Something I’ve noticed over the last 14 years running a Medicare insurance brokerage is that more and more women are becoming the primary insurance decision makers in their households. In fact, the U.S. Department of Labor reports that women make around 80 percent of the healthcare decisions for themselves and their families here in America.
This may be because women are more comfortable discussing healthcare related topics like preventive care, diet, and wellness. They seek to establish a relationship of trust with their doctors and are good communicators when it comes to health.
So as women begin to plan for the future healthcare costs they will incur during their golden years, it’s important that they consider the reasons why they should plan differently for Medicare than their male counterparts.
Social Security Is Not Enough
We’ve all heard that Social Security is designed to be a safety net and not your sole source of income. Even so, many people do rely on Social Security to provide the majority of their income.
Because women are often paid less than their male counterparts during their working years, some women collect monthly income benefits from Social Security that are lower than the average check that a man would get. In 2018, Fidelity reported that women age 65+ have an average income of $12,587 per year from Social Security whereas men collect an average of $16,590 per year.
This disparity occurs for a couple of reasons. The first is due to the wage gap: women are often paid less than their male counterparts during their working years. Another factor is that women often take some years off work to raise children, which means they may have fewer years of work overall that are calculated into their Social Security earnings one day.
Since so many people depend on Social Security for the bulk of their income once they have quit working, these lower Social Security checks can leave more women than men in financial stress if they were never married or are widowed.
It’s important that we be aware that Medicare isn’t free, and we will pay monthly premiums throughout our lifetime for both outpatient and drug benefits. Planning to make sure enough money is set aside for this is vital.
Cost of Healthcare for Women
Healthcare spending for women is considerably higher than spending for men at virtually every phase of their life and even more so after age 65.
The average 65-year-old woman will pay up to 20% more for healthcare during their golden years than a man of the same age. With average healthcare costs of around $11,000 per year, people age 65 plus can expect to spend more on healthcare during their retiree years than when they were younger.
While Medicare will cover some of these costs, not all costs are covered. Just like the health insurance you may have had in your younger years, Medicare has deductibles, copayments, and coinsurance that you will pay as you use healthcare services.
For example, if you enter the hospital, you will be responsible for a Part A deductible of $1,364 in 2019. Should you stay in the hospital for longer than 60 days, you also begin paying expensive daily hospital copays. On the outpatient side, Medicare Part B will cover 80% of your expenses after you first satisfy an annual deductible of $185.
However, you are responsible for paying the other 20% with no limit. This means you will spend 20% on things like doctor visits, lab testing, diagnostic imaging, medical supplies, durable medical equipment, outpatient surgeries, chemotherapy, radiation, and dialysis.
As you can imagine, spending 20% indefinitely on these items can be a sure way to medical bankruptcy if you develop a chronic illness. For this reason, many people purchase Medicare supplement or Medicare Advantage policies to help fill in the gaps. These private insurance policies have monthly premiums that you will pay for, so this extra coverage and those costs need to be factored into your budgeting for future expenses.
There are also things that fall outside of Medicare’s coverage altogether, such as dental, vision, hearing and routine foot care costs. Most of us are used to our employers providing coverage for these things so it’s an extra burden that we may have to pay out of pocket once we are over 65.
If women consume more healthcare services as they age, then they should also plan to set aside more money for these future healthcare costs accordingly.
Women are expected to live 2.3 years longer than their male counterparts. Studies have shown that we incur the highest healthcare costs in our last months of life, so it’s important that women save accordingly for those extra years.
We also need to consider that Medicare doesn’t cover any form of long-term care. While all of us hope to remain independent throughout our entire lives, the reality is that nearly one in two people will eventually need some form of long-term care.
So, while Medicare will always provide for your medical care, even when you are living in a facility, it does not pay the monthly rent for long-term care. The national average costs for this begin at around $3,628 per month and climb from there.
Considering that women have a longer life expectancy, there is a significant chance they will need long-term care one day and will have to pay for this out of pocket. This is yet another bucket of money that women should be budgeting for in their future.
Less Likely to Have Employer Retiree Coverage
There’s no question that far fewer employers offer retiree coverage these days, and some offer no retiree benefits at all. This a shame because employer-sponsored retiree coverage is usually the most cost-effective type of coverage when compared to Medicare.
Unfortunately, women are less likely to have access to retiree benefits from their former employers.
Many women can solve this dilemma by obtaining coverage through their spouse’s employer. However, single women won’t have this option. This means they will likely rely on Medicare as their primary coverage and we’ve discussed the types of costs that people on Medicare can expect to spend.
What Can We Do About It?
Knowing that we’ll need to plan for higher healthcare costs one day, women should take steps now to prepare and budget accordingly.
First, get educated on what your options will be once you turn 65 and enroll in Medicare. I often say that I wish there was a class offered by Medicare for people when they turn 50 so that they can calculate the costs ahead of time while there is still time to save. Instead, we usually see people first begin to research the costs for Medicare just a few months before they turn 65.
Spend some time online or working with a Medicare insurance broker to estimate your future costs for Medicare Parts A, B, and D, plus any supplemental or Medicare Advantage coverage that you may want to fill in the gaps. This will give you a target monthly amount that you know you’ll need to make ends meet in the future.
Pay off Debts
Many financial planners will tell you that one of the best things you can do for your future is to pay off all of your debts before you quit working. Save as diligently as you can and work on paying off your car and your mortgage before you begin taking Social Security benefits. You can even consider doing some part-time side hustles like pet sitting or driving for Uber or Lyft in your spare time so that you have extra money to throw at these debts.
Turning 65 and enrolling in Medicare when you are debt-free will make you feel more confident that you can handle the costs that are coming your way.
Open an HSA Account
Many employers these days offer high-deductible health plans that are compatible with health savings accounts. Consider enrolling in one of these health plans so that you can open your own HSA. Money that you contribute to this account is tax deductible. It also earns interest that compounds over time and if you save quite a bit of money into this account over the years, you can even invest some of it to get greater returns.
In 2019, you can contribute up to $3,500 as an individual or $7,000 as a couple into your health savings account. If you are at least age 55, you can also contribute an extra $1,000 per year as a catch-up contribution.
You can use this tax-free money for qualified medical expenses whenever you have them. This includes Medicare premiums, deductibles, copayments, and coinsurance. It also includes long-term care expenses. If you are diligent about saving into this account over the years, you’ll have a nice nest-egg of money for healthcare expenses that you can rely on when you are no longer working.
Delay Taking SS Income Benefits
One of the biggest factors in maximizing your Social Security benefit is when you begin taking them. While you can take Social Security as early as age 62, doing so will reduce your benefits significantly. Waiting to take them at around age 67 means you will collect 100% of your benefit.
If it’s possible that you can delay taking them until age 70, you will increase your monthly benefit considerably in doing so.
While women may face higher healthcare costs than men someday, there’s ample time to do something about it if you focus on this at least 10 to 15 years before you stop working.
Note: Benefit information and other statistics in this article are based on 2019 data. For the most current information, visit the Social Security Administration website.