With Medicare set to hit insolvency in 2018 or 2019, according to most predictions, and doctors’ fees and insurance premiums escalating to new highs, healthcare is perhaps the most important issue on the American agenda today. Research conducted by Hartford, Connecticut-based Hartford Financial Services in partnership with Massachusetts Institute of Technology’s (MIT) AgeLab show that it is also the greatest worry for retirees and pre-retirees.
“We asked people aged between 45 and 75 what their highest concern was, and 83% responded that it’s healthcare inflation,” says Maureen Mohyde, a director in The Hartford’s corporate gerontology department. “I would say that this concern is only going to continue growing in coming years, as retiree healthcare coverage disappears and people experience more and more unexpected healthcare costs both during their working and retired lives.”
But even if retirees and pre-retirees cite healthcare costs as their primary concern, most people are still not aware of how high these costs really are going to be, says Paul Fronstin, senior research associate at the Washington, D.C.-based Employee Benefit Research Institute (EBRI). In fact, most Americans do not even know what constitutes Medicare, how much it covers, and at what age they are eligible for it, Fronstin says. The majority of people believe Medicare is an all-inclusive system that provides retirees with complete coverage, and they are shocked when they realize how much they are going to have to spend over and above Medicare to pay for their healthcare needs in retirement, he says.
Financial advisors are stepping up to the plate in terms of impressing the importance of healthcare costs upon their clients, but experts believe that healthcare and its associated costs need to be dealt with in the same way as retirement finance, through a concerted and thorough public/private partnership.
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The combination of Social Security (even if it is arguably in bad shape), individual savings accounts, and sponsored retirement plans backed by legislation to ensure they work properly have ensured that retirement funding is now a “classic example of successful private/public partnership,” says Jerry Ripperger, director of consumer health for Des Moines, Iowa-based Principal Financial Group. “We need a similar dialog for healthcare,” he says.
Things are moving in the right direction on the healthcare front, Ripperger says. Medicare is on the next Congress’s agenda, employers are beginning to provide health reimbursements and health savings accounts (HSAs) are getting more attention. “Healthcare is one of the big line items for insurance companies and financial services companies,” he says.