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How To Protect Yourself From Unplanned Healthcare Costs

How To Protect Yourself From Unplanned Healthcare Costs

By Jeremy Raffer


During your working life you’ve probably been covered by health insurance through your employer or your spouses. That coverage extends until one of you retires and possibly beyond if you work for the government. For most, once you’re retired, you’ll probably receive healthcare coverage through Medicare, which is good for routine healthcare needs like your health insurance was when you were working. However, as you get older, there are often some large expenses that Medicare doesn’t cover that can really throw a wrench into your lifestyle and savings.  Fortunately, there are actions you can take to insulate yourself from these risks.



Table Of Contents:

Medicare And What It Can Do For You
Who Needs Long-Term Care?
Who Provides Assistance When You Need It?
What Are Your Options?
Long-Term Care Insurance
Paying Out-Of-Pocket




Medicare And What It Can Do For You

Original Medicare consists of two parts--Medicare Part A and Medicare Part B. Medicare Part A offers hospital insurance coverage. This means it covers the costs associated with staying in a hospital, a skilled nursing facility, surgery, hospice etc. Medicare Part B covers medical insurance which can help pay for visits to the doctor, outpatient care, and things like medical equipment and supplies. Medicare Part D is optional prescription drug coverage. Some people will buy a Medicare Advantage Plan (Part C) to get more extensive medical and drug coverage if they know they’ll need it. Make sure to review all the options and choose the most realistic plan for your needs.

Importantly, Medicare does not cover long-term care costs after the first 100 days and really only covers them under special circumstances such as:

1. You are admitted to a hospital for 3 days.

2. Within 30 days of your hospital stay you are admitted to a Medicare-certified nursing facility.

3. You need specialized care such as Physical Therapy.

If you meet all of these criteria, Medicare will pay for the first 20 days, and after that they share the cost with you. After 100 days, you’re on your own.


medicare and healthcare costs


Who Needs Long-term Care?

Long-term care covers a variety of services that support your daily living needs. It’s not for medical assistance specifically, but for people who need help with everyday activities such as bathing, getting dressed, using the bathroom, eating, and getting up from a bed or chair. Help with housework, taking medication, and shopping for groceries are common tasks that can also become increasingly difficult and require aid with increasing age.

Here are some sobering facts to keep in mind:

1. The national average for a private room in a nursing facility is $8,365 per month. In the state of New Jersey (where I live) the average cost is $11,863 per month.

2. Someone who is 65 today has a 70% chance of needing some type of long-term care.


3. On average women live longer, and therefore have a higher probability than men of needing care. They also tend to spend more time receiving it.

4. The average length of time people need long-term care for is 3 years--that’s roughly 3.7 years for women and 2.2 years for men.


Who Provides Assistance When You Need It?

Long-term care services typically come in 4 formats. Generally, the need to move down this list rises with the level of care needed for the individual and the funds available.

1. An unpaid caregiver such as a family member or friend. This is the most common option.

2. A nurse or some sort of registered therapist who comes to the home.

3. Some sort of daycare service.


4. A dedicated long-term care facility.

home healthcare

What Are Your Long-term Care Options?

Most people need some sort of long-term care coverage, and should ultimately create a plan to pay for it. Unfortunately, the most common way is to pay for it out-of-pocket. Most people do a poor job of planning, so checkbooks and credit cards wind up paying for unexpected long-term care bills. There is a better way though, and that’s purchasing long-term care insurance to cover the cost. Bear in mind that long-term care insurance is quite expensive, but the younger you are when you apply for it, the cheaper it’ll be. If you have the foresight and funds to pay for it, long-term care insurance can provide you the best bang for your buck.

Long-Term Care Insurance

Long-term care insurance is a great way to insulate yourself against unplanned health costs. It can be quite expensive, but not nearly as expensive as needing it when you haven’t purchased any. Long-term care insurance works like most other insurances in that you pay the premiums for your policy, and in return you have a defined amount of benefit to use for expenses. The amount of money you put in will typically yield 3-7 times your contributions for qualified medical expenses. Depending on the plan you sign up for, they can provide coverage for registered nurses, dedicated long-term care facilities, and even cash compensation for a friend or family member who’s helping out.

Long-term Healthcare options



Paying Out-Of-Pocket

Some people can self-insure which means paying expenses out-of-pocket. The rationale here is when you can afford to write checks to cover costs, why bother with insurance? Unfortunately, just because it’s an easy strategy doesn’t mean it’s a good one. This technique is not advised for multiple reasons. When long-term care insurance is used, your money goes much further because you have leverage. That leverage means your insurance pays--not your savings. You wouldn’t want to throw money down the drain simply because you can afford to. Previously, a fair objection was that if you paid into a long-term care plan and didn’t wind up needing it, you’d lose all the premiums paid over the years. In the past, this was true. Fortunately, there are now long-term care plans that will provide a death benefit if the funds are not used; you get a little less leverage for your money in exchange, but if you don’t end up needing it, it doesn’t go to waste.



As much as we like to pretend otherwise, it’s a fact of life that we all age. With time comes wisdom, grandchildren, senior discounts, better parking spots, and, unfortunately, unplanned medical expenses. Those expenses are quite likely to happen and there’s a lot you can do to manage them with some planning. You can’t assume Medicare will cover all your costs, so purchasing something like long-term care insurance could be the smartest move your wallet will ever make.


So how do you protect against unplanned healthcare costs? Let me know in the comments below and remember to give your financial advisor a call today to discuss it with them. Or if you’d like, give me a call, and I’d be happy to talk with you and answer your questions.


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Jeremy Raffer, MBA
Wealth Manager
Phone – 201-773-4641


Any opinions are those of Jeremy Raffer and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and  are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. All hypothetical examples are for illustrative purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.