December 12, 2013 by Lisa Brammer
61 percent—more than three in five—affluent Americans over the age of 50 are terrified of future health care costs. Kind of a bold statement I know, but that is exactly what the annual survey by Nationwide Financial, the Columbus, Ohio based insurance and financial services organization, reported. What makes this statement even more disturbing is the fact that the people they surveyed were affluent Americans over 50 with at least $150,000 in household income. If people whose incomes are in the top 5 percent of this country are terrified of the future costs of health care, where do you think that leaves the rest of Americans?
There are many factors that might play into their fear such as our weak economy, the implementation of the Affordable Care Act, and increasing health care costs, but what I think these factors all add up to is the fear of the unknown. What exactly will the previously mentioned factors actually cost us and how can we prepare for something we really don’t understand?
Back in August, I wrote a blog entitled “Understanding Health Insurance, It’s Not Rocket Science—or Is It?” In it I discussed the results of a Carnegie Mellon University survey that found that only 14 percent of respondents actually understood their health insurance and how each of its elements worked. It was revealed that even though people thought they understood their health insurance they, in fact, did not. If you would like to read the blog about the Carnegie Mellon survey, please click on the link provided below. https://ucscollections.wordpress.com/2013/08/22/understanding-health-insurance-its-not-rocket-science-or-is-it/
According to the Nationwide Financial survey, 75 percent of pre-retirees say their top fear in retirement is their health care costs spinning out of control. And nearly 2 out of 3 wished they had a better understanding of Medicare coverage. Does anyone else besides me think there is a direct correlation between these two statements? I don’t mean to be rude, but after reading the Carnegie Mellon University survey I can’t help but think that if nearly 67 percent of respondents actually admitted they really didn’t understand Medicare coverage, the number of people that actually do is a much smaller number then the reported 33%. When asked, those surveyed estimated that once they retired Medicare would pay 69 percent of their health care costs. When asked how they arrived at those numbers a whopping 61 percent admitted they had guessed. According to the report, Medicare currently only covers about 51 percent of expenses related to health care services. (I can’t help but wonder if when the time comes, would they or even could they pay the 18 percent discrepancy they hadn’t planned for.) When asked to estimate how much they anticipated paying in out-of pocket health care costs each year, respondents guessed an average of $4300—a number, if I did the math correctly, about 27 percent lower than the number given by the 2012 Employee Benefit Research Institute study that estimated out-of pocket health care expenses for a 65 year old couple retiring today and living for 25 years to be $283,000.
To me, the take-away from these surveys isn’t just that Americans are “terrified” of their future health care costs, but they are terrified and (or is it in part because) they do not understand how their insurance works and what percentage of health care costs will be their responsibility.
In these uncertain times, there are so many things out of our control, but understanding health insurance is not one of them. If you have an insurance policy, do yourself a favor and read the Certificate of Coverage—or at the very least your Summary Plan Description and familiarize yourself with each of the elements in your plan. Before medical care is necessary, talk to someone at the insurance company and ask how each element works so you understand what will be covered by your insurance plan and what will be your responsibility. And if you are like most of us with escalating deductibles, understand what that amount is and if available contribute money to a health savings plan or flexible spending account. If those are not available, start your own savings account for medical care—you won’t be able to fill it with pre-tax dollars but you’ll be glad you have it to mitigate the financial hardship caused when people are not prepared for the cost of a medical emergency or procedure.
If you are a healthcare provider, educating your patients about their health insurance coverage—be it Medicare, Medicaid or commercial—will provide much-needed information that will not only go a long way with patient satisfaction, but by empowering your patients with knowledge of deductibles, co-insurance, copays, and the differences between Medicare A, B, C, D and Medigap insurance it will go a long way to set realistic expectations on what their out-of-pocket costs will likely be and hopefully your patients won’t need to feel “terrified” any longer.
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