10 days and 1 year, dur­ing which time you are respon­si­ble for pay­ment of care. 
  • The LTC insur­ance ben­e­fit if often paid based on a dai­ly or month­ly max­i­mum amount, which may not be enough to cov­er all the costs of care. 
  • While life­time cov­er­age may be select­ed, it can increase the pre­mi­um cost sig­nif­i­cant­ly, and some poli­cies may not offer that option.  Anoth­er option that can be valu­able, but also increase the pre­mi­um expense con­sid­er­able, is cost-of-liv­ing or infla­tion pro­tec­tion, which annu­al­ly increas­es the dai­ly insur­ance ben­e­fit based on a cer­tain per­cent­age.
  • Most com­mon LTC insur­ance ben­e­fit peri­ods last from 1 year to 5 years, after which time the insur­ance cov­er­age gen­er­al­ly ends regard­less of whether care is still being pro­vid­ed. 

To encour­age more indi­vid­u­als to buy long-term care insur­ance, many states have enact­ed Part­ner­ship pro­grams that autho­rize pri­vate insur­ers to sell state-approved long-term care Part­ner­ship poli­cies.  Part­ner­ship pol­i­cy own­ers, who expend pol­i­cy ben­e­fits on long-term care ser­vices, will qual­i­fy for Med­ic­aid with­out hav­ing to first spend all or most of their remain­ing assets (assum­ing they meet income and oth­er eli­gi­bil­i­ty require­ments). 

 

Government Benefits for Veterans

If you are a vet­er­an, you may be eli­gi­ble for long-term care ser­vices for ser­vice-relat­ed dis­abil­i­ties and for oth­er health care through the Depart­ment of Vet­er­ans Affairs.  Vis­it the Depart­ment of Vet­er­ans Affairs web­site (www.va.gov/healthbenefits) for more infor­ma­tion. 

 

Other Health-Care Factors to Consider

It’s clear that health care is an impor­tant fac­tor in retire­ment plan­ning.  Here are some tips to con­sid­er: 

  • Eval­u­ate your present health and project your future med­ical needs.  Con­sid­er­ing your family’s health his­to­ry may help you deter­mine the type of care you might need in lat­er years. 
  • Don’t pre­sume Medicare and Medi­gap insur­ance will cov­er all your expens­es.  For exam­ple, Medicare (Parts A and B) does not cov­er the cost of rou­tine eye exams, most eye­glass­es or con­tact lens­es, or rout­ing hear­ing exams or hear­ing aids.  Include poten­tial out-of-pock­et costs in your plan. 
  • Even if you have Medicare and Medi­gap insur­ance, there are pre­mi­ums, deductibles, and co-pay­ments to con­sid­er. 

You may have already begun sav­ing for you retire­ment, or you could be retired already, but if you fail to include the cost of health care as a retire­ment expense, you are like­ly to find that health care costs can zap retire­ment income in a hur­ry, poten­tial­ly leav­ing you finan­cial strapped. 

Read the Worth­while Women Series