Does staying healthy reduce your lifetime healthcare costs?
Posted on 11 May 2010
By Mark Miller
Permanent URL of this article: http://retirementrevised.com/money/does-staying-healthy-reduce-your-lifetime-healthcare-costs
The benefits of a healthy lifestyle as you age are well known. But does staying healthy save money?
Apparently not. In a classic case of “no good deed goes unpunished,” the lifetime health costs for a typical healthy couple at age 65 will hit $260,000, with a 5-percent risk of exceeding $570,000. Meanwhile, a typical unhealthy couple can expect to spend $220,000 with a 5-percent risk of exceeding $465,000.
That’s the finding of a new research brief from the respected Center for Retirement Research at Boston College (CRR). Here’s the problem: if you live a healthy lifestyle, you’ll live longer. CRR found that average annual health costs of healthy retirees are lower than those of the unhealthy. But “the healthy actually face higher total health care costs over their remaining lifetime.”
The CRR brief cautions healthy people not to assume they won’t need insurance in old age to protect against health care risk. Medigap and long-term care insurance policies should be considered:
Households planning for retirement need to decide how much to set aside for health care costs and whether to purchase Medigap and/or long-term care insurance. Those currently in good health would be unwise to infer that they will continue to enjoy lower than average health care costs. The reality is that even the currently healthy can expect to eventually suffer from one or more chronic diseases, which often results in high out-of-pocket and long-term care costs.
Households that delay purchasing insurance until their health declines run the risk of facing higher premiums, or for long-term care insurance, being denied coverage altogether. Insurers need to charge premiums that reflect the risk of claim. Individuals who wait until their health declines represent a particularly bad risk because they incur higher medical costs than the healthy, at least in the short run, and also pay fewer years’ premiums. Therefore, households that do not buy Medigap then they first join Medicare run the risk of facing substantially higher premiums, as do households of any age that postpone buying long-term care insurance.
Click here to download the CRR brief on health care costs.
