The Great Unknown: Healthcare Costs
These days the big unknown seems to be the market. Daily it seems to go up and down, down and up. However, if you look back over long periods of time, the data reveals trends and we are able to look at the historical numbers and give context and realistic expectations for the future. We are not market timers but believe that if we control what we can – allocation, diversification, and fees – clients will be in the best position possible to plan for their future. With that philosophy in place, we look at the human factor - each individual’s unique life circumstances - and map out a comprehensive plan that encompasses a person’s financial goals, attitudes, family dynamics, and values.
But another great unknown is the cost of healthcare. One person can prepare and then live to 95 with hardly a doctor visit. Another can be in the prime of life and receive unexpected news that results in hundreds of thousands of dollars in health-related expenses – everything from hospitals, medical trials and procedures, medical travel, assisted living, home healthcare, nursing homes, and/or hospice care. The sheer thought of the emotional side of one’s health and then adding in the financial struggle is daunting.
Even though we should not lose sleep worrying about something we cannot control, it is wise to prepare for what we can do with what we know and with what we have.
First, we must confront the facts:
As a society, we are living longer. This means we have greater opportunities as well as risks to prepare for.
Statistically, as we get older, we will have more health issues and therefore more costs associated with healthcare.
Medicare Part A and B may be in place for the retirement years, but it will not cover all our costs. Most dental care, eye exams, hearing aids, and many other routine expenses are not covered under Medicare. Another one that is not ccovered is Long Term Care – anything from in-home assistance or home modification to a full care nursing home.
According to the Genworth 2023 Annual Cost of Care Survey, the national median annual cost of long-term care is:
Adult Day Care: $24,696
Assisted Living: $64,200
Homemaker Services: $68,640
In-Home Health Aide: $75,504
Nursing Home (semi-private room): $104,028
Nursing Home (private room): $116,796
In 2025, the coinsurance amounts for Medicare are as follows:
$419 per day for days 61–90 of a hospitalization.
$838 per day for lifetime reserve days after day 90.
$0 for the first 60 days of each benefit period
Second, we must do what we can to mitigate our health costs, such as eating a balanced diet, exercising, and routine check-ups. Taking care of your health may be one of the best ways you can save money in your retirement years, and it adds to your quality of life along the way. While not all diagnoses can be prevented, it’s important to manage what we can!
Third, we must put a plan in place. Even though we may not know what tomorrow holds, we can make assumptions based on family history, statistics, and consider both best- and worst-case scenarios. Maybe we cannot all put aside enough money to plan for every contingency, but we can plan for possible outcomes so that we know we have done our best for ourselves and our loved ones.
Since we are fee-only advisors, we do not sell insurance coverage (which is generally commission based). We do work with our clients to create a potential needs analysis and evaluate potential solutions including self-insuring, Long Term Care (LTC) policies, Hybrid LTC policies, etc. If you have an insurance agent, we are happy to work with them. If not, we can recommend a trusted insurance agency.
The cost of healthcare is one of many topics we cover when we develop financial plans for clients. It is not one we can ignore. Cashflow, retirement planning, insurance, investments, tax considerations, employee benefits, estate planning, education costs, as well as healthcare costs all come together in developing a comprehensive plan. It will take time and work to pull all the pieces together, but it is worth the peace of mind that accompanies a working plan for your and your family’s future.