TIME Spending & Saving

This Is What Keeps Rich People Up at Night

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This is what keeps high earners up at night

When it comes to retirement, Americans’ biggest fears are that they’ll run up huge medical bills, or that they’ll outlive their savings and run out of money. But what’s surprising is which Americans worry about these things the most.

According to a new Bankrate survey, people who earn more than $75,000 a year worry more about healthcare costs in retirement than the population overall. Perhaps surprisingly, they also worry more than those who earn less than $30,000 a year.

That’s probably because while people at the low end of the income spectrum might expect to fall back on Medicaid as a safety net, this isn’t an option for more affluent Americans, points out Bankrate senior investing analyst Sheyna Steiner. “The more assets and savings one has, the more difficult it will be to qualify for government assistance,” she says. “Certainly, the thought that your entire nest egg could be wiped out due to illness or injury is chilling.”

Rich Americans don’t think they’ll be getting much help from Uncle Sam, either: More than three-quarters say they think Social Security will provide less than half — or none at all — of their income in retirement, the highest percentage of any income bracket and higher than the 66% overall who share this view.

People who earn more than $75,000 also have a greater fear that they’ll run out of money in retirement. Overall, 23% of survey respondents say their top worry is that their savings will run out, but 29% of those in the $75,000-and-up income bracket say the same.

Some of this is just a fear of the unknown — and possibly the realization that they have further to fall if they outlive their savings. “A major change of life like retirement is especially daunting,” Steiner says. “People with high incomes have the opportunity to save more but they can also spend more as well which is a trap too many people fall into.”

These fears persist despite the fact that about half of high-income Americans say they’re happy with the amount they’re socking away for retirement, compared to the 29% overall who say they’re happy with their current retirement savings. And even among those earning more than $75,000 a year, more than a quarter say just keeping up with basic living expenses is hampering their retirement savings.

“There’s definitely a contingent of high earners who are not saving enough for retirement,” Steiner warns. “Their current lifestyle may not allow them to save much which may force them to cut back as they get older.”

Steiner says that’s because the people who do have disposable income might not be able to resist spending it today rather than banking it for retirement. “People often spend above their means or right up to the limit,” she points out. “People who maximize their lifestyle without saving for the future run the risk of severely downsizing in retirement or running out of money.”

 

MONEY long term care

Why Long-term Care Insurance May Be a Better Deal Than You Think

The costs of long-term care insurance keep rising. But the coverage is still well worth considering.

Long-term care costs are the black hole of retirement planning.

With the fees for nursing home care averaging $212 a day, an extended stay can devastate the retirement savings of a typical household. Children of aging parents can see their own finances, and even their own children’s futures, undermined by their natural desire to help out Mom and Dad.

Private long-term care insurance can help, but only about one in eight Americans buy it, since the costs are high. Even so, I would argue that this coverage is well worth considering—especially if you have assets to protect, but can’t afford to pay for years of long-term care out of pocket.

Of course, it’s not an easy decision. Here are two key points to help you decide:

It’s Insurance, not an Investment

You’ve probably been hearing that buying long-term care coverage is a bad financial move for most people. Recently a study from the well-regarded Center for Retirement Research at Boston College found that fewer people will need long-term care— some 44% of men and 58% of women will need long-term care vs. estimates of 70%—and that those expenses may be less than previously thought.

One key reason for the lower costs, according to the Center, is that half of men and 39% women who enter nursing homes stay for less than three months—relatively short periods that are potentially covered by Medicare. (Contrary to what many people believe, Medicare does not cover long-term care expenses but will pay for up to 100 days of institutional care following a qualifying hospital stay.) Most Americans end up relying on Medicaid to pay for longer stays, although that program kicks in only after families have mostly spent down their savings.

Given these shorter stays and the availability of those safety nets, only 20% to 30% Americans were found to be economically better off buying long-term care coverage. “Few individuals would choose to buy insurance even if they were rational, far-sighted, and well-informed,” the Center concluded

These findings may very well be true, but they miss a bigger point. Insurance is not about optimizing your finances—it’s about protection against a catastrophic event. The odds of your house burning down are very, very small, but you have home insurance nonetheless. And even if your mortgage lender didn’t require it, I bet you’d still have home insurance.

The same case could be made for owning long-term care insurance. It offers valuable coverage that preserves choice and financial resources in the event you can no longer manage on your own.

Smart Shopping Lowers Costs

Of course, more people would probably own these policies if the premiums weren’t so steep and price hikes so frequent. Rates jumped another 8.6% last year, according to a recent report from the American Association for Long-Term Care Insurance, largely due to unexpectedly high claim expenses, which caused several insurers to leave the market.

Today a 60-year old couple buying coverage with a lifetime benefits cap of $328,000 might pay an annual premium of $2,170 a year, the association said. And if they bought inflation protection that boosted the value of their coverage to $730,000 at age 85, their annual premium would rise to $3,930.

Even so, wide price variances have become more common. “In some situations the difference between the lowest-cost policy and the highest-cost was 34%, but it could be as much as 119%,” association director Jesse Slome said. (The state of Texas has a helpful range of premiums for different coverage situations; your state insurance department may offer similar information.)

Clearly, smart shopping is crucial. Here’s what will influence the price you pay:

  • Your age. It’s the biggest determinant of costs. Younger buyers get lower premiums because their insurers usually have many years to invest that money before paying out any claims.
  • The level of coverage. The variables include the amount of allowable daily benefits, the number of years the coverage will last, and the number of days that expenses must be self-insured before benefits kick in (the so-called the elimination period). You can also add inflation protection to maintain the real value of coverage limits.
  • Your health. Expect to get grilled about your physical condition. Bluntly put, insurers prefer really healthy customers for long-term care insurance. And it’s not just your health being reviewed here, but the health of your parents and siblings as well, since family history is used to forecast future claims.

Look to see how adjusting the major coverage variables will affect your premiums. Choosing a longer elimination period than the standard 90 days, for example, can bring down the cost.

In the end, you’ll have to weigh the costs against your own assessment of the risks. Personally, I have long-term care insurance to protect my family from catastrophic health care expenses in my later years. And, yes, it is more expensive than I’d like. But if I never use it, and wind up paying more than $100,000 in premiums during my lifetime, I will have one reaction:

Whew!

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Simple Steps to Avoid Outliving Your Money in Retirement

MONEY Ask the Expert

Why You Shouldn’t Drop Other Insurance if You Have VA Health Benefits

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Robert A. Di Ieso, Jr.

Q: “How do I go about dropping my Medicare Part B plan? I have health care through the VA so I really don’t need it.”—Jerry Breier

A: Wait! Don’t drop that coverage…

“If you are eligible for Medicare, you should not rely solely on VA benefits for your health care needs,” says Medicare Rights Center spokesperson Mitchell Clark.

The VA also states on their website that they “strongly encourage you to keep your health insurance.”

The two coverages are complementary.

Because VA health care is a benefit and not insurance, you can only receive care—for free or for a small co-payment, depending on your priority group—through a VA facility.

Your Medicare Part B insurance, meanwhile, helps pay for doctors’ services, outpatient care, and, most importantly, emergency room visits outside the VA.

Part B will come especially in handy if you have an emergency and need to be taken to a non-VA hospital. The VA will cover some non-VA emergency room care, but certain requirements must be met. The VA will also only pay to the point of medical stability and all claims must be filed within 90 days from the last day of the emergent care.

Also keep in mind that certain VA hospitals and facilities may not be able to perform all procedures you may want due to equipment restrictions. In that case, they may cover the cost for treatment outside the VA’s network, or if there is an alternate remedy to your problem that they can perform at the VA, they will cover that procedure instead. So if there are several treatments to an ailment, you may have to go with whatever the VA can provide rather than choosing from among all possible solutions as you could with Medicare.

If you’re still really set on dropping Part B, check the VA’s list of service facilities to make sure there are locations near your home and other places you frequent, like your child’s home or a favorite vacation spot. You should also consider the types of services you use and will likely need to use in the next several years to determine whether you’ll be okay only receiving care from a VA facility.

To drop this coverage, you only need to contact Medicare (1-800-633-4227) and let them know your decision.

Should you decide you want to be reinstated, however, you will have to wait until the following January. Keep in mind that you will also likely incur a Part B premium penalty of 10% for each 12-month period you are without the coverage, warns Clark. Any savings you may have racked up from not paying Part B before could be eaten up by the higher premiums.

Let’s say, for example, your current Medicare part B premium is $104 a month, as it is for most people, and you drop coverage now but then decide to re-up in two years’ time. Your new premium could be $125.84, says Brentwood, Tenn. financial planner Gary Ward.

Can’t afford the Part B premium? You may qualify for assistance through the state-run Medicare Savings Program. You can visit Medicare’s website to find out which agency in your state runs the program.

Read more from Money.com:

MONEY Ask the Expert

How To Tame The Unexpected Costs of Medicare

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I got my annual notice from Social Security this week for 2015 and was surprised to find out that the Medicare premiums for me and my wife were going up for this year because of the amount of money I made in 2013. I did not know Medicare premiums were adjusted based on income. I am 71. Is there anything I can do? – Norman Medlen

A: You won’t be able to change your premiums for this year, but there are moves that can help lower your future costs.

First, though, realize that your confusion is understandable. Many people don’t know that Medicare premiums are calculated based on income, says Nicole Duritz, vice president of Health and Family Education and Outreach for AARP. Some people even believe that Medicare, which most Americans are eligible to receive when they turn 65, is completely free. It’s true that most people don’t pay for Medicare Part A, which covers hospitalization, but that’s because they have contributed to Medicare throughout their careers through payroll taxes.

But your income determines how much you pay for Medicare Part B, which covers routine medical care, including doctor visits and outpatient services, such as physical therapy and X-rays. Under the rules, your income can include a salary from working, as well as proceeds from the sale of a house or withdrawals from a portfolio.

Granted, the income thresholds are relatively high. If an individual earns $85,000 or less, or a married couple earns $170,000 or less, the premium is $104.90 a month. People earning more than $85,000, or a couple earning more than $170,000, will pay $146.90 to $335.70 a month depending on their income. Only an estimated 5% of Medicare recipients pay more than the basic $104.90 level. The premiums are deducted from your Social Security check.

Premiums for Medicare Part D, which is for prescription drug coverage, are also income-based, which add anywhere from $12.30 to $70.80 a month to the premiums charged by the plan you select.

Still, there’s good news: your premiums are re-evaluated each year based on your most recent tax return. So if the money you received was a one-time windfall, your premiums will drop back down the following year.

To make sure your premiums stay affordable, do some advance planning, says Rich Paul, president of investment advisory firm Richard W. Paul and Associates. That’s especially true if you think you may have more windfalls ahead. “It’s not just your Medicare premiums that will go up—the additional income may bump you into a higher tax bracket and your income taxes will go up too,” says Paul.

For example, if you are converting a traditional IRA to a Roth, consider spreading the amounts over several years. That way, you won’t have a large one-time jump in your income. Or make a large charitable contribution at the same time as you convert, since the deduction will offset some of your tax bill.

In addition to the premiums, the size of Medicare’s out-of-pocket costs surprises many people, says Duritz. Medicare Part B covers roughly about 80% of your medical bills, but you have to pay the other 20%, including deductibles, co-insurance and co-pays. And unlike many employer plans, Medicare doesn’t cover some major medical expenses, including glasses and dental work.

To cover those gaps, many people opt for a Medicare supplemental plan or Medicare Advantage. How much you pay depends on where you live and the status of your health, in addition to your income. “If you’re healthy, you won’t incur the same costs as someone with a chronic condition because you don’t need as much care or medication,” says Duritz.

Fortunately, there are a number of ways you can lower costs. She suggests getting regular health screenings to catch any problems early, exercising and maintaining healthy weight. If you are on medications, talk to your doctor about lower-cost options. “It doesn’t have to be a generic—it could just be an older brand name,” says Duritz. “We have had people cut their prescription drug costs by $1,000 or more using alternative medications.”

It’s also important to reevaluate your Medicare plans during annual open enrollment, which runs from October 15th to December 7th. Plans and costs change every year—and your medical needs may change too.

For help finding the best options, try AARP’s “doughnut hole” calculator—named for the gap in prescription drug coverage under Medicare Part D—to find suggested drug alternatives to discuss with your doctor. AARP’s Medicare Health Care Cost calculator will estimate your overall Medicare costs and suggest ways to minimize your spending. And AARP’s Question and Answer tool walks you through all the costs of Medicare and how it works. With this information, you’ll have a better idea of the costs to expect from Medicare.

More on Medicare from Money’s Ultimate Retirement Guide:

What is Medicare?

What is Medigap insurance?

How do I select a Medigap policy?

Read next: So You’re Retired! Now What?

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MONEY Health Care

What Consumers Should Know About Rising Health Care Costs

A conversation with Steven Brill, author of "America's Bitter Pill," on what Obamacare did—and didn't do—for consumers.

In 2013, Steven Brill brought new clarity to the American health care system with his award-winning TIME cover story, “Bitter Bill: Why Medical Bills Are Killing Us.” Now he’s out with a new book on the same theme: “America’s Bitter Bill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System.” In it, Brill explores how the American health insurance system has evolved, the special interests that shaped the Affordable Care Act, the slow and troubled implementation of health care reform, and challenges we still face. He spoke to MONEY reporter Kara Brandeisky about his book and the key takeaways for health care consumers. (TIME and MONEY are sister Time Inc. publications and share a website. This conversation has been edited for length.)

MONEY: Your book is a comprehensive look at how the Affordable Care Act came to be. But it starts with this personal story about the experience you had as a health care consumer. How did your own open-heart surgery influence the way you thought about health care policy?

BRILL: Well, it sort of drove home something that I knew intellectually, which is that if—when—you’re a consumer in the health care marketplace, it’s not like being a consumer in any other kind of marketplace. We like to live in the illusion—or some people do—that health care can be bought and sold on the market the way any other product can because consumers can make a choice and they know what they’re doing and all the rest of it.

And the fact is that when I was lying there on that gurney, I didn’t know—and I didn’t care—what the price of anything was. I had no idea what I needed. I had no idea what the bills were going to be. When I got the bills, I had very little idea of what they meant—and I’m supposed to be, you know, an expert on this now. And when I got my explanations of benefits, not only did I have no idea, but—as you read in the book—the CEO of United Healthcare had no idea what it meant.

Who should Americans hold responsible for rising prices?

The members of Congress that, for example, passed a law that doesn’t allow Medicare to negotiate the price of prescription drugs. The members of Congress and local legislators and regulators that allow so-called nonprofit hospitals to enjoy very high profits and charge $77 for a box of gauze pads. It’s a matter of the United States deciding that it is going to join the rest of the developed world in controlling health care costs because it is not a free market that can function as a free market.

Obama said in his State of the Union that health care inflation is at its lowest rate in 50 years. [Former director of the White House Office of Management and Budget] Peter Orszag responded to your book, “The cost curve in health care is bending more drastically than I even believed possible in the fall of 2009.” What’s your response to that? Do you think we’re making enough progress at this point?

No, we’re not. And as the book recounts, Peter Orszag and his staff, until the very end, were writing memos complaining to the President and to the political staff that there’s next to nothing in this law that’s going to control costs. So he sort of is on both sides of the issue. And, you know, Peter wrote another piece in Bloomberg several months ago complaining that the law’s panel that was set up to judge comparative effectiveness is doing nothing to judge the comparative effectiveness of expensive treatments, and it’s time that we do something about that.

But saying health care inflation is low is not saying that costs are coming down. It’s just that health care inflation is now maybe two or three times overall inflation in the United States. And all that data that they cite are from the years 2011, ’12, and ’13, which are all before the core of Obamacare, the exchanges, even went into effect at the beginning of 2014. So I don’t know what they’re talking about.

But more important, if you take the trouble to read the law, all 965 pages of it, you will be hard-pressed to find anything except at the edges that does anything to address cost. There’s nothing in there that addresses prescription drug costs. There’s nothing in there that addresses what hospitals can charge and profits of hospitals, except for one provision that allows the IRS to restrict the billing collection practices of nonprofit hospitals for people who need financial aid.

And that is a provision—it’s very important. It’s a big deal. Senator Grassley, a Republican from Iowa, is the one who added that provision to the law. And that provision could have taken effect in March of 2010 when the law was passed, and it took the Obama Administration nearly five years, just until very recently, to write the regs to put that into effect. I could have written those regs in an hour and a half.

I thought some of the saddest stories in your book were about sick people who were burdened with outrageous bills because the Affordable Care Act regulations weren’t in effect yet or they hadn’t been written. What took so long?

You tell me. One of the motifs of the book is that the Obama people, from the President on down, are maybe really good at policy, but they’re just really bad at the nuts and bolts of governing. There is no explanation for why it would take five years to write that provision. It is not complex. It’s either that they were still in the grip of the hospital lobby or they were just not paying attention, just the way they weren’t paying attention to launching a website that would work.

You went and talked to Americans who could benefit from health insurance reform, and you found that they were pretty misinformed about some of the basic tenets of the law. What were some of the biggest misconceptions you encountered?

Well, it starts with the notion that this is a government takeover of health care. It’s exactly the opposite. It’s a plan that has its roots in something that Richard Nixon proposed in the 1970s that is a government subsidy of the private health care marketplace. Basically the government is subsidizing millions of Americans—which I think is a good thing—to go buy health care from private insurance companies who are going to insure them for services provided by private health care providers: hospitals, drug companies, medical device makers. So it buttresses the private sector. It certainly doesn’t interfere with it, let alone take it over. That’s one misconception.

The other misconception—and this is the Administration’s fault—is that a lot of the reporting talks about the premiums and says the premiums are $1,000 a month for a certain kind of plan. Well, they are, except for the fact that 87% of the people who are going on the exchanges are getting a subsidy, so that if you’re a family making $60,000 a year, a family of four, that $1,000 a month premium might actually cost you $300 because the government is chipping in a $700 subsidy.

The Obama Administration was really reluctant to talk about that because they were embarrassed that this was a major income-redistribution program, which is what it is. Once upon a time, the Democrats would have been proud of that. Now they’re really gun shy about it. As I point out in the book, just the Medicaid expansion in the law called for more people to get free health care—to get money from the government for health care—than the entire welfare program that Ronald Reagan ran against in 1980. And yet you didn’t see much about that. The Administration didn’t talk about it, and the press didn’t write about it.

In your original TIME story [“Bitter Pill”], chronicled how these hospitals were charging these outrageous prices, and hospital executives are making multimillion dollar salaries. So I think readers might be surprised that in your book, you say a solution is to let these hospital systems get even bigger and start insuring patients, as well. How did you come to that conclusion?

Well, because you’ve only described half of the solution. I say let them do that, but then treat them like the oligopolies or monopolies that they are, and stringently regulate their profits, their prices, even the salaries of their executives. In other words, if they’re going to be monopolies and oligopolies, and they’re going to keep their tax exemption as nonprofits, you can take a much different regulatory stance. I mean, it is totally beyond me that we have antitrust laws on the books that are supposed to regulate monopolies, and yet, Yale New Haven Health System, which is a monopoly by anybody’s definition when it comes to providing health care in New Haven, is not regulated.

And so my answer is, well, not only regulate Yale New Haven, but tell them to sell health insurance. In other words, if I live in New Haven, I’d rather buy my health insurance from Yale New Haven because it’s a great brand, it’s a great hospital. They’ve bought up so many of the doctors and clinics in and around New Haven. They own the Bridgeport Hospital. They own everything. So I could go to them and say, “Here’s my $10,000 a year for my health insurance. You keep me healthy.” And if that happens, they have no incentive to over-test or over-bill or keep me in the hospital an extra day because they’d only be charging themselves for that because they’d be the insurance company. And that all works fine again if there is real regulation, there are ombudsmen in place who really make sure that they don’t skimp on care now that they’ve gotten my $10,000.

But I think that is a realistic solution because it’s happening anyway. All these hospital systems are expanding and buying up doctors’ practices. Something like 70% of the doctors in the country are in practices owned or affiliated with the hospitals, owned by the hospitals or having some financial relationship with the hospitals.

And you also seem hopeful that tort reform could help drive down health care costs.

It would do a decent share of it, because it’s not about malpractice rates. It’s about the fact that if you go into an emergency room today and just use the word “head” as in “I have a headache,” “I fell on my head,” or even “I have to head to the bathroom,” if you use the word “head” you’re getting a CAT scan. And indeed, if you go on Google—or at least it used to be true, I haven’t done it lately—and type in “emergency room CAT scans,” all the ads on the right-hand side will be for trial lawyers. And so hospitals either have the excuse or the reason to over-test. And in the United States, we use CAT scans and MRIs three or four times as much per capita than they do in Germany, in France, in Japan and all those other places. And again, our results are no better.

[Since you’re a lawyer] I’m curious how specifically you think the system could be reformed.

Just have higher bars to lawsuits, penalize the frivolous suits, make it easier to get them thrown out. You could even have special courts which have doctors sitting as jurors. There are all kinds of proposals. The idea is not to make it impossible for someone to collect for actual malpractice, but to drive away the current system where in many places if there’s any kind of a bad result in a hospital or in a doctor’s practice, there’s a lawsuit and people have to settle it to keep going. And what doctors will do and hospitals will do is again they’ll say to someone who talks about a head, “Let’s give him a CAT scan so if anything bad happens we can always say, ‘Hey, we gave him a CAT scan,’ ‘We gave him an MRI. We did all this. We did belts and suspenders.’” That’s your defense. And that’s a very expensive defense for a lawsuit that doesn’t even necessarily happen.

You told [NPR’s] Terry Gross that as costs continue to rise you think there’s going to come a point where “something is going to snap” because “we can’t pay for this.” I wonder if you could talk a little bit more about what that breaking point might look like for consumers.

Well, we’re getting to a point where, in your own health insurance, your deductible keeps going up, your co-pays and your coinsurance keep going up, the amount you have to chip in for prescription drugs keeps going up. And that’s not because the insurance company profits are going up. It’s because their costs are going up, and so they have to keep raising their premiums and your employer can’t afford those premiums.

At some point, that’s going to become—I mean, I think it is becoming—unsustainable for people who even have good health insurance. And by the same token, it’s unsustainable for the federal government to be subsidizing ever-increasing insurance premiums for people who are buying insurance on the exchanges. So there’s nothing in the law that does anything about the core costs, the hospital costs, the drug costs. And it’s going to keep going up, and the share that the taxpayers are paying and that individuals are paying is going to go up even faster. And I think at some point, someone is going to organize a campaign around this.

Fifty years from now, how do you think historians will view the Affordable Care Act and what it did for consumers?

As a milestone, as an important milestone. Because at the bottom line, it went a long way toward erasing a national embarrassment, or disgrace even, which is that we’re the only developed country that hasn’t made some provision for all or most of our citizens to have access to health care. Now, in theory at least, every American has access to an insurance policy that will be affordable—although it’s not as affordable as it should be—and that will cover them part of the way so that they won’t either not get care and therefore have their health in peril, or even their lives in peril, or be sued into bankruptcy if they end up in the emergency room with a $9,000 bill for a bunch of CAT scans and an hour and a half of waiting.

Is there anything else that you hope consumers will take away from your book?

Well, I think consumers reading the book will certainly have a better understanding of how to read their own health care bills, how to complain about them, how to try to do something about them, how to ask the right questions. So there’s a consumer-friendly aspect of the book, too, I think.

What are the “right questions”?

“Why did I need that?” “What did that cost you?” Well, the first thing is, “What does that mean?” since most hospital bills are in code. It took me months to figure out what different hospital bills meant. But now there’s enough of a movement around that, after my article and after the stuff that Libby Rosenthal did [in her New York Times series, “Paying Till It Hurts”], that hospitals are finding they have to answer those questions.

And the power of embarrassment is not to be dismissed. If you start asking your hospital, “What is that mucus control device on the bill that’s $18?” And they say, “Well, that’s the box of tissues you got.” They may say, “You know what? Forget the mucus control device. We’ll take that off the bill.”

MONEY retirement planning

Here’s What You’re Really Going to Spend on Health Care in Retirement

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Tim Robberts/Getty Images

These benchmarks will help you gauge your future medical spending and set the right savings goals.

For older Americans, figuring out how much you’ll need to save for future health care costs is the toughest part of retirement planning. The bills are not only daunting, but hard to predict. Now two recent studies from the Kaiser Family Foundation provide useful data that can serve as real-world benchmarks for your future health care expenses.

You already know Americans are living longer, and that health care spending is rising along with our life spans. To see how that increase varies over time, one Kaiser study, The Rising Cost of Living Longer, breaks down Medicare spending into its main components—such as hospitals, doctors and drugs—and measures how much Americans spend on these services at different ages.

Those between the ages of 65 and 69, who represent 26% of traditional Medicare beneficiaries, account for only 15% of program expenses in 2011, the most recent year for which data are available. (The study does not include Medicare Advantage plans). People between the ages of 70 and 79 comprise 32% of Medicare beneficiaries and 30% of spending.

Among the oldest Americans—those age 80 and above—the health care taxi meter runs up its largest charges, Kaiser found. These seniors represented 24% of Medicare beneficiaries but generated 33% of program expenses.

Below you can see the breakdown in spending by category for three different ages—70, 80 and 90. As Americans age, the demand for hospital, nursing, in-home care and hospice services climbs.

  • Age 70: Overall Medicare spending of $7,566, including $2,450 in Part A inpatient expenses, $2,054 in Part B doctors and services, $1,159 for hospital outpatient services, $1,191 for drugs (in both Part B and Part D drug plans) $349 for skilled nursing facilities, $279 for in-home care, and $84 for hospice.
  • Age 80: Overall Medicare spending of $11,618, including $3,962 in Part A inpatient expenses, $2,763 in Part B doctors and services, $1,440 for hospital outpatient services, $1,394 for drugs (in both Part B and Part D drug plans) $1,073 for skilled nursing facilities, $664 for in-home care, and $322 for hospice.
  • Age 90: Overall Medicare spending of $14,745, including $4,573 in Part A inpatient expenses, $2,640 in Part B doctors and services, $1,242 for hospital outpatient services, $1,344 for drugs (in both Part B and Part D drug plans) $2,583 for skilled nursing facilities, $1,233 for in-home care, and $1,132 for hospice.

Those are scary numbers, but the real issue for retirement planning is how much of that spending will be coming out of your own pocket. Another Kaiser study, How Much Is Enough, details the amounts older Americans spend on bills for health insurance premiums and uncovered health care expenses at different ages.

People between the ages of 65 and 74 spent $4,020 out of pocket on average in 2010 (he year analyzed by the study). Those between 75 and 84 spent $5,245, while those 85 and older spent $8,191—more than twice as much as younger seniors. On average, 42% of all out-of-pocket spending was for insurance premiums and 58% for uncovered health care expenses, including long-term term care (the biggest chunk, at 18%), medical providers, drugs and dental costs, which Medicare does not cover.

Will your retirement health care spending match these averages? Probably not. Medicare insurance plans differ, and no one can precisely forecast your future health or longevity. That said, even a rough guide can be a useful planning tool. So take a look at your own health care plan and see what coverage it provides for these common medical charges. Consider the likelihood for each type of expense, as well as the average Medicare costs by age, to come up with an estimate of the savings you might need to fund these costs.

To prepare for that spending now, take a look at the sources of your retirement income. If you have a health savings account, do everything you can not to touch it now but let its tax-advantaged balances accrue. It is an excellent vehicle for funding future medical expenses with no adverse tax consequences. Ditto for a Roth IRA, which lets your money grow tax free. For more tips on planning for retirement health care costs, check out MONEY’s stories here, here, and here.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Why Women Are Less Prepared Than Men for Retirement

TIME Health Care

Clinic Loses Accreditation After Joan Rivers’ Death

Joan Rivers-Death Investigation
Tina Fineberg—AP Yorkville Endoscopy seen in New York, Sept. 5, 2014.

The clinic has been cited for multiple errors in its care of the late comedian

The New York clinic where TV personality Joan Rivers underwent vocal cord surgery, before her sudden deterioration and death, will lose its federal accreditation at the end of the month.

As of Jan. 31, Yorkville Endoscopy will no longer receive Federal funds for services given to Medicare and Medicaid beneficiaries, the Huffington Post reports.

Earlier this past year, the New York State Department of Health determined that the clinic made multiple errors during Rivers’ care. Rivers died on Sept. 4 after suffering brain damage from lack of oxygen after she quit breathing during surgery only a few days earlier.

An employee of the clinic also reportedly took a photo of Rivers during the surgery.

The clinic released a statement, saying: “We are continuing to work with all regulatory bodies. We intend to communicate with CMS and appropriate authorities to have the decision reversed. Yorkville continues to be a licensed facility and perform procedures while cooperating with the regulatory process.”

MONEY Health Care

Why You Could Have to Foot the Full Bill for a Weight-Loss Drug

The government has approved more drugs that suppress your appetite, but not all insurers will pick up the tab for the prescription.

In December, the Food and Drug Administration approved a new anti-obesity drug, Saxenda, the fourth prescription drug the agency has given the green light to fight obesity since 2012. But even though two-thirds of adults are overweight or obese—and many may need help sticking to New Year’s weight-loss resolutions—there’s a good chance their insurer won’t cover Saxenda or other anti-obesity drugs.

The health benefits of using anti-obesity drugs to lose weight—improvements in blood sugar and risk factors for heart disease, among other things—may not be immediately apparent. “For things that are preventive in the long term, it makes plan sponsors think about their strategy,” says Dr. Steve Miller, the chief medical officer at Express Scripts, which manages the prescription drug benefits for thousands of companies. Companies with high turnover, for example, are less likely to cover the drugs, he says.

“Most health plans will cover things that have an immediate impact in that plan year,” Miller says.

Miller estimates that about a third of companies don’t cover anti-obesity drugs at all, a third cover all FDA-approved weight-loss drugs, and a third cover approved drugs, but with restrictions to limit their use. The Medicare prescription drug program specifically excludes coverage of anti-obesity drugs.

Part of the reluctance by Medicare and private insurers to cover weight-loss drugs stems from serious safety problems with diet drugs in the past, including the withdrawal in 1997 of fenfluramine, part of the fen-phen diet drug combination that was found to damage heart valves.

Back then, weight-loss drugs were often dismissed as cosmetic treatments. But as the link between obesity and increased risk for type 2 diabetes, heart disease, cancer and other serious medical problems has become clearer, prescription drugs are seen as having a role to play in addressing the obesity epidemic. Obesity accounts for 21% of annual medical costs in the United States, or $190 billion, according to a 2012 study published in the Journal of Health Economics.

The new approved drugs—Belviq, Qsymia, Contrave and Saxenda—work by suppressing appetite, among other things. Saxenda is a subcutaneous injection, the other three drugs are in pill form. They’re generally safer and have fewer side effects than older drugs. In conjunction with diet and exercise, people typically lose between 5% and 10% of their body weight, research shows, modest weight loss but sufficient to meaningfully improve health.

The drugs are generally recommended for people with a body mass index of 30 or higher, the threshold for obesity. They may also be appropriate for overweight people with BMIs in the high 20s if they have heart disease, diabetes or other conditions.

In 2013, the American Medical Association officially recognized obesity as a disease.

Nevertheless, “people still assume that obesity is simply a matter of bad choices,” says Ted Kyle, advocacy adviser for the Obesity Society, a research and education organization. “At least half of the risk of obesity is inherited,” he says.

Many people who take an anti-obesity drug will remain on it for the rest of their lives. That gives insurers pause, says Miller.

The potential cost to insurers could be enormous, he says.

Susan Pisano, a spokesperson for America’s Health Insurance Plans, a trade group, says the variability of insurer coverage of anti-obesity drugs “relates to issues of evidence of effectiveness and evidence of safety.”

In 2012, the U.S Preventive Services Task Force, a non-partisan group of medical experts who make recommendations about preventive care, declined to recommend prescription drugs for weight loss, noting a lack of long-term safety data, among other things. But its analysis was based on the older drugs orlistat, which is sold over the counter as Alli or in prescription form as Xenical, and metformin, a diabetes drug that has not been approved for weight loss but is sometimes prescribed for that by doctors.

The task force did recommend obesity screening for all adults and children over age 6, however, and recommended patients be referred to intensive diet and behavioral modification interventions.

Under the health law, nearly all health plans must cover preventive care recommended by the task force without cost sharing by patients. Implementation of the obesity screening and counseling recommendations remains a work in progress, say experts.

Dr. Caroline Apovian, director of the Nutrition and Weight Management Research Center at Boston University, says many of the patients she treats can’t afford to pay up to $200 a month out of pocket for anti-obesity drugs.

“Coverage has to happen in order for the obesity problem to be taken care of,” says Apovian. “Insurance companies need to realize it’s not a matter of willpower, it’s a disease.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

MONEY Medicare

The Huge Health Care Expense Medicare Won’t Pay

BurwellPhotography.com—iStock

For peace of mind, you need more than Medicare.

Medicare helps more than 55 million Americans with their health care expenses, with most people age 65 or older qualifying for coverage. With benefits for everything from hospital stays to doctors’ visits, Medicare is an essential part of retirement financial planning for older Americans in dealing with one of the largest expenses they bear. Yet there’s a huge gap in Medicare coverage that doesn’t provide financial assistance for services that an estimated 70% of senior citizens will need at some point during their lives. In order to prepare yourself for those expenses, you’ll need to make separate provisions outside Medicare to ensure that you’ll have the financial resources necessary to cover the costs of care.

Nursing homes, long-term care, and the Medicare gap

Medicare covers many things, but the coverage it provides for nursing homes and other types of long-term care are extremely limited. Medicare Part A, which covers most inpatient care such as hospital visits, does make a provision for covering the costs of a skilled nursing facility. If you qualify, Medicare will pay 100% of the cost of skilled nursing facility for 20 days, and it will cover all but a $157.50 per day copayment in 2015 for the next 80 days of approved care at such a facility.

However, in order to qualify for those services, you need to have had a qualifying hospital stay of at least three days, and the care you receive at the facility must be connected to the treatment you were getting in your initial hospital visit. Once your 100 days is up, you’re responsible for all costs — and you’ll need a break of at least 60 days in a row in order to end your current benefit period and renew your benefits for future coverage.

More importantly, many people in nursing homes aren’t receiving skilled nursing services and therefore don’t qualify for Medicare benefits at all. If the only kind of care you need is custodial care such as helping you get in and out of bed, bathing, or getting dressed, then Medicare won’t cover those costs.

When it comes to home health services, Medicare also has limits. You’re entitled to up to 100 home health visits under Medicare Part A following a hospital stay, and Part B also provides certain home health benefits. But to qualify, your doctor has to certify that you’re homebound, and you must need skilled nursing care or certain other treatment such as physical therapy, speech-language pathology, or occupational therapy services. Again, Medicare won’t cover purely personal care, making seniors responsible for much of their own costs for getting in-home help.

How to bridge the gap

Unfortunately, the costs that Medicare doesn’t cover play a part in most retirees’ lives at some point during their retirement. According to a study from the Department of Health and Human Services, almost seven out of every 10 Americans turning age 65 will need long-term care at some point in their lives.

Most traditional insurance, including medical and disability insurance, follow Medicare’s rules in limiting coverage to those whom are medically necessary and involved skilled, short-term care. Even supplemental Medicare policies typically only cover the $157.50 copayment for covered services and provide nothing for long-term care.

In order to get insurance coverage for long-term care needs, you’ll need a specific long-term care insurance policy. These specialized policies cover a wide array of services, ranging from assisted living facilities and nursing homes to home-healthcare and personal care needs. Premiums depend on the age at which you buy insurance, the maximum daily coverage you choose, and the lifetime maximum benefits the policy will provide. In general, the older you are when you obtain long-term care insurance, the higher your annual premiums will be. Moreover, many long-term care policies include what are known as elimination periods, which define initial time periods of three months or longer during which you’ll be solely responsible financially for covering costs of care.

In addition, some states provide programs that assist with certain care needs for senior citizens. Nutrition programs deliver meals directly to many retirees’ homes, and transportation and personal-care assistance are aimed at making lives a little easier. Those services by themselves won’t address many of the major needs people have, but they can nevertheless help bridge some of the coverage gap in Medicare.

Medicare is a vital part of your long-term financial security in retirement, and it covers many different services. But to protect yourself against the needs for nursing and other long-term care, you’ll need to turn to alternatives to Medicare to give yourself the peace of mind that you’ll be able to cover those extensive costs.

MONEY Ask the Expert

How to Pick a Medigap Policy That’s Right for You

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Robert A. Di Ieso, Jr.

Q: “I’m looking into Medigap insurance policies with very limited success. The information is very scarce. It is difficult to choose an insurance company. What criteria should I use to decide among carriers?” — Ray, Henderson, Nev.

A: Medigap, an insurance policy that supplements Medicare, helps pay for some of the medical costs that Medicare doesn’t cover, such as your co-payments, co-insurance, and deductible. Some policies even help with services Medicare doesn’t touch, like medical care outside the U.S.

You can choose from 10 standard Medigap policies, each named for a letter in the alphabet. The government mandates what features the 10 plans must offer, but the policies are sold through private insurers. (If you live in Massachusetts, Minnesota, or Wisconsin, the standard benefits on the Medigap policies sold in your state differ.)

Medigap Plan A is the most basic policy, while Plan F offers the most extensive coverage, picking up almost all of your out-of-pocket expenses. Plan F is also the most popular, accounting for 55% of plans sold, according to America’s Health Insurance Plans, the health insurance industry trade group.

The fastest growing Medigap policy, Plan N, is a newer option that has cost-sharing requirements but is typically less expensive than Plan F.

To shop for a Medigap plan, start with the Medigap policy search tool at the Medicare website. Enter your zip code, and you’ll see the standardized plans available to you, details about what they cover, the estimated costs, and a list of insurers selling those plans in your area. For price quotes, you’ll have to call each company directly.

Usually the only difference between same-letter policies is cost—and the price range can be shockingly large. According to a survey of rates by Weiss Ratings, the annual premium on a Medigap Plan F ranged from $162 to $5,674.

“I recommend that people get Plan F if they can afford it because it offers the most coverage,” says Fred Riccardi, client services director for the Medicare Rights Center. If you can’t swing a Plan F, pick the option that offers the most coverage within your budget.

Once you settle on a letter, you can shop on price alone. “Since the policy itself is standardized, premiums are really the only thing that will vary across insurance companies,” says Riccardi. “The only reason I see people go with a more expensive policy is if they prefer a certain insurance company.”

However, you do need to pay attention to the insurer’s pricing system too. Some plans are “issue age,” meaning the premiums rise with medical inflation. Others are “attained age” policies, with the price increasing each year with your age as well as medical inflation. You’ll also see “community rate” policies, which charge every policyholder the same premium regardless of age.

Attained age policies may appear to be the cheapest initially, but in the long run they could cost you more. “People should be aware that if they buy an attained age rated policy, their premiums will increase as they get older,” says Riccardi. “They may be better off considering a community rated or issue age rated policy if these options are available in their state.”

To get the lowest price and ensure that you won’t be denied, apply for a policy during the six-month open enrollment period that begins the month you turn 65, says Riccardi. Under federal law, insurers cannot deny you coverage during that window, and they must offer you the best available rates regardless of your health.

If you’re shopping for a Medigap plan outside of this window, you can be turned down or charged more for a pre-existing condition, unless you live in a state that offers extra consumer protections.

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