Retirement Blog

Finance Blogs » Retirement » Hurrah for health care reform

Hurrah for health care reform

By Jennie L. Phipps · Bankrate.com
Thursday, March 31, 2011
Posted: 3 pm ET

Projected lifetime health care costs for people retiring at 65 in 2011 declined $20,000 thanks to the changes in Medicare driven by the health care reform law signed in 2010, calculates Fidelity Investments, the nation's largest provider of employee benefits.

A reduction in out-of-pocket costs for prescription drugs made the biggest difference, Fidelity says, warning that retirees shouldn't get their hopes up that this is a trend. "While the savings generated through the health care reform laws is a welcome relief to many seniors, it should be considered a one-time adjustment, at least for the time being," said Brad Kimler, executive vice president of Fidelity's Benefits Consulting business in a statement.

The Patient Protection and Affordable Care law requires pharmaceutical companies to offer a 50 percent discount on brand name drugs that fall into the so-called "doughnut hole" -- a gap in Medicare's drug benefit plan that begins when an individual's prescription drug costs exceed the initial coverage limit -- $2,840 in 2011 -- and continues until their total out-of-pocket spending qualifies them for Medicare's catastrophic coverage -- a $4,550 threshold in 2011. Medicare recipients most likely to be helped by this are people with no employer-sponsored prescription drug coverage who make too much money for low-income subsidies. The law is expected to phase out the rest of the doughnut hole by 2020.

I used to read these phenomenally high lifetime costs for retirement health care and scoff. I had the mistaken idea that if you are entitled to Medicare, you don't pay very much. Then my accountant husband did the math, and it's pretty clear that Medicare is definitely not free.

Here's the breakdown, if you're doing some retirement planning and need to factor this in:

  • Medicare Part B is $115 per person, per month or $2,760 for a couple for a year, plus there is a $162 per person deductible.
  • Part D prescription drug coverage averages $40.72 per person, per month or $984 annually for a couple.
  • The annual deductible is $310 per person or another $620 for a couple.
  • A Medigap policy that covers the things that Medicare doesn't, including the deductibles listed above, is about $250 per person, per month or $6,000 per year for a couple.

You add all that up and you get at least $10,000 per year, per couple -- a significant chunk of money that will almost certainly increase by at least the inflation rate annually.

There is help available for people with low incomes, but people with modest retirement incomes and no retiree health insurance really feel the pinch.

If health care reform helps, any effort to repeal it is a big mistake.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
12 Comments
Bill
May 25, 2011 at 8:04 pm

I believe several of you need to get your facts and priorities straight.

First, if you are young and don't like the idea of paying into a system for which there is a great risk that you might not get to see the benefit, no one can blame you for that fear. That being said, I think you will find that the current generation of retirees have saved FAR MORE than the generation about to retire in the coming 10-15 years. Most current retirees lived through the Depression and WWII and knew hardships we can only imagine today. Our next generation of retirees in the coming 10-15 years more likely only knew the good times--and have lived off credit and not saved like their predecessors. For you 20 somethings, that means your parents' generation!

Second, the (nonpartisan) Congressional Budget Office has CLEARLY stated that "Obamacare" will REDUCE the deficit over the course of the legislation. Not by much, but it will slightly reduce the deficity. So for you conservative hawks who stupidly create information out of nothing, please stop--you are wrong.

Third, Obamacare has yet to be in any position yet to cause a single lost job. Other than allowing parents to continue to insure their children up to age 26, there haven't been ANY implemented changes from the law...as nothing from the law goes into effect until 2012! All of the lost biotech and pharmaceutical industry job losses have NOTHING to do with Obamacare. Again, conservatives, please check your information before creating it to make yourselves feel better.

Finally, I would argue that in a civilized society, we should ensure that our healthcare is available to everyone--from the poor to the retired. Obamacare closes the "doughnut hole" loophole mentioned in the discussion. That allows a better prescription benefit for everyone. PLease don't hold it against Obama that his healthcare law finally did what should have be done ages ago. If you "Christian conservatives" out there were truly Christian, you would similarly be inclined to make sure we can provide healthcare for our poor and for retired people in the future.

I also hate to point out to conservatives who hate Obamacare's requirement that you must buy health insurance--that's one of the ways we reduce costs. All of the poor uninsured people go to emergency rooms where they have to be treated, at exorbitant emergency room rates, to boot, and the rest of us all end up footing that bill through higher premiums and higher medical charges in our insurance. By requiring everyone to have insurance and then requiring people to go to doctors offices and clinics as opposed to emergency rooms, the new Obamacare both (1) adds to the pool of people paying into the system, spreading the insurance companies' costs to far more people, which allows rates to be lower slightly, and (2) precludes people from going to the more expensive emergency room option which is far more expensive. Both reduce costs. Not enough but far more than anything proposed to this point.

Deal with it.

Lonn Lebo
April 14, 2011 at 5:47 pm

Over 50k pharma sales jobs cut in 2010 alone. Listed as top 10 shrinking career by CNBC. If you think this is unrelated to Obamacare you are as ignorant as the millions Barack pays to not work in exchange for votes. Only 45% of Americans work for a paycheck in this country. So sad. 10s of millions collecting checks from Obama without working. Hope and Change. What a disaster.

Not True Lonnie
April 07, 2011 at 8:07 pm

Lonny ol' boy..try speakng the truth. This just published last month...

"Challenger, Gray & Christmas, the outplacement consultants, finds that job cuts in the pharmaceutical industry have fallen 87 percent, from 26,165 job cuts a year ago to 3,385 so far this year."

Further, the supposed layoffs you speak of were happening well before Obamacare. Here's a look at 2008 layoffs in the Pharmacy industry:

1. Pfizer - 10,000 jobs
2. AstraZeneca - 7,600 jobs
3. Bayer - 6,100 jobs
4. Schering-Plough - 5,500 jobs
5. Wyeth - 5,000 jobs
6. Johnson & Johnson - 5,000 jobs
7. Bristol-Myers Squibb - 4,300 jobs
8. Novartis - 3,750 jobs
9. Amgen - 2,600 jobs
10. Glaxo - 1,650 jobs*
11. Nycomed - 1,250 jobs
12. Merck - 1,200 jobs
13. Sanofi-Aventis - 1,180 jobs
14. Reliant - 600 jobs
15. King - 520 jobs
16. Eli Lilly - 500 jobs
17. Sepracor - 300 jobs
18. Ligand Pharmaceuticals - 267 jobs
19. PDL BioPharma - 250 jobs
20. West Pharmaceutical - 250 jobs
21. Genentech - 240 jobs
22. Abbott - 200 jobs**
23. Bradley Pharmaceuticals - 196 jobs***
24. Alkermes - 150 jobs
25. Encysive Pharmaceuticals - 150 jobs
26. CV Therapeutics - 143 jobs
27. Neurocrine Biosciences - 130 jobs
28. Nektar Therapeutics - 110 jobs
29. NitroMed - 70 jobs

Ash
April 02, 2011 at 7:57 am

I've always respected the writings presented on Bankrate.com -- until now. Defending a government intervention that has such a wide and detrimental effect on the finances of American citizens is offensive and inexcusable. This is a financial site, why don't you write a piece on what a corrupt and ineffective program Medicare is, and how it not only hurts current retirees but those of us who will be funding this nonsense for many years to come? For example, the 'doughnut hole' that you pointed out is something the government could have addressed years ago -- without the additional 1,999 pages that are sure to add even more government corruption.

Jeremy Engdahl-Johnson
April 01, 2011 at 9:06 pm

With reform in place, what are the primary Part D considerations for employers?

Jeff
April 01, 2011 at 1:55 pm

Funny how the writer takes a paragraph to describe why 'obamacare' (a word they don't want us to use) is a good thing. What about the 2000 pages of other regulations-- the ones that the independent congressional budget office determined will add trillions of dollars to the deficit-- even using Obama's rosy assumptions!

What happens when employers stop providing health care coverage, opting instead to pay the much cheaper fine?

What happens to seniors as doctors continue to flee Medicare, thanks to even more layers of regulation and cuts to reimbursement? (I am a doc who recently opted out of Medicare; I am paid less by medicare than the rates of an average plumber, electrician, or massage therapist).

The writer sums obamacare up nicely: If health care reform helps, any effort to repeal it is a big mistake.

If health care reform helps, any effort to repeal it is a big mistake.

Luckily, people who place less blind faith in government take-overs know that the converse is also true.

NoDebt
April 01, 2011 at 8:40 am

Jason,

Exactly. I am 26 right now and wondering why I am even bothering funding a 401k and Roth IRA because I see the precedents being set here and fear nationalization of all retirement accounts in my lifetime in the name of "helping seniors on a fixed income" (who are in that predicament because of the decisions that they made when they were my age)

The immense deficits and running of the printing presses have been borrowing (stealing) from younger and FUTURE generations since Woodrow Wilson was President. I am afraid that when it comes time for my generation to be senior citizens there won't be anything left to steal from younger generations... And today's seniors won't even be here to see the consequences of the government that they shaped.

Fellow young people we need to vote and stop this Socialism while we can or the only thing left for us will be an American "Nightmare"

Jason
April 01, 2011 at 6:56 am

Is your last statement a joke? What you are saying is that since other people are now paying the way for seniors that this is a good thing? Since it is a good thing, we should overlook all of the bad things?

People need to learn to live with the choices they made. If you made bad choices and are paying for it with a shoddy retirement, why should I have to bail you out? I'm already busy preparing for my own retirement, and helping pay the way for my disabled mother in law.

The government needs to quit playing Robin Hood with my money. It is my money, I earned it. It is not for the government to steal and then give to someone that has been irresponsible and paying the consequences now.

Lonn Lebo
March 31, 2011 at 9:01 pm

This 50 percent discount imposed on pharmaceutical companies has directly led to hundreds of thousands of layoffs by drug companies. This is job killing legislation in many ways as hundreds of companies are reducing their workforces so they can instead use these dollars to pay for the taxes imposed by this wrongheaded legislation. Who is going to pay for all of this? This administration is insincere when it says jobs are a top priority.

Debt Free
March 31, 2011 at 8:37 pm

Hurrah! One step closer to bankrupting the nation and transferring larger amounts of our wealth to retirees who didn't save their own money when they were our age! Of course when the consequences of running the printing presses and borrowing from rival nations such as China catch up today's retirees won't be here to suffer those consequences!

With all of the subsidies available to those who have retired and never saved a dime, or had the motivation and focus to advance in a career, it makes me wonder as a 26 year old why I am working so hard to become financially secure by saving money when I could take the lazy way out and just live off of the taxpayer. The problem is, we are getting to the point where there is nothing left to borrow (steal) from younger / future generations in the name of "safety nets" and "social justice."