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Posted by Elizabeth Richardson on September 4, 2008, 5:17 pm
>
> First, consumers in their 50s and 60s spend more on healthcare than
> youngsters, so they will need a good insurance policy. Around here
> that costs around $1000/month.
Skip, I'll use a term I've used before. That $1000 a month pays for sick
care, not health care. Health care comes from daily exercise, spending time
and money in the produce department at the grocery store, and minimizing
stress in one's life. These are far less expensive ways of addressing the
issue.
That said, I'll be the first to admit that we wouldn't have been able to
retire early if it hadn't been for the health insurance component of my
husband's pension.
Elizabeth Richardson
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Posted by rick++ on September 4, 2008, 7:14 pm
wrote:
> I'd like to see comments on the issue of early retirement.
>
> First, consumers in their 50s and 60s spend more on healthcare than
> youngsters, so they will need a good insurance policy. Around here
> that costs around $1000/month.
I've observed health care costs have been doubling every five
years for middle age. About half of that is due to premium age
adjustments - every five-year cohort is 40%+ higher premiums
and copays. The other half is half is medical inflation- a good 10%
a year. So age 50 to 65 is three doublings or a factor of eight.
I find the 5-year doubling period for the past 15 years when I total
all my premiums and outlays.
Meidcare premiums and copays are on the same doubling rate,
but starting at a lower amount. The premiums have inreased from
$53 a month to $122 for standard medicare in the past five years. Plus
co-pays are going up. Plus means-testing is phasing in ...
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Posted by joetaxpayer on September 4, 2008, 8:06 pm
rick++ wrote:
> Meidcare premiums and copays are on the same doubling rate,
> but starting at a lower amount. The premiums have inreased from
> $53 a month to $122 for standard medicare in the past five years. Plus
> co-pays are going up. Plus means-testing is phasing in ...
At some point, won't costs have to level out? If any one sector grows
faster than the rest of the economy, won't it grow as its share of the
pie, until it crowds out all others?
(I recall in 1984 being told that semiconductor sales in $$ grew at 14%
long term. I mumbled 'not for long' and was asked to explain myself. If
the economy grew at 5%, that meant that semi's share of the pie would
double in 8 years, give or take. Indeed, cars were using more
electronics each year, but at some point it had to level out. It took a
couple decades, but the growth and forecasted growth had mitigated.)
Joe
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Posted by rick++ on September 5, 2008, 11:02 am
> rick++ wrote:
> At some point, won't costs have to level out? If any one sector grows
> faster than the rest of the economy, won't it grow as its share of the
> pie, until it crowds out all others?
The US has an insatiable appetite for medical care - basic healing,
extreme healing ($100K drugs for a few extra months of life), looking
good, and sport. 16% of US GDP is now health-related, with
projections
of 20% to 25% by mid-century not out of line. The wealthy US economy
decided to spend its economic surpluses on health.
That 16% isnt funded out of thin air. Its a mixture of public and
private revenues. 25% of the federal budget goes to medical:
19% for medicare & medicaid, 3% for federal retiree medical,
and 3% for veterns medical. So I'm personally paying a 7%
"medical tax" of all my income - 1/4 of my total taxes last year.
My additioanl private expenditures doesnt bring me up to that 16%,
but I can see where that could happen for sicker people.
Its not of line to project 1/4 to 1/2 of my retirement budget
to be devoted to medical premiums and expenses, the way trends
are going.
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Posted by TB on September 5, 2008, 12:50 pm
rick++ wrote:
> On Sep 4, 6:06 pm, joetaxpayer
>> At some point, won't costs have to level out? If any one sector grows
>> faster than the rest of the economy, won't it grow as its share of the
>> pie, until it crowds out all others?
>
> The US has an insatiable appetite for medical care - basic healing,
> extreme healing ($100K drugs for a few extra months of life), looking
> good, and sport. 16% of US GDP is now health-related, with
> projections of 20% to 25% by mid-century not out of line.
My belief is that costs won't keep rising at these rates because the
money isn't there to pay for them - same reason $140/bbl oil doesn't
currently look sustainable. We talked through this topic in the Feb 08
thread "Planning for health care costs in retirement" - it was when that
Fidelity study was getting press, where they said a newly retired couple
needs $215k just for health care. But this requires a market where money
just appears from thin air, because the average retired couple has
something like 1/3 that amount saved, for all retirement costs.
Many economists used to say that US gasoline consumption isn't
price-sensitive. Then gas hits $4/gallon and you can't give away an SUV,
and we see the first-ever drop in year-on-year gasoline use. At some
point the same will happen with health care, it's not going to become
1/2 of the US economy (which it would, if the Fidelity study's figures
are rolled forward 25+ years).
Or put another way, there's a finite pool of dollars available for
consumption of all these things...health care, housing, energy, etc.
It's zero-sum, so a dollar more for energy is a dollar less for the
others. And none of them are immune to basic principles of supply and
demand. The costs can temporarily get skewed by bad policy (cheap
financing for subprime borrowers, lack of workable health-care insurance
approach for all of US, federal subsidies for the purchase of
low-mileage passenger vehicles) but that won't go on forever.
-Tad
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