Tips on Managing Health-Care Costs in Retirement

Health problems can throw a wrench into anyone's financial plan, but for retirees there are special concerns. Aside from the obvious challenge of dealing with health issues as one ages, retirees must learn to navigate a health maze that can include Medicare, a supplemental insurance plan, prescription-drug costs, and other factors, and all while living within a budget defined by how much they've managed to sock away over the years.

Last week on Morningstar.com, we wrote about strategies retirees can use to manage new health-care costs (you'll find that article here) as well as how pre-retirees can get a handle on how much they will need for health-care costs once they stop working (found here). We also asked Morningstar.com readers who are retired or close to retirement to share tips about how they manage their health-care costs.

The responses ran the gamut from those who were pleased with their coverage and how it helped keep their expenses low to those distressed at how much they've had to pay even with coverage as well as for outside costs they hadn't anticipated. Then, there were those whose retirement health-management plan included a strong focus on maintaining health through diet and exercise. The following is a selection of our reader comments. You can read the full discussion here.

'We Don't Have Very Much Money, But We Have Lots of Health Insurance'
Among the many respondents who were pleased with their health plans and level of health expenses in retirement was hondo, who wrote, "My wife and I are blessed with very good health insurance. With my retirement insurance and Medicare, our medical expenses are zero at present, except for our premium. Our prescription drugs expense is extremely low, as our insurance pays very well for prescription drugs also. I often tell the young ladies that register us at the doctor's offices, 'We don't have very much money, but we have lots of health insurance. We are thankful.'"

Nancyh also gave her health-care coverage rave reviews. "Traditional Medicare for both me and my husband with a Plan F supplement. This plan is phenomenal! Initially he had an Advantage Plan, which saved a little out of pocket, but doesn't provide nearly as good coverage. So after the first year he changed plans to F. Note: This did entail a physical, so if you make changes, do it before you have a diagnosis. I have had very high medical bills this summer and was able to go to MD Anderson [a cancer treatment center at the University of Texas] for surgery without living in Texas.  I have not paid a penny for anything.  While saving a few bucks a month is appealing, it pales beside the enormous amount of your out-of-pocket costs for any serious illness with lesser plans."  

And count judyken among the grateful as well. "When I turned 65, I went on Medicare with supplemental insurance and a drug plan," she wrote. "Six months later I ended up with a very expensive medical issue. Thanks to a good insurance agent my out-of-pocket cost was negligible. It's now two years later and I am still working, but very close to retirement."

Some posters, including BoomerGuy, said that Tricare, a plan for those serving in the military and their families, has worked out well for them. "Our health care is pretty much covered for us," he said. "I have good ol' Medicare. When I retired from federal service, I kept my Blue Cross/Blue Shield Federal Employees Health Benefits plan to provide backup for me and primary for my 11-year younger wife. And, as a military retiree, we have Tricare for Life (TFL), backing up the previous two. BC/BS and TFL covers our few drugs; no need for Medicare Part D. Other than monthly premiums, our health-care expenses are pretty much zilch.

'A Bigger Problem Than I Ever Imagined'
Of course, not everyone was as enthusiastic about their health-care cost situation. A few mentioned paying more than $10,000 a year in out-of-pocket costs, including premiums for Medicare and other plans.

"At 69, I must say health-care costs are a bigger problem than I ever imagined," wrote srercrcr. "The biggest problem is prescription drugs ... the drug companies are raising the prices constantly! Beyond that, medical through Medicare is a blessing if you can find a provider. ... So health care takes a big chunk of our income, but we grin and bear it. It beats the alternative!"

Another oft-mentioned retirement budget-buster was dental care.  

"The medical expense that can be tough to plan for is dental expenses, for which there are no good insurance options that I have found," wrote ironranger.

"As others have noted, dental is a big expense for which what little insurance there is has a low cap," said Dennis. "I fooled myself as a young adult about my dental hygiene. I’m now paying the penalty with bridges, root canals, and implants. In a big city, those expenses can amount to 15% of my total yearly expenditures, about my cost of housing."

Yogibearbull said he deals with health-care costs in retirement by "just biting the bullet hard. Our premiums have skyrocketed, and the deductibles have gone up a lot. But what is the choice? One of my doctors says jokingly, 'You want your health or your money?' Fortunately, I can afford these costs for now."

"My wife and I, ages 81 and 83, want to stay alive, and so we pay," said weezcb. "Our costs go up every year, but since Obamacare, costs are way up. I take Eliquis, which is $44 per month, and have sleep apnea supplies which are costly. We no longer do fancy restaurants, instead have a simple lunch. We took no vacation last year, choosing to stay home. We have moved to a condo, cutting our taxes in half. We are thankful for excellent health care in our area, and enjoy every day."

'Having a Plan and Working the Plan'
One group of readers mentioned using health savings accounts (HSAs) as a long-term planning strategy.

Muniadvocate said, "The deposits are tax deductible so I use the money I used to put into a 401(k) to fund the HSA. The returns on investments ... are tax-deferred until I take a distribution. If the distributions are reimbursements for qualifying health expenses, then it is not taxed.  I plan to let the HSA build as long as I can while paying out-of-pocket for 'routine' health expenses. It is all about having a plan and working the plan."

"I'm not retired yet (I'm 58) but treat my HSA as a future retirement account, given the big tax advantages," said Lynnee. "... I won't have any employer-sponsored health care in retirement, so I'm hoping these efforts to stay healthy and max out my HSA pay off. I guess I'll know in 20 years or so."

Blueh2o also emphasized the need to plan and budget to meet health-care cost challenges.

"I budget for medical like I do for everything else," the poster wrote. "Food, transportation, travel, entertainment, internet, Morningstar, etc. It's all budgeted. ... It shouldn't be how to manage but how to budget and prepare. Of course that means thinking about retirement living decades before you actually retire. That may be the biggest problem. We made a conscious decision to live below our means while working (and did so at almost every income level--high or low). And that makes our retirement just another life event instead of a great imponderable."

Another reader, JerryE, wrote, "I have learned three things since retirement three years ago: 1. Take care of major dental work before retirement. It is extremely expensive and not covered by insurance. 2. Understand Medicare premium adjustments (penalties) which can be as much as 100% if you make more than the limits allowed. 3. Take out long-term care insurance if you can afford it. Otherwise you may lose all of your savings when you can least afford it.

Location, Location, Location
Some readers mentioned seeking medical care at university clinics, which they said are less expensive than other health providers in their area.

Ray888 discussed how he and his spouse use geography to their advantage when it comes to cutting health-care costs.

"We spend over half the year in rural Maine and the rest in Philadelphia. We have doctors in both locations with records being electronically shared. ... Parking is free in Maine; in Philadelphia parking typically costs two times as much as the typical deductible on my health insurance. Appointments are always easier to get in Maine and the whole interaction with the health-care system is always less stressful in the rural location. ... Routine costs like rehab are typically one-third that in the big city. When special expertise is needed, the hospital in Maine is tied into a big urban hospital and my Philadelphia health system is available online for all consultation and all my records. I feel like, and in fact do, have two doctors looking after my health care; a second opinion is gotten on everything automatically. I'm not sure the actual dollar savings, but I do feel more in control of my own health care. That has to be beneficial long-term."

'My Physical and Mental Condition Has Improved'
Many readers mentioned not just financial but lifestyle moves as important components of their retirement health-care plan. Baggans' response was typical.

"For the short-term, joined a health club, upgraded grocery purchases to healthy and organic options. Cook healthy at home and eat healthy at restaurants," the poster wrote. "Both myself and my doctor think it's a wise choice [for] using money as my physical and mental condition has improved year over year."

Bobert42 credited exercise and a healthy diet with helping keep health-care costs under control. "Some would say that adopting a healthy diet consisting of mostly vegan foods--whole grains, fruits and vegetables with as much as possible being organic--is too expensive," he or she said. "But would you rather put a few more dollars into a healthy lifestyle or spend the money for doctors and hospitals?"

In fact, for many of our readers, keeping a healthy mind in their later years seems to be nearly as important as keeping a healthy body.

"If I were to give any advice to those still working it would be to live as close to debt-free as possible," wrote strek. "House payments and the like are unavoidable, but credit-card debt and monthly payments are killers. There is enough stress in our everyday lives and anything we can do to relieve that stress has got to have positive health benefits."

Finally, COLHouse provided a good summary of many of our readers' best tips on how to prepare in advance for managing health-care costs in retirement.

"Much of the work ... has to be done before one retires," the poster wrote. "HSA: You cannot [contribute to] an HSA when you are on Medicare, so max out your HSA payments as long as you can. ... Dental and vision: Get all the fillings, crowns and bridges you may need while you are still covered by a good dental plan. ... Get a long-term-care policy when you are in your late 50s or early 60s and are still in good health. Later, it will be too expensive and you may not meet the underwriting standards. Moving? If you plan to move when you retire, thoroughly check out the medical care in your desired retirement location. Many MD's are not taking new or Medicare patients, so make certain you can find good primary care physicians and specialists at the new location. Get physical: You should have been doing this before you retired, but join a gym and stick with it. Swim, take classes, walk, but exercise every day. ... Diet: When you are retired, you have more time to cook, learn about good nutrition, and buy fresh fruits and vegetables at the farmers' market. ... Socialize and keep active. Doing so will help keep you more healthy, which will also reduce your medical costs."

Comments have been edited for brevity and clarity.