Retirees Often Underestimate These 3 Big Medical Costs

When retirees budget for their golden years, it is easy to focus on obvious expenses like daily costs (groceries, housing, bills, etc.) and premiums for Medicare, supplemental Medicare insurance and Medicare drug plans, and even long-term-care insurance. However, Knewz.com has learned that three significant healthcare costs often fly under the radar and can add tens of thousands of dollars to their expenses, thus draining their savings.

Unanticipated Healthcare Costs

“When you first retire you feel fine, but later medical needs appear out of nowhere. … Be prepared to spend more on healthcare,” says Ray Loewe, an 83-year-old retiree who spent his career as a financial planner guiding people through the complexities of preparing for retirement. According to financial services titan Fidelity, the estimated cost of healthcare premiums for an average couple throughout retirement is around $330,000, or $165,000 for an individual, that is, not including long-term-care insurance. However, reports say that as retirees get further into retirement, new medical costs pop up that recur year after year. Most of these costs are often overlooked in many financial planning scenarios.

Drugs Not Covered By Insurance

According to a new federal requirement for Medicare drug insurance, also known as Part D Medicare, people using Medicare drug plans won’t have to pay more than $2,000 out of pocket for the drugs covered by their drug insurance each year. However, not all medications are covered equally. High-cost drugs for conditions like cancer or rare diseases may fall outside the plan’s “formulary list,” forcing retirees to pay much more than anticipated. There are almost 500 different drug-insurance policies offered to people on Medicare, and they all differ in what medications they cover. Furthermore, experts warn that formulary changes mid-year can suddenly shift expensive prescriptions back into patients’ hands, drastically increasing costs.

Costs are Even Higher in Rural Areas

In rural or isolated areas, like Alaska, even routine medical care could depend on air travel to other cities, so the budget for retirees has to factor in travel costs in addition to the medical costs. These travel costs can multiply quickly, especially for frequent specialist visits or recurring treatments. Furthermore, some retirees choose an isolated and remote retirement home, which can drive up medical costs as getting quality medical care could often mean long-distance travel, covering flights, hotels, meals and more. Carolyn McClanahan, a medical doctor and financial planner, says that while picking a retirement location, “You have to decide whether lifestyle or the best medical care matters most to you.”

Concierge Care

In many regions, fewer primary care doctors accept Medicare, causing retirees to seek concierge services, which provide more personalized care for a fee ranging around a few thousand dollars annually. According to Tom Blue, a Richmond, Virginia, concierge-practice adviser and former executive director of the American Academy of Private Physicians, annual fees of $5,000 to $10,000 are common and “$25,000, which was the ceiling in 2012, is not rare anymore,” especially in places like New York City, Los Angeles and Silicon Valley. Blue further says that there are around 12,000 concierge doctors across the country, plus another 20,000 who don’t charge annual fees but operate on a “direct pay” basis. In those cases, patients pay out of pocket for office visits instead of using Medicare or insurance, although insurance usually still covers things like lab work and tests.

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