Consider These Medical Expenses When Planning for Retirement

Takeaways

• Unexpected medical care expenses like prescriptions, travel for care, and concierge services can significantly impact retirement finances.
• Proactive planning, including researching coverage options and budgeting for inflation, is essential to mitigate these costs.

Many retirees pride themselves on years of careful financial planning, yet one major area often catches them off guard: the cost of health care. According to a recent Wall Street Journal article, even those who’ve saved diligently can be blindsided by three areas of medical expenses: costly prescription drugs, travel-related health care burdens, and the rising price of concierge care. These often-unanticipated health care costs can add up to many thousands of dollars that may be hard to come by with a fixed income.

Prescription Drug Costs

Medicare Part D helps cover the cost of prescription drugs but it does not cover all medications equally, and some drugs may carry significant out-of-pocket expenses. Specialty drugs or newer biologics can cost thousands of dollars each month, even with insurance. However, there are ways to prepare for these potential costs:

• Research Medicare Part D plans annually. Each year during Medicare’s Open Enrollment (October 15 – December 7), review and compare plans based on your current prescriptions. Plans differ in coverage tiers, copays, and formularies.
• Look into patient assistance programs. Pharmaceutical companies and nonprofits such as the PAN Foundation have programs to help patients struggling to afford high-cost medications.
• Consider a Medicare Advantage plan with prescription coverage. Some Medicare Advantage (Part C) plans include drug coverage with potentially lower out-of-pocket costs for certain drugs. Make sure your plan includes the specific drugs you need.
• Budget for the unexpected. Retirees should factor a cushion into their budgets for uncovered or high-cost prescriptions.

The Cost of Traveling for Medical Care

For retirees living in rural areas, resort towns, or states with limited health care infrastructure, the cost of traveling long distances to see specialists or undergo procedures can add up quickly. Such costs may include gas, airfare, lodging, meals, and even time lost. Here are ways to alleviate these costs or avoid them:

• Choose your retirement location wisely. Consider proximity to high-quality medical centers when deciding where to live. Access to care may outweigh scenic appeal in the long run.
• Allow for travel in your health care budget. Include transportation and lodging in your annual medical budget if you foresee needing to travel regularly for care.
• Use hospital travel assistance programs. Some major medical centers and nonprofits often provide discounted lodging and transportation services for patients traveling from out of town, especially for ongoing treatments like chemotherapy or organ transplants.
• Explore telehealth options. Many Medicare Advantage plans, some supplemental insurers, and Original Medicare offer telehealth services, allowing patients to consult with specialists without leaving home.

Rising Cost of Concierge Care

Concierge medicine, an arrangement in which patients pay an annual fee for enhanced access to a primary care physician, has grown in popularity, especially among wealthier retirees. These services can offer same-day appointments, 24/7 access, and longer visits, but they come at a premium. Annual fees typically range from $1,500 to over $5,000, not including additional costs for uncovered services. Retirees can prepare for the possibility of entering into this patient/provider arrangement:

• Weigh the cost against your needs. If you have multiple chronic conditions or value continuity of care, concierge medicine may be worth the investment. However, for healthy retirees, it may be unnecessary.
• Look for hybrid practices. Some physicians offer less robust programs that provide some enhanced services at a lower cost than full concierge models.
• Use Health Savings Accounts (HSAs). If you’re not yet on Medicare and have a high-deductible health plan, you may be able to contribute to an HSA and use those funds in retirement to pay for concierge care (excluding the membership fee) or other qualified medical expenses.
• Ask your doctor about availability and coverage. Not all concierge practices are the same. Some include preventive screenings, wellness visits, or lab work in the annual fee, while others charge extra. Understanding what's included can help avoid surprises.

Proper Planning Is Key

Health care is one of the biggest expenses retirees will face, often second only to housing. According to Fidelity’s 2024 Retiree Health Care Cost Estimate, the average 65-year-old retiring today could spend $165,000 on health care during retirement.

To avoid being caught off guard by overlooked health care costs, retirees should:

• Work with a financial advisor or elder law attorney who understands the complexities of Medicare and health care budgeting.
• Plan for inflation in medical costs, which is typically higher than the general inflation rate.
• Build an emergency fund specifically for unexpected out-of-pocket expenses.

By proactively researching health care options and budgeting properly, retirees can avoid financial strain and focus on what retirement should be about — living well.

To learn more about your options for health care coverage, visit Medicare.gov, National Council on Aging (NCOA), and Patient Advocate Foundation.

For additional reading about health care for older adults, check out the following articles:

• Turning 65? What to Know About the 4 Parts of Medicare
• Medigap: Plugging the Holes in Medicare
• When Should You Purchase Long-Term Care Insurance?
• Medicare Advantage: An Alternative to Original Medicare