Planning for the Uncertain Future of Health Care

Jill Ciccarelli Rapps, CFP^® | èBella Magazine | Aug/Sep 2018

Despite the heated and sometimes hostile dynamic that arises when discussing hot-button issues, you may be surprised to discover that many Americans agree on one thing: health care is the single most pressing issue of our day.

A March 2018 Gallup poll indicates that health care availability and affordability is the #1 issue on the minds of the American people. Americans worry more about health care than any other issues: 55% worry a great deal, 23% worry a fair amount, and only 23% worry a little/not at all.

In addition, a June 2017 Gallup poll found that health care costs are viewed as the most important financial problem facing American families; in fact, this concern is even more prevalent among U.S. households than debt, lack of income or college expenses (see chart).

Four Issues to Watch in 2018

Four key themes will likely emerge as the Congressional candidates deliberate the path forward for the American health care system:

Molding the Future of the Affordable Care Act: Given that the individual mandate of the ACA was repealed as part of the 2017 tax reform bill, the penalty for having no insurance is set to be eliminated in 2019.

The lack of a mandate could reduce the number of people enrolled in the insurance market and cause an increase in premiums; although as long as subsidies are available, enough incentive still remains to keep people in the insurance pool. A mass exodus is unlikely.

The Democrats will likely push for the restoration of the individual mandate, as well as the protection or expansion of other ACA provisions and services; whereas the GOP will likely continue their efforts to repeal subsidies and most other aspects of President Obama’s signature health care bill.

Apart from creating the subsidized market for individuals and expanding access to Medicaid, the ACA also played a role in addressing some of the shortcomings of Medicare: including coverage for the prescription drug “donut hole” payment gap and cost controls for Medicare Advantage. If the ACA were to be completely repealed, the affordability and availability of these health programs could also be called into question.

Restructuring Medicaid and Medicare: With respect to Medicaid and Medicare, most of the Democratic Party are split between either expanding access to Medicare and Medicaid or maintaining the status quo. On the other hand, the GOP has long sought to restructure these programs to mirror a free market system.

In regards to Medicaid, the GOP might explore instituting premiums for Medicaid beneficiaries and tightening standards for eligibility.

For Medicare, GOP proposals include providing government vouchers to purchase private insurance coverage, promoting the usage of tax-advantaged health savings account, and increasing the age threshold for those who are not yet receiving entitlement benefits.

Reducing Prescription Drug Prices: Corporations that hold the patents and production rights for prescription drugs have limited competition and are subject to almost no cost controls; as a result, Americans pay considerably more for their medications than people in any other developed nation.

Despite the contrasting visions of the two parties, there does seem to be bipartisan interest in reducing prescription drug costs for consumers.

Both public and market forces could help to reduce the strain of prescription drug costs. A proposal to allow Medicare to negotiate drug prices with the distributors has been floated but has not gained much traction. A potential merger of CVS and Aetna could also enhance their bargaining power with pharmaceutical companies – allowing policyholders to access their prescription drug at lower rates.

Discussing Publicly Funded Healthcare Coverage: A handful of top Democrats in the Senate and the House have started pushing for a single-payer universal health care system (similar to Canada and most of Europe); while others within their party are advocating a “middle-of-the-road approach”, such as a Medicare buy-in public option.

Both proposals would involve a significant restructuring of health care coverage and delivery of services, although the specifics about the funding structure remain unclear. Widespread public support exists for single-payer health care among Americans, but Congressional support is sparse and these policies face staunch opposition from the insurance and pharmaceutical industries.

How to Effectively Manage Your Health Care amidst Ambiguity

Although it is nearly impossible to predict exactly how our health care system will change over the coming years, you do have the ability to take tangible steps towards enhancing your financial preparedness for medical expenses that may loom in the future:

• Understand how health care costs may affect your retirement nest egg. Proactive planning for expenses provides you with a better opportunity to afford quality health care for the duration of your life; failing to do so can have life-or-death consequences.

• Gain a functional understanding of the nuances of health care costs and different planning opportunities. Then, evaluate all aspects of your current (short-term) and anticipated (long-term) health care needs to create a personalized health care savings plan that can afford you more control and autonomy from government jurisdiction.

• Work with a financial advisor who specializes in health care planning. An experienced financial advisor can help you estimate and prepare for your future health care expenses, as well as guide you to simplify and organize every facet of your health care plan.

• Ensure that your estate planning health care documents (durable power of attorney, living will, will and testament) are up to date and accurately reflect your wishes. Additionally, you should communicate all of this information to your health care surrogate(s).

• Document your preferred living situation in the event that you need extensive health care or caretaking needs down the road (i.e. Do you prefer to remain at home? Stay with relatives? Buy into a continuing-care retirement community or assisted living facility?). Also, come to terms with how each of these decisions could affect your financial plan and your tax liability.

With these five action items and the guidance of your family and team of professionals, you can be financially prepared for your health care needs!