A recent study found that seniors in the United States withdraw $22 billion from their savings each year to cover healthcare costs. Similarly, about two in three bankruptcies in the U.S. are associated with illness and healthcare costs.
While some medical and care expenses are unavoidable, there’s a lot that you can do to mitigate and control healthcare costs during retirement. Here are some important “dos and dont’s” for older adults:
Do take to time to understand health coverage
Many Americans have misconceptions about paying for healthcare and senior care in later life. For instance many adults believe that Medicare will cover all of their healthcare and long-term care expenses after they turn 65. In fact, none of the Medicare plans (A, B, C, or D) cover long-term care such as nursing homes and assisted living communities. Nor do they pay for common health needs such as dental care and dentures, hearing aids, or routine foot care. Research what your health plan will cover, and what gaps you might need to fill with other insurance or by paying privately.
Do not be afraid to talk to an expert
The world of healthcare and health insurance can be murky and complex. While we recommend really taking time to understand your healthcare and coverage options, you don’t have to do this alone. Before making important decisions about health coverage, long-term care, and retirement, consider seeking the guidance of an unbiased expert, such as a certified financial planning professional.
Do take advantage of free preventive care
Medicare and private health plans fully cover important preventive care. Take advantage of this by utilizing all recommended preventive care, from tests to vaccines. This will dramatically reduce your risks of some of the most common (and costly) conditions and diseases that befall us as we age
Do not be overly optimistic about your future health costs (or pessimistic about your longevity)
As you plan for the future, be realistic and don’t bank on your healthcare needs remaining perpetually low. Here, the adage “Hope for the best, plan for the worst,” holds true. Try to plan your healthcare and finances based on the assumption that you will have substantial healthcare needs at some point, even if you are healthy now. Similarly, some seniors base their healthcare and financial planning on the assumption that they will have passed away by a certain age. This is also a mistake. If at all possible, build a plan that sustains your care even if you live well beyond what you might expect.
Do be smart about deductibles
For instance, if you are planning a non-urgent elective procedure, it can be wise to have it done after you have already paid all of your deductible for the year instead of next year after the deductible has been reset.
Do not shun generic medications
The only difference between a generic drug and the brand-name version of the same drug is cost. On average, generic drugs are about 80% less expensive than their brand name counterparts. Ask your pharmacist for generic versions of your medications whenever possible.
Do be mindful of increasing healthcare costs
The annual, overall inflation rate in the United States is about 2%. Unfortunately, healthcare expenses are growing at an even higher rate than this. Financial experts advise that you factor-in annual costs increases of 4% into your healthcare and financial planning.
Do not be afraid to appeal denied claims
About 5%-10% of claims to health insurance are denied, and experts have estimated that up to 90% of these denials are due to simple errors. If you think coverage for a medical expense was denied in error, don’t hesitate to appeal that denial.