Healthcare: The Final Frontier
The Final Frontier
The conversation came up again as we were idolly chatting after the podcast recording. But, what are you guys doing about healthcare? We all shook our heads knowingly. Because no one had a brilliant answer. There was the conversation regarding the usual suspects: health sharing ministries, expat insurance, The Affordable Care Act. So many possible answers, but most unsatisfying. Healthcare has become the final frontier.
It is the last, and most difficult puzzle that most early retirees face. No matter how much they have saved up, how closely the numbers have been mapped, it is the one unknown that makes us quake.
How do we manage this mess?
Settle For Imperfect
There are so many versions of imperfect. I am not an expert in any of them. But I know that they each have their own specific drawbacks. The benefit, of course, is obvious. They are low cost alternatives.
Health care ministries are great but because they are not actual insurance companies, they lack the governmental supervision that may be protective. They work wonderfully, until they don’t. Although quite cheap, there always is the worry that either they won’t pay or be accepted by providers. There is no simple answer.
The Affordable Care Act and exchanges are helpful if we qualify for subsidies and the offerings in your state are reasonable. Expat insurance may work if we spend a reasonable time out of the country each year. Geoarbitrage is a possibility if we are willing to pick up and pay for healthcare in cash in a different country.
Or maybe one can apply for citizenship or residency in a country that has some form of universal health.
All possible, but not necessary optimal. It’s the reason healthcare is the final frontier.
Forget FIRE
The most basic and obvious of answers. Let go of the early retirement dream. Continue to work in an optimized environment, maybe even part time, where insurance is covered by an employer.
While this sounds like the worst of all options, it is actually the one most often chosen. Especially for married couples. One spouse continues to work at a job that they don’t loathe. Maybe not love, but don’t loathe.
This is the lowest cost option that not only covers healthcare costs, but may also provide income lessening the amount necessary to withdraw from a portfolio.
Being the final frontier, the last hurdle, could be the game stopper. Early retirement may just not be possible or plausible for everybody. It’s like making it a few steps away from the finish line and then pulling up short.
Painful, but necessary.
Suck It Up, Sally
Or we can suck it up. We can budget in a huge amount towards healthcare (25K/year for a family of four) and not consider ourselves FIRE until we can work this into our yearly budget and SWR number. This is very unsatisfying for a hack rich community like ours.
Yet it is probably the most reasonable way to manage this final frontier. We are conservative people, and this is the conservative answer. If you happen to be lucky enough to have a health sharing ministry or the ACA work out for you, then you have a little extra money to play with.
This is what I am doing.
Final Thoughts
Healthcare is the final frontier. It is the last obstacle to a successful early retirement. We can try to find a hack that we find palatable, or we can suck it up and plan carefully. The answer is up to us.
There is no easy button here.
I agree. This is a HUGE issue. My wife is from the Philippines, and she would like to retire there relatively soon. It’s a great scuba diving destination, and I’m all for it when we’re FIRE. I will be Medicare age. There are adequate medical facilities there, and budgeting $25,000 a year is reasonable. But what do you do when you find out you have some treatable illness that requires surgery, chemotherapy, and radiation therapy, with a bill in the hundreds of thousands of dollars? Medicare won’t pay outside the USA as far as I know. Flying back to the USA and moving here for treatment may not be pragmatic. Has anyone grappled with this problem while living overseas? I’d really like to hear about the Philippines, especially.
This choice IMHO entirely rests on your actual state of health at retirement. If you have no pre-existing within the guidelines of their coverage Healthshare is the way to go. All this tippy toeing around about solvency is a load, they are solvent and will cover you for a real need. They will not cover your 90 days of cocaine addiction treatment or 20 years of “back pain” with chiropractic adjustments, but your acute appy or ruptured AAA or chest pain with stent placement is covered. These are the things you are really worried about not eye exams or mammograms. They will do just what they say they will do. My healthy just graduated 22 yo kid had a hemo-paretenum due to a ruptured ovarian cyst (the cost of being a woman). It required a 24 hour admit, workup and observation with CT and ultrasound but no surgery, presenting as emergent rapidly increasingly severe belly pain. It generated a 10K bill and it was properly covered and her out of pocket was $250. Hard to beat that. ACA would require 2x as much monthly premium and a 6K deductible and then it would pay only 80% of the remainder 10K – 6K = 4K * 0.8 = $3200 means my healthy kid would be on the hook for $6800 hospital bill. My 60 yo wife has no pre-existing, within their guidelines and Healthshare is our solution for her as well. If you’re healthy it’s the obvious choice. Blue Cross is not your friend and will do everything it can to screw you but if you have pre-existing then it’s pretty much your only choice plus a lot of cash (25K) in the bank to cover the differential. We split coverage. I’m on Medicare with United Health Care supplemental. My wife and dependent child are on Liberty Healthshare my adult child is on her own liberty policy and we pay non covered expenses like prescriptions or infrequent office visits like gyn exams or eye exams out of pocket at self pay rates. All toll I’m paying about 9K/yr as a line item on my budget to cover 4 people. Once my wife is on Medicare I will tap my HSA to pay for both of our Medicare monthly expenses. That money won’t be in my taxable stream and will come out tax free, giving a little more leeway (few hundred a month) in the tax bracket. Since the HSA money exists just for this purpose I will remove that as a monthly line item expense and our monthly health care cost will drop to just the cost of the supplemental insurance. There is enough in the HSA to cover 20 years of Medicare.
SOunds like Health Shares have treated you guys well.
Healthcare really is the final FIRE frontier. My husband has already retired and I’m gradually winding down how much I’m working. I still am enjoying working a less stressful schedule than when I was in accumulation mode. But healthcare may keep me working a few shifts longer than I planned to.
My wife too.