States of Medicare

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The State(s) of Medicare

Most Americans heading into retirement expect Medicare to take over where employer-sponsored policies left off, a benefit that our parents and grandparents have enjoyed for almost five decades. The original plan was simple: Medicare was to be a cost-effective safety net for senior citizens after a lifetime of labor and weekly deductions. Of course, with 78 million Americans turning 65 over the next 20 years—to the tune of almost 10,000 per day living well into their late 70s—the long-term future of Medicare, at least in its present form, is tenuous.

However, whether Medicare will survive is really not the most pressing issue, as it is unlikely that any drastic changes will occur with the election on the horizon. The true challenge lies in encouraging current and future subscribers to gather the necessary information to make educated decisions about their healthcare options in retirement.

The simple question “What does Medicare cover?” might yield a range of responses from “everything” to “I have no idea.” A visit to Medicare.gov will certainly provide a wealth of information for those willing to do their research, but the reality is that most retirees have limited knowledge about what is and isn’t covered, the effects of the new healthcare legislation, or how high their out-of-pocket costs will be.

To put it simply, most Americans are completely unprepared for the onslaught of healthcare expenses waiting for them on the day they retire.

To prove this point, it is necessary to investigate how variables affect expenses by using a revolutionary tool called Retiremark. This platform, designed to utilize data from one of the leading actuarial firms in the country, as well as its own medical board, is the first to integrate healthcare costs—based on age, gender, retirement age, health conditions, residency, income, and types of coverage—into the retirement planning process.

Let’s take a brief look at the residency variable with consideration to the overall costs of Medicare Parts A and B (which are standard in every state), Medicare Part D (which does fluctuate), a supplemental MediGap Plan C policy, and finally, the average out-of-pocket costs for services that Medicare does not cover. These outputs have been calculated for a healthy 65-year-old couple entering retirement that earns less than $170,000.00 per year.

Here is a table highlighting the least and most expensive states for our couple retiring at 65:

Rank Least Expensive Cost Most Expensive Cost
1. Hawaii $6,610 Florida $8,580
2. Vermont $6,980 Nevada $8,420
3. South Dakota $7,310 New Jersey $8,390
4. Maine $7,330 Michigan $8,370
5. North Dakota $7,430 Arkansas $8,330

It is evident that a significant difference in healthcare costs between Hawaii and Florida exists, but $1,970 is not going to compel someone in Orlando to hop a plane to Maui. However, let’s expand our projections ten years, when the couple is 75:

Rank Cheapest Cost Most Expensive Cost
1. Hawaii $13,080 Florida $17,400
2. Vermont $13,900 Nevada $17,170
3. South Dakota $14,590 New Jersey $17,150
4. Maine $14,640 Michigan $17,020
5. North Dakota $14,860 Arkansas $16,940

That Florida couple can expect to see—at minimum—more than 10% of their total fixed income go to healthcare costs, and that is only if they remain healthy. Even residents of Hawaii can expect their healthcare costs to double in just ten years.

Now let’s add a variable and the new healthcare legislation, which requires additional contributions to Medicare based on income.

Suppose that our Florida couple sells a property and ends up in a higher Modified Adjusted Growth Income Level, (where they could remain until deceased).

Projected Healthcare Expenses: Age 65-75

MAGI Level Hawaii Ohio (Median) Florida
Under $170,0000 $97,120 $119,610 $130,110
$214,000-$320,000 $145,294 $170,074 $179,548
$320,000-$428,000 $174,388 $200,574 $209,412
$428,000 + $203,452 $231,034 $239,242

Regardless of residency, the spike in healthcare expenses from the lowest bracket to the middle tier is immense. Also, it will cost the Florida couple almost 30% more in healthcare-related expenses over a 10-year period.

Because healthcare costs rise as we age, the numbers become downright scary as we project out 20 years.

Projected Healthcare Expenses: Age 65-85

MAGI Level Hawaii Ohio (Median) Florida
Under $170,0000 $279,440 $349,400 $375,740
$214,000-$320,000 $417,064 $495,282 $517,868
$320,000-$428,000 $500,230 $583,534 $603,804
$428,000 + $583,294 $671,652 $689,618

Projected Healthcare Expenses: Age 65-90

MAGI Level Hawaii Ohio (Median) Florida
Under $170,0000 $493,610 $534,1500 $569,420
$214,000-$320,000 $708,845 $759,102 $788,262
$320,000-$428,000 $838,981 $895,226 $920,618
$428,000 + $968,934 $1,031,132 $1,052,776

These figures mushroom as additional variables, such as a chronic illness or change in coverage, are added.

Everyone is concerned about these spiraling out-of-pocket costs, but few solutions are currently available. Going forward, there is only way to ensure a comfortable and stable retirement: to integrate the aforementioned variables into a customizable financial plan that creates a system of income distribution that will directly addresses rising healthcare costs.

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