Healthy planning for the future

Managing healthcare needs is no easy task, and proper planning can be difficult for individuals and families of all backgrounds. Add escalating healthcare costs and contested healthcare policies to the equation and the challenge is only compounded.

What can you do given this reality? In order to make the best healthcare-related decisions for you and/or your family, it’s important to know all of your options.

On a recent UBS On-Air podcast, Wealth Planning Specialist Emily Lau sat down with Head of UBS On-Air Anthony Pastore to discuss a wide-range of healthcare-themed topics, including how Medicare works, what you should be aware of prior to enrollment and healthcare options for individuals without coverage. 

Healthcare-related expenses are on the rise. In fact, "[they] have an average annual growth rate of 5.5 percent," according to Lau. "That is twice the average annual growth rate of everyday expenses, such as food and utilities.¹" 

Let’s put that in perspective: A 60 year-old couple in present-day would have needed to set aside 300,000-600,000 (USD), on average, in order to cover future healthcare-related expenses. That’s a significant amount of change, especially considering that figure doesn't even include costs associated with long-term care.²

Therefore, Lau says, "planning for healthcare-related expenses early on will prevent you from being unprepared."

Are you under the age of 65 and in need of healthcare coverage? Here are three important points for you to know about the Affordable Care Act (ACA).

The ACA prohibits insurance companies from denying claims due to one's age or existing health conditions. 

The ACA has also established state regulated insurance exchanges. "These exchanges, at a minimum, must offer two health insurance carriers with various medical plan options," according to Lau. 

Premium subsidies are available through the ACA depending on your level of income.

Curious as to how Medicare actually works? For starters, it is important to know that you can enroll "as early as three months prior to turning age 65," says Lau. Failing to apply during the enrollment period "could result in a penalty."

Medicare Part A: This component covers the costs associated with hospitalization, skilled nursing homes (on a limited basis) and hospice care. Most individuals do not pay a monthly premium because payroll taxes fund this component of the program; however, you'll still be responsible for out-of-pocket costs like your deductible.   

Medicare Part B: This component covers certain doctor visits, outpatient care, medical supplies and preventative care. In addition to a deductible and co-insurance, the component includes a monthly premium that may be subject to a significant surcharge depending on your modified adjusted gross income (MAGI).

But do Medicare Part A and Part B cover the costs of prescriptions? No, prescriptions are actually covered by what is known as Medicare Part D. 

Enrollment into Medicare Part D is strictly voluntary, however you are required to have both Medicare Parts A and B in order to be eligible. The enrollment period for Medicare Part D is the same as Parts A and B. There is also a monthly premium associated with Medicare Part D, which increases as your level of income increases. 

Medicare Parts A and B are not designed to cover the costs associated with hospital stays and doctor visits. You can sign up for Medicare Part F and Part C, which cover those types of costs. Private health insurance companies provide Medicare Parts D, F and C.

What differentiates Medicare Parts F and C? The premiums are higher, but out-of-pocket costs are lower.

Now that you have a better understanding of the options available, here are some considerations that will help you decide on the plan that best suits the needs of you and/or your family.

There are two options to consider for obtaining supplemental healthcare coverage, considering that Medicare Parts A and B do not cover the majority of healthcare-related costs. 

The two options you may consider are either a Medicare Advantage Plan or a Medigap Plan that is paired with prescription insurance. Once you decide on one of the two options, you then must choose a specific Medicare Advantage Plan or Medigap Plan.

Lau highlights that "if your employer continues to offer health insurance coverage during retirement, that coverage may serve as your supplemental policy."

“If you need to obtain healthcare coverage prior to age 65,” Lau emphasizes, “you should confirm enrollment deadlines for your state-specific insurance exchange, which can be located on www.healthcare.gov ." The process for first time Medicare enrollment should begin at least three months prior to turning age 65.

Consult with your Doctor and confirm your medical plan of choice is accepted.

If you obtain Medicare Part D for prescription coverage, Lau suggests that you "confirm with your insurance company that the prescriptions are covered by your medical plan of choice."

Confirm renewal deadlines on an annual basis and be mindful of deadlines should you decide to change your medical plan of choice. 

Discuss with your UBS Financial Advisor what the costs associated with your medical plan of choice are and how to incorporate those costs into your overall financial plan.

^1,2August 2017 UBS Modern Retirement Monthly "Healthcare in Retirement" 

Research from CIO GWM is provided by UBS Financial Services Inc. UBS Financial Services Incorporated of Puerto Rico is a subsidiary of UBS Financial Services Inc. In Canada, research from CIO GWM is provided by UBS Investment Management Canada Inc.

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