How to Pay for Health Care in Retirement

Tuesday, December 16, 2008

Page 7

IN MY OPINION (Column)

How to Pay for Health Care in Retirement

By TED RUHIG

Retiring from retirement is becoming popular. OK, maybe not popular, but a necessity nonetheless. Consider the thousands of retired auto workers, for example, who have been getting retirement checks every month since they retired from one of the Big Three: Ford, Chrysler or GM.

If the Big Three, or just one of the three, goes belly-up, the retirement future of those who rely for them for health insurance and a pension will become problematic. Said one retired GM employee in a recent interview: “Most everybody that’s ever worked here, you worked on the promise that your pension was secure. Now you’re finding out that possibly that promise was a lie, and maybe it’s not going to be secure.”

How do people pay for retirement if the companies from which they retired no longer pay retirement benefits? Well, there’s always the equity in their homes — except for that IN MY OPINION (Column) “Unable to Sell Homes, Elderly Forego Move to Assisted Living.”

Many elderly cannot buy into retirement homes because they require a huge upfront payment, from $100,000 to $500,000 just to move in. If they can’t sell their homes to raise that kind of cash, they can’t move. Retirement communities have watched as their waiting lists have withered and their occupancy rates have fallen. They are now scrambling to lure people in.

Perhaps the senior lobbying organizations can help. The biggest lobbying group on behalf of seniors is AARP. But look at the mess AARP is in. A Senate inquiry has found evidence of deceptive marketing practices by AARP in promoting supplemental health care policies.

More than one million folks have bought such policies, which carry the names of AARP Medical Advantage, Essential Plus and Hospital Indemnity Plan. AARP is the main beneficiary from the sale of these policies, and more than 40 percent of its $1.2 billion budget comes from royalties derived from the sale of health policies.

Policies pushed by AARP provide fixed cash benefits. Many times these health plans pay much less than seniors were led to expect. Charles E. Grassley, R-Iowa, a member of the Senate Finance Committee, has observed that marketing of these AARP-promoted products is misleading because while seniors were led to believe these policies helped to cover the high costs of needed medical treatments, they do not begin to do the job. In fact, these policies tend to exacerbate the problem of lack of insurance coverage because they cover very little of the costs not also covered by Medicare.

A New York Times article on the topic states that “AARP-sponsored limited-benefit policies have been a problem for many years. Uninsured people buy them thinking they are equivalent to major medical coverage, but they are not.”

For example, one of AARP’s Medical Advantage plans pays a maximum of $5,000 for surgical procedures that may cost two or three times that amount. Yet its marketing message describes its limited benefit policies as “essential benefits you deserve, the security you want.”

Senator Grassley rightly complains that “the pitch for these products should be straight up and informative instead of designed to leave the impression of being comprehensive when the product is, in fact, very limited and leaves consumers seriously in debt if they need intensive medical care.”

AARP staff members point out to the probing Senator that their policies are better than nothing. They go on to say that these fixed indemnity insurance plans are targeted to people between 50 and 65 years of age and designed to be purchased in addition to other health insurance.

Yet AARP admits that those who purchase such policies usually have no other health insurance. Senator Grassley has recently requested that AARP provide “an explanation of how these policies are marketed and sold to Medicare beneficiaries.” He also wants AARP to disclose the profits it has made from sales of these health care products, which are managed by a taxable subsidiary of AARP Inc., the parent organization.

With all of these challenges — the loss of pensions from belly-up companies; an inability to sell a home to raise cash to pay for assisted living; and purchasing health insurance which is totally inadequate to meet health needs; — retirement in the U.S. has become downright unfriendly.

No wonder South Korea has joined Thailand, Singapore and other Asian nations in their lucrative business of medical tourism. Global medical tourism is expected to become a $40 billion-a-year industry by 2010. Medical care is combined with a holiday trip, and the savings can be 30 to 80 percent on the medical procedure as compared to having it done in the U.S.

It’s expected that this year alone, more than half a million Americans will travel overseas for operations and treatments for a multitude of reasons. It looks like we will have to leave the country if we want to find some enjoyment and health in retirement.