States of Medicare - Where You Reside in Retirement Will Affect Your Bottom Line

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Medicare Defined

DECEMBER 6, 2011 BY LEAVE A COMMENT (EDIT)

What is Medicare?

A federal system of health insurance for people over 65 years of age and for certain younger people with disabilities.

Broken into parts;

    • Original Medicare
      • Parts A & B
    • Supplemental
      • MediGap Policies
    • Prescription Drugs
      • Part D
What is not covered
  • Deductibles, coinsurance, or copayments when health care services are provided (unless have a MediGap Policy).
  • Dental ,Vision, Hearing and Podiatry (with only a few exceptions).
  • Custodial care at home or in a nursing home (LTC).
  • Health care outside of the United States (except in limited cases – unless have a MediGap Policy).
  • Routine or yearly physical exams.
When did Medicare start?

Who was the first person to receive Medicare?

Who receives Medicare?

      • Benefits are available to all U.S. residents, but they must be a permanent resident of the United States and have at least 10 years of working history, meaning they have paid into Social Security.
      • Also, beneficiaries must be either 65 years old or permanently disabled while receiving Social Security benefits.
      • Individuals with end-stage kidney disease who require dialysis or a kidney transplant are also eligible for Medicare.

Medicare eligibility tool can be found here

For more detailed information on Medicare please see HealthView Services’ Medicare Breakdown or go to www.medicare.gov.

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Financial Advisors Newest Responsibility – Healthcare?

OCTOBER 23, 2011 BY LEAVE A COMMENT (EDIT)

A few weeks ago, the Centers of Medicare & Medicare held their New England seminar entitled Train the Trainers. This seminar, and others across the country, is conducted to inform S.H.I.P & SHINE specialists of any Medicare changes and to provide a networking venue to discuss best practices for clients. These specialists, usually community volunteers, are trained and certified in their respected states to counsel subscribers on Medicare (Part A & Part B), MediGap insurance, Medicare HMOs, retiree insurance plans, Medicaid, and free or reduced-cost health care programs.

During one of the sessions, the topic of healthcare was briefly supplanted by a turn to the “dark side”— a discussion of the economic side of healthcare in relation to the financial services industry.

An attendee posed a simple question: “With everything that financial advisors do for their clients, should they also be held responsible for knowing about Medicare and healthcare in retirement?”

The person explained that she asked the question out of frustration because many of her clients had the wrong coverage or were generally worse off after receiving advice from their financial advisors, but she wanted to give the benefit of the doubt.

After a few moments of chatter, another SHIP specialist stated, “Today’s advisors claim to be ‘retirement specialists.’ We never did. When I turn on the TV, I see ad after ad highlighting how such and such company can help me retire by answering all of the hard questions. Anyone here want to argue that healthcare is not the most difficult question in retirement? They (the advisors) are 100% accountable.”

This exchange draws a parallel to an article by Bob Powell in last week’s Retirement Weekly entitled “Advisers could be liable for not broaching retiree health-care costs.” Powell broached the topic of how advisors are aware about the very real costs of healthcare in retirement and may, in the very near future, be held accountable for not addressing the issue. The hands-off approach to healthcare planning may be waning, as generic numbers from Fidelity, articles from Credit Suisse, and complete expenses calculations from firms like HealthView Services are providing hard data that will force all financial advisors to consider healthcare costs in the retirement planning process.

In general terms, the probability that healthcare will garnish over $250,000 from a retiring couple’s portfolio, or that 33% of a person’s total expenses over the age of 60 is healthcare-related is not surprising anymore. Because of this, advisors will no longer be able to brush aside this topic—and it is becoming more apparent that there will be severe consequence for those that do.

FILED UNDER: RETIREMENT

HealthView Services Shows How Your State May Impact Your Retirement Planning

AUGUST 11, 2011 BY LEAVE A COMMENT (EDIT)

The economic downturn of the past five years, the precarious states of Medicare and Social Security, and the impact of new healthcare legislation have left 78 million Baby Boomers feeling vulnerable and unprepared for the future.

They’re not the only ones.

Financial advisors must also adapt to this landscape by re-prioritizing client needs. Traditional plans are being supplanted by the need to address the single most important factor in achieving stability during retirement: healthcare costs. In a recent study conducted by Credit Suisse, seniors over the age of 60 spend 33% of expenditures on healthcare while housing and food account for 23% of consumption.

Let’s examine this chart compiled by HealthView Services, the only software platform that generates a comprehensive health expense report for retirement planning. HealthView’s newest features calculate out-of-pocket expenses by state and include the legislative changes that will require additional contributions to Medicare based on income, as seen below:

Estimated Healthcare Expenses: Healthy Couple Age 65-90

Modified Adjusted Growth Income (MAGI) Level

Residence:

Vermont

(2nd Least Expensive)

Residence:

Ohio

(National Average)

Residence:

Florida

(Most Expensive)

Under $170,000

$560,410

$649,520

$689,210

$214,000-320,000

$853,547

$942,934

$974,253

$320,000-$428,000

$1,030,995

$1,120,549

$1,146,710

$428,000 +

$1,280134

$1,297,854

$1,318,887

In five years, a 60-year-old couple living in one of the least expensive states at the lowest MAGI level will have to spend over $500,000 dollars to stay healthy. If the couple moves to Florida, premiums rise 23%. At the highest MAGI level, a healthy Florida couple will need an estimated $1.3 million in retirement to pay for healthcare!

As a result, advisors collaborating with clients on a portfolio that focuses on saving for healthcare costs needs to become a priority. To that end, here is an emerging philosophy: those entering retirement can buy a less expensive car, downsize their home, or take fewer vacations, but they cannot eliminate medications or cut back on health services.

Notice how an advisor can help a client who expects to earn less than $170,000 a year during retirement by recommending changes in retirement date, residency, and type of health coverage.

Current Age

Retirement Age

Coverage

Total Cost in Retirement

Savings Required

7% Pre-retirement, 5% in Retirement

Additional

Pre-retirement Savings

60

65

All expenses

$560,410

$198,819

$0

60

65

Doctors/Drugs

$305,560

$108,041

$0

60

68

Doctors/Drugs

$291,030

$92,794

$0

60

68

Doctors/Drugs

$291,030

$60,847

$5,000

By utilizing HealthView’s data, the advisor can offer options such as targeting part of a portfolio with regular contributions to afford quality physicians and medications.

Since healthcare in retirement is now means-tested, advisors will play an important role in managing high net-worth client income levels because their possible expenses could rise dramatically, depending upon their MAGI level. The crippling cost of healthcare in retirement is likely to exceed that of housing, which makes it vital for advisors to create client stability by integrating healthcare costs into retirement plans.

Media Contact: Susan B. Chanley, 781-587-0115, sbumsteadchanley@comcast.net

FILED UNDER: HEALTHCARE, MEDICARE, NEWS, RETIREMENT

The States of Medicare

JUNE 25, 2011 BY LEAVE A COMMENT (EDIT)

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, butthe 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 calledRetiremark. 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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