While many people are putting aside money for college costs, retirement nest eggs, and other predictable financial goals, not many make it a point to save money for healthcare costs. Whether they think that their insurance will cover most costs, or they aren’t planning for the unexpected, many Americans find themselves unprepared to pay medical bills.
Healthcare insurance plans through a place of employment or Medicare can take care of many medical bills, but these plans have limits that can quickly be exceeded. In addition to the costs not covered by healthcare insurance, there is the rising cost of the insurance policy itself. As baby boomers get older, there will be a surge of insurance claims, which may increase the overall cost of healthcare policies. To make matters worse, in May 2009 the government stated that the Medicare fund that pays hospital bills for older Americans is expected to be depleted in 2017, rather than 2019 which had been previously projected.
We cannot predict the rate of increase for medical costs in the future, nor can we foresee what the government may do to change policy in this area, but recent history tells us that medical costs have been rising at an alarming rate. According to the Bureau of Labor Statistics, medical costs have risen by an average of 4.9% per year over the last 20 years. This is a significant increase in prices: The average annual increase for all goods and services over that time frame was 2.8%.
Prepare for the rising costs by saving and investing enough to meet these needs as they arise.
©2009 Morningstar. All rights reserved. Used with permission.
