Some medical costs have been lowered due to the new health reform law but retired people still need a large amount in savings. A report by the Employee Benefit Research Institute (EBRI) estimates that in order to be 90% sure of being able to cover medical expenses, people would need between $120,000 and $211,000 in savings. Women would need more since they live longer than men. The report is titled Funding Savings Needed for Health Expenses for Persons Eligible for Medicare.
Paul Fronstin, co-author, and director of EBRI’s Health Research and Education Program, said: “Because employers are continuing to scale back retiree health benefits, and policymakers may soon begin to address Medicare’s funding shortfall, more of the financial costs of health care will be shifted to Medicare beneficiaries in the future.”
Estimates in the EBRI report have target levels of being sure to be able to cover out-of-pocket medical costs at 50%, 75% and 90%. The average male retiring this year at 65 will need between $65,000 and $109,000 in savings to be 50% sure of being able to cover medical costs. Women will need between $88,000 and $146,000 to be 50% sure. Men wanting to be 90% sure will need between $124,000 and $211,000, while women will need between $143,000 and $242,000.
The calculations only refer to those who are at least 65 when they retire. People retiring earlier will need more money in savings. The EBRI stresses this fact.
The new analysis by EBRI has savings estimates for single and married people. These savings estimates are based on Medicare and out-of-pocket costs, in order for medical care to be completely covered. The new estimates are updated from the 2008 estimates which were done before the new Health Law was enacted. The revision, also, includes Medicare Part D changes.
The most recent data for payment of expenses is from 2007. Medicare paid 64% of health care costs for beneficiaries while the out-of-pocket costs were about 14%. The other 12% were paid by public programs and private insurance.
There are ways for retirees to lower their 14% out-of0pocket costs. Since doctors depend on patients for their livelihood, many are willing to negotiate on procedures, tests and service costs. Find out what the reimbursement rate of your health insurance company is for a procedure and then ask your doctor to do it for that amount. You may not be able to get free health care but it can significantly cut your out-of-pocket costs. Even if your doctor turns down your request, ask every time you go. Persistence can pay off.
It is very challenging to determine what amount will be needed in savings to pay for medical costs in retirement. There are so many factors to take into consideration since no one knows how long they will live or what illnesses they will have. No one knows what medication they may be on either. Prescription drugs can become a huge expense.
Dallas Salisbury, co-author of the report and CEO of EBRI states,” Many workers are generally unprepared for both health care expenses in retirement and retirement expenses. In fact, many individuals will need more money than the amounts cited in this report.”
