Managing Post-Retirement Risks: Unexpected Health Care Needs and Costs

Unexpected health care costs are a major concern. Employers continue to cut back on post-retirement health care benefits. Low-income retirees may spend a large percentage of their resources on health care. Medicaid does provide assistance for the poor.

Medical technology improvements that extend life may increase care costs.

Uncertainty over implementation of reform measures is hampering current retirement planning.

Predictability

Health care costs are:

• Relatively easy to predict for a large group over a limited time.
• Hard to predict for individuals.
• Very hard to predict far into the future.

However, the cost and benefit structure impacts of health care reform should be more predictable now that the new health care reforms are fully implemented.

Managing the Risk

Medicare is the primary source of coverage for post-65 retirees. Supplemental coverage is available from employer plans and individual Medigap policies or HMOs.

Other federal or state/local programs may assist low-income retirees.

Instead of retiring from a job with health benefits, employees may choose to keep working, at least part-time, in a job that will allow them to remain covered.

Wide varieties of "discount benefit plans" are available for typical non-covered services such as dental or vision care. Regulators have had to clamp down on marketing practices to keep consumers from mistaking such discount arrangements for insurance coverage.

Medical travel or even migration to other countries has gained popularity as a way for consumers to reduce their cost for care. Costly surgery covered in the United States by normal insurance is available elsewhere at lower out-of-pocket cost, although there may be added risk.

Conclusion

Future resource requirements are hard to predict because a high level of uncertainty exists about the future design of Medicare and other changes in health policy and operation of health exchanges.

In a typical group, a small percentage of individuals usually account for a large percentage of the group's overall health care costs.

It's not too late for retirees to reduce their risk of major health problems by lifestyle changes involving diet, exercise, smoking, etc.$

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