September 8, 2006
Baby boomers face their medical future
A recent study by the Commonwealth Fund sheds new light on the situation that baby boomers age 50 to 65 are facing with their current and future health care. In fact, 66 percent of older adults in working households indicated they were concerned about being able to afford medical care in the future.
But the problem isn’t only in the future. It turns out this group has more uncertainty in their insurance coverage and more significant health needs than most other folks. As the study said, “…one of five baby boomers age 50 to 65 in working families spent some time uninsured since their fiftieth birthday. This despite the fact that more than 60 percent of this age group is living with at least one chronic health condition.”
While health care costs are rising across the board, this group suffers more than most, and for those who end up buying coverage individually, the price is particularly steep. More than half of older adults with individual coverage spend more than $3,600 per year on premiums. And after paying these premiums (whether they get sick or not) they also have to pay the deductible which for 48 percent of them is $1,000 or higher.
This day-to-day reality is beginning to impact their plans for retirement, as well. As Commonwealth put it, “The combination of rising out-of-pocket health care costs and sluggish wage growth threatens workers’ ability to save for retirement. This is particularly true for older adults ages 50 to 65, or ‘baby boomers,’ whose per capita health care expenditures are more than twice those of younger adults.”
But there is an answer. Obviously, we need to help this booming age group get a handle on medical expenditures. Part of that will involve teaching some of the most influential people in our lives - parents and grandparents, for example - about how to be more savvy health care shoppers. Another piece of it is connecting them with financial tools that work for them instead of against them.
With a traditional policy you have high premiums that you never see again. A climbing deductible and higher co-pays makes this a black hole as far as investments go. But a high deductible health plan combined with an HSA, has many benefits that are particularly attractive to this age group: lower premiums - this means you have more cash to invest in the HSA, and eventually put toward your deductible; portability – in case your employment situation changes, you still keep your HSA and have the benefit of your past investments; tax-free savings with tax free interest - in fact, HSA accounts offer more favorable terms than IRAs in terms of saving for retirement health needs; and the catch-up contribution - an extra fund that folks between the ages of 55 and 65 can stow away in their HSA. For 2006 this amounts to an extra $700.
And even more promising, is the fact that most of these older adults are willing to save if the right financial mechanism comes along. As Commonwealth reports, “A substantial majority of older adults in working families (71 percent) said they would be interested in having one percent of their earnings deducted from their paychecks and placed into an account, which could later be used to pay for long-term care or other health services that Medicare does not cover.”
Consumer-driven healthcare has a lot to offer baby boomers both now and in the future. Education will be key; it is a new kind of plan, after all. But these are the folks that lived through Elvis, The Beatles, a man on the moon and the Vietnam War. They are better prepared for redefining the world as we know it than just about anybody. Especially if it means more in their pocket and more control over the expenditure.
Reprinted with permission from www.consumerdrivenguy.com. For more information, contact Mike Turney at 614/326.4875 or email@example.com. HRH is the endorsed insurance agency of the Columbus Bar since 1989.