LIKE ALMOST EVERYBODY ELSE, my wife and I faced large health care cost increases this year. It wasn’t all from changes in our health insurance. We’re getting up there in years. We go to the doctor more often. Not all hospital charges are covered by Medicare or our health insurance. And there are some costs that aren’t covered at all–namely dental, ear and eye problems.
We’re fortunate: We can afford the cost growth. Many of our acquaintances can’t. Several have changed to less expensive insurance plans, only to have trouble finding doctors and getting appointments. General practitioners and geriatric doctors are growing scarce. Many are getting away from Medicare’s low pay rates and administrative costs. In addition, fewer medical students are interested: They recognize that specialists get significantly higher incomes—and they need those incomes to pay their mounting student loans.
Political parties always promise lower medical costs. But can they really make a dent in such costs, which have been increasing for years at significantly higher rates than consumer inflation? I think not, largely because of the virtually unstoppable aging of our population. People are living longer, with increased medical problems simply from aging. That’ll require more medical care, not less. Meanwhile, the economics are getting worse: Fewer working people per retiree means not only less tax revenue to support Medicare, but also a losing battle for insurers, who will struggle to hold down insurance premiums if the covered population becomes less healthy.
It’s dismaying to consider what annual cost increases can do to health costs. Fidelity Investments projects that a 65-year-old couple will need $260,000 to cover their retirement medical costs. That’s figured in today’s dollars and excludes nursing home costs. At 3% inflation over 15 years, that $260,000 would grow to more than $400,000 in then-year dollar values. What if health care costs grow at 6% per year? In 15 years, a newly retired couple would need more than $600,000–just for medical costs.
Henry “Bud” Hebeler is the retired president of Boeing Aerospace Company and the author of Getting Started in a Financially Secure Retirement. For more on retirement issues, visit Bud’s website at AnalyzeNow.com.