The Straddle of the Sexes

Medicare and journey through retirement

by Paula Muschler

It shouldn’t be any surprise that women and men may see healthcare issues in their retirement a little differently. What could be surprising is how much less confident women are that they’ll have what they need.

A study of 1,000 seniors age 65 and older who were surveyed about their healthcare needs in retirement found that 70 percent of men were confident in their healthcare savings, while only 55 percent of women were as confident. These findings are covered in the Allsup Medicare Advisor® Report: Medicare for Women and Men, based on analysis of research by Market Probe, Milwaukee, for Allsup.

In addition, women always had more retirement concerns related to health costs:

• Future of Medicare (63 percent of women were worried vs. 59 percent of men)
• Paying for long-term care (46 percent of women, 39 percent of men)
• Paying for healthcare (43 percent of women, 38 percent of men)
• Outliving their money (40 percent of women, 35 percent of men)

These concerns point to a broader issue that touches on finances and healthcare in retirement for women, especially when compared to men.

Healthcare Impact: How Women and Men Differ

A woman turning 65 today can expect to live longer than a man, on average, reaching age 86 compared to 84 for men. One in four 65-year-olds today can expect to live past 90, according to the Social Security Administration.

This means women’s financial resources will need to go a bit further. One challenge is that women tend to have fewer financial resources and rely more on Social Security as their primary source of income in retirement. The Allsup study found 62 percent of women rely primarily on Social Security compared to 48 percent of men, who were more likely to have a pension, retirement savings and other income. (See Fig. 1)

These differences open the door for financial advisors to play a role in helping couples evaluate how they are going to approach their healthcare. This can include acknowledging that each person’s Medicare plan choices may be different. This could be the best way to ensure they minimize their concerns and have the coverage that best matches their individual needs.

For example, many couples may approach retirement thinking about how they are going to share this experience and share their financial resources. But Medicare does not have a family plan; it is a federal health insurance program provided to the individual.

That’s why it’s so important to stress that healthcare choices should be handled differently—including the possibility that spouses will be best served by being on entirely different Medicare plans.

Bringing Medicare into Retirement Planning

The reality check that financial advisors offer can be extremely valuable to their clients when looking at healthcare costs. It’s clear that many seniors don’t have a good grasp of their healthcare needs, costs and options once they reach retirement.

For example, only about one-third of men and women (35 percent of men, 29 percent of women) had set aside any of their savings for healthcare costs in retirement, according to the Allsup study. Less than one-third also budgeted for an annual healthcare cost increase (30 percent of men, 26 percent of women); and, of those who have a financial planner—less than one-third had talked with their advisor about Medicare (27 percent of men, 29 percent of women).

These findings point to a sizable opportunity for financial advisors to add value to the discussion about healthcare costs in retirement. The estimates vary, but people tend to spend between 5-8 percent of their budget on healthcare, depending on income and other factors.

Financial advisors can help clients by evaluating how Medicare will coordinate with their other healthcare options and the potential costs. Medicare specialists also are available to assist financial advisors with this process; for example, offering a comparative analysis of someone’s Medicare plan options.

Variables to consider include the availability of employer-provided retiree healthcare coverage, veterans benefits and other healthcare options; the client’s income when nearing and in retirement; whether they have dependents; and where they want to live in retirement.

Key Medicare Questions for Clients

The following are key questions financial advisors can use to begin the discussion with clients about healthcare costs in retirement.

1. Have you started thinking about your Medicare options? Many of your clients may not bring up the topic of Medicare unless you introduce the subject.
   Clients may not know much about Medicare. It’s complex and, therefore, not surprising that people want to avoid the topic. But even for those who choose Original Medicare (also known as Part A, hospital insurance, and Part B, medical insurance), they still will have to make decisions about supplemental, or Medigap coverage, and prescription drug Part D coverage.
2. When do you turn 65? This may seem obvious, but it’s critical that your clients prepare in advance of reaching this pivotal age. Three months before turning 65, the clock on the initial enrollment period starts ticking. You can help clients understand that this is a crucial opportunity for certain decisions, which otherwise might have a higher cost if they wait.
   Individuals have the three months before their birthday, the month of their birthday and three months after to make their initial Medicare selections. Even if they are still working, they need to examine their options when turning 65 because Medicare may pay primary or secondary to their employer coverage, depending on the size of their employer.
3. Who else depends on your healthcare? If a couple was using employer insurance from the spouse who is not transitioning to Medicare, they need to consider the other person’s healthcare coverage. Dependents also may be affected, since an adult child can be on a parent’s policy until age 26. Private health insurance or COBRA may need to be considered for these dependents.
4. Do you have alternatives to Medicare? Some employers continue to offer retiree healthcare coverage, though this number continues to decline. Only about one in four employers offers retiree health benefits today, compared to nearly two-thirds in the 1980s. Individuals also may have healthcare through the U.S. Department of Veterans Affairs, which doesn’t replace Medicare but could affect the Medicare choices a senior might make.
5. Do you understand how Medicare costs can add up? Medicare premiums typically get the lion’s share of attention in the media and with marketers selling the plans they offer. But Medicare premiums are only one piece of the total costs for healthcare coverage. Many people may not understand how a low premium could carry higher co-pay, coinsurance or deductible costs when evaluating their plan options.
   Medicare offers a number of combinations of coverage and plan pricing. As outlined earlier, Original Medicare has Parts A and B. Supplemental Medigap plans come in a number of varieties and add cost to Original Medicare. Part D plans cover prescription drugs.

Individuals also may shop among Medicare Advantage plans, which generally combine coverage provided under Parts A, B and D. Seniors have, on average, about 20 Medicare Advantage and 35 Part D plans to choose from, depending on where they live.

All of this points to the personal nature of choosing Medicare coverage. The key questions outlined above are important, but they are just the beginning. Healthcare in retirement is complex. As the Allsup study shows, seniors are significantly concerned, and financial planners have an important opportunity to address these issues as part of retirement planning.

Discussions about healthcare and Medicare should remain an ongoing area of dialogue between clients and their financial advisors in retirement. Helping clients through this experience can be challenging, but great reward comes from helping those clients get the Medicare coverage that’s a match for them—both in terms of their health and financial profile.