How Could Healthcare Costs Risk Affect You?

The following healthcare-related costs might occur:

Your costs could increase each year. On average, people aged 65 or older spend more than $3,500 per year on out-of pocket healthcare costs. Spending on prescription drugs is expected to increase roughly 12 percent per year through 2011. If you retire before age 65, you may not be eligible for Medicare. If you become sick or injured, you will have to pay all of the resulting healthcare costs unless you have some other form of coverage. Individual health insurance policies can be very expensive. If you are age 60 and in good health, average premiums are as high as $5,600 per year. Older women usually spend more out-of pocket for healthcare than older men do, excluding the costs of long-term care. Women who have at least one kind of severe restriction in their activities of daily living spend about one third of their income on healthcare costs.

Here are some important questions you should ask yourself about healthcare costs risk:

What are your current or expected sources of healthcare coverage in retirement? (Consider Medicare, Medicare supplement, employer-sponsored retiree health insurance, individual health insurance, and other sources such as a state program or Medicaid.) If you have employer-sponsored retiree health insurance, how much do you pay for premiums, co-payments, and coinsurance payments? Do you anticipate this coverage changing in the future? Are you planning to retire before age 65? If so, do you have healthcare coverage until age 65 (the current age at which people are eligible for Medicare coverage)? Do you (or your spouse) have any chronic illnesses? Do you take any prescription drugs? What is the health status of your immediate family members, particularly those who are older than you? Are there any hereditary illnesses in the family that may require significant healthcare? Do any family members pay significant costs for maintenance drugs?