10,000 boomers retiring each day

Advisors


Health-care news and the costs associated with it are obviously on everyone’s mind, and for good reason. As health care continues to take up a larger part of the overall economy, structural changes — such as the push toward paying for value, greater emphasis on care management and increased cost sharing with consumers — are taking a stronger hold, pulling back against rapid health-care spending growth.

Retiring baby boomers will more than double Medicare and Medicaid costs by 2020, according to industry data. As health-care costs increase faster than economic growth, Medicare taxes and the Trust Fund will cover less and less. By 2033, some pundits say, the Trust Fund will be bankrupt, and taxes will pay only for 48 percent of the costs.

Americans are unique in that a vast majority feel personally responsible for retirement preparation — a survey by Transamerica found that 91 percent felt very or somewhat personally responsible for post-retirement income sufficiency, versus 73 percent of workers globally. But high health-care costs in the United States make it difficult to actually be prepared. According to some industry calculations, a person with a $40,000 annual income needs $1.5 million to comfortably retire (the higher your income, the more millions you need in order to maintain your lifestyle). If that weren’t steep enough, this figure doesn’t include health costs.

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Since health costs rise along with age, this equation gets more problematic. The average 65-year-old couple in retirement can expect to pay $275,000 in out-of-pocket expenses for health care, according to Fidelity Investments. But by some estimates, they only have a 50 percent chance of covering these costs. According to a report by AARP, “the U.S. stands out for the high cost of health care and its failure to generate better health outcomes.” So no matter how personally responsible emerging seniors may feel, half are likely to fall short when medical costs are concerned.

There’s Social Security, sure, but the reserve is expected to be depleted by 2033. The limits of Medicare and Medicaid are being tested as well. According to the Congressional Budget Office, by 2035 spending for Medicare alone will reach 8 percent of gross domestic product; as of 2080, that figure may be 15 percent. And since emerging retirees will both live longer and experience higher rates of hypertension, higher cholesterol, obesity and diabetes, their strain on health and finances will be prolonged.

There’s no easy solution, but as an entrepreneur in the health-care industry that works with seniors, I feel it’s my obligation — and ours in the field collectively — to come up with solutions that strive for patient affordability and ways to actually lower costs behind the scenes.



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