Planning for Health Care in Retirement 1
Agenda The Retirement Income Challenge Understanding Health Care Creating a Plan to Address Health Care Costs 3
The Retirement Income Challenge 4
The Retirement Income Challenge Retirees need to make a series of important decisions between ages 55 and 70½ 1 Retirement Decision Points 1 The Retirement Income Reference Book, 2012, LIMRA 5
The Retirement Income Challenge Percentage of Private-Sector Workers Employed By Establishments Offering Health Insurance to Retirees, 1997 2011 9 9 Employment-Based Retiree Health Benefits: Trends in Access and Coverage, 1997 2011. EBRI. October 2012. No. 377. 6
The Health Care Dilemma 9
The Health Care Dilemma Health care spending has far outpaced inflation over last decade...and they can have a significant impact on your finances 8 5.8% Health care 6 2.5% Inflation 7 38% Have difficulty paying bills 27% Use up savings 16% Borrow money 6 National Health Expenditure Projections, 2012 22: Slow Growth Until Coverage Expands And Economy Improves. Health Affairs, September 2013. 7 US Bureau of Labor Statistics. Consumer Price Index (CPI-U) average inflation rate from 2003-2012. 8 2013 Health and Voluntary Workplace Benefits Survey: Nearly 90% of Workers Satisfied With Their Own Health Plan, but 55% Give Low Ratings to Health Care System, by Paul Fronstin, Ph.D., EBRI, and Ruth Helman, Greenwald & Associates. EBRI Notes, Vol. 34, No. 9, September 2013. 11
The Health Care Dilemma Consumer Estimate of Annual Health Care Costs in Retirement 10 $10,000: $6,000 to $9,999: $3,000 to $5,999: $1,500 to $2,999: $0 to $1,499: Don t Know: 8% 13% 25% 12% 16% 26% 79% have underestimated, or don t know their medical costs 10 Nationwide Survey Health Care Costs in Retirement. Consumer study of 625 respondents, January 2012. 13
Understanding Medicare Option 1 Option 2 Original Medicare Part A and Part B + Secondary Insurance GHI, MedSup + Rx Coverage Part D or GHI OR Medicare Advantage (Part C) 1. Hospitalization, 2. Medical 3. Rx (MA-PD) 16
Understanding Health Care Option 1 Medicare Part A: Hospital Insurance 14 Inpatient Hospitalization Patient costs for an in-hospital stay Days 1-60 $1,216 deductible Skilled Nursing Facilities Home Health Care Hospice Days 61-90 Days 91-150 Days 150+ $304 per day copay $608 per day copay All costs 14 Medicare.gov. Medicare 2013 & 2014 costs at a glance. http://1.usa.gov/190ejwx. 17
Understanding Health Care Option 1 Medicare Part B: Medical Insurance 15 Doctors/Providers Preventive Benefits Durable Medical Equipment Outpatient Services Individual Pays Monthly premium (based on MAGI) $147 deductible 20% coinsurance on doctors services and outpatient care 15 Medicare.gov. Medicare 2013 & 2014 costs at a glance. http://1.usa.gov/190ejwx. 18
Understanding Health Care Option 1 Medicare Part B: Monthly Premiums 16 If Your Yearly Income in 2012 was: You Pay Filed Individual Tax Return Filed Joint Tax Return $85,000 or less $170,000 or less $104.90 $85,000 - $107,000 $170,000 - $214,000 $146.90 $107,000 - $160,000 $214,000 - $320,000 $209.80 $160,000 - $214,000 $320,000 - $428,000 $272.70 above $214,000 above $428,000 $335.70 16 Medicare.gov. Medicare 2013 & 2014 costs at a glance. http://1.usa.gov/190ejwx. 19
Understanding Health Care Option 1 Medicare Part D: Prescription Drug Coverage Available two ways: Stand-alone Prescription Drug Plans (PDPs) Through Medicare Advantage Plans (MAPDs) ALL people with Medicare can get Part D Open Enrollment Oct 15 th to Dec 7 th 2014: Other enrollment times based on circumstance Coverage begins Jan 1, 2015 20
Understanding Health Care Option 1 Medicare Part D: Prescription Drug Coverage (2014) 17 ** Premiums vary by insurer You pay Medicare pays The doughnut hole is large and expensive 95% Medicare benefit (catastrophic coverage) 100% No Medicare coverage in doughnut hole 75% Medicare benefit (initial coverage) Beneficiary pays 5% (min. co pay) $2.55 generic or $6.35 brand $4,550 out-of-pocket reached $6,765 in total drug costs Beneficiary pays 100% or $3,605 47.5% of the cost for brand name medications 72.0% of the cost of generic medications $2,850 in total drug costs Beneficiary pays $635 (25% or flat co-pay amounts based on formulary) $310 Deductible Beneficiary pays 100% or $310 17 Medicare and You, 2014. Medicare.gov 21
Understanding Medicare Option 1 Medigap: Medicare supplemental insurance Pay only after Original Medicare (Parts A & B) Flexibility to see any doctor who accepts Medicare Open Enrollment - Six months beginning with Part B effective date at age 65 or older Does not cover prescriptions 22
Understanding Health Care Cost of Medicare Premiums: Monthly Annual Medicare Part A Medicare Part B Medicare Part D Medigap Plan C $0 $0 $104.90 $1,258.80 18 $39.90 $478.80 19 $ 185.00 $ 2,220.00 20 Total Per Person Per Couple $329.80 $659.60 $3,957.60 $7,915.20 18 Medicare.gov. Medicare 2013 & 2014 costs at a glance. http://1.usa.gov/190ejwx. 19 Kaiser Family Foundation. "Medicare Part D: A First Look at Plan Offerings in 2014." October 10, 2013. Weighted average premium for Medicare Part D Stand-Alone Prescription Drug Plans". 20 Medicare.gov. Median cost for Medigap Policy C in Columbus, Ohio. Ranges from $117 to $253. 23
Creating a plan to address Health Care costs 27
Health Care Cost Assessment 30
Health Care Cost Assessment 31
Health Care Cost Assessment 32
Health Care Cost Assessment 33
Health Care Cost Assessment Client Fact Finder 35
Creating a plan to address health care costs Personalized health care cost assessment Health profile Longevity Total investment needed at retirement Impact of not taking action 36
Summary The Retirement Income Challenge Understanding Health Care Creating a plan to address health care costs 37