Healthcare spending has increased a whopping 260% since 1960.* For women, these costs are higher, for one simple reason: longevity. Women live longer than men, so they require more years of care. While planning for longer care needs is a main concern, it’s not the only worry. In addition, women are often the primary caregivers in families. Thus, for women, planning for healthcare needs goes beyond a fiscal strategy: a proactive plan must also consider who will care for them when they no longer can.
Longer Lives, Higher Costs…
The average woman is expected to live two years longer than the average man, to about 87 years old; however, that’s just the average—the range is wide. One in four women can expect to live even longer, to age 94. Women of substantial wealth live longer still.** As longevity rises, so do healthcare costs. A woman in her mid-60s may spend between $5,000 and $6,500 per year on healthcare, but by her mid-80s, that number doubles, to between $10,000 and $14,000 (Display).
…And More Are Paid Out of Pocket!
While longevity is the primary reason women have higher overall lifetime health costs, the type of care and how it’s funded are also important to consider when planning. For example, the longer an individual lives, the greater the need for long-term care (LTC). Since women live longer than men, they require disproportionately more LTC. In fact, nearly three times as many women than men will require LTC lasting five years or longer.***
Paying for LTC comes in many forms. Medicare only pays for medical expenses and a short-term stay in a nursing home or rehab facility, but not LTC to help with daily activities of living. Family members can step in to help with care and/or costs, but three- quarters of individuals who need LTC will pay for it out of pocket (Display). Medicaid eligibility varies by state, but typically only kicks in when all other resources are depleted or nearly depleted.
Since women use LTC longer than men, it stands to reason that their out-of-pocket costs are far greater. The dollar figures can be staggering: one-quarter of individuals can expect long-term costs up to $100,000, while 15% can expect to pay over a quarter-million dollars.***
Who Cares for the Caregiver?
Establishing a fiscal strategy to pay for future healthcare expenditures is only part of the planning process. Women, in particular, also need to arrange for their own eventual care. Women are often primary family caregivers for children, spouses, and even parents. Because they tend to outlive male spouses and will need LTC for longer, planning for their own care should be a mindful, active process.
Finding the right structure of care is essential, and should include answering many important questions: Where do you want to live—in your own home, with a child or other relative, or in a residential facility? What level of care is desired and what changes should be made if you require an extraordinary level of care? Importantly, setting up the proper legal documents—a durable power of attorney for property and healthcare decisions, a revocable living trust, a living will, and a last will and testament—is crucial to ensuring your wishes are adhered to. Clear instructions to children or other family members can help ease transitions and avoid conflict in the event of sudden illness or disability.
Planning Doesn’t Have to Be Daunting
While most people don’t like to imagine themselves ill or disabled, the facts are women live longer and have higher healthcare costs, a majority of which comes from out of pocket. As a result, they require more assets to pay for their care. Women also often move from the caregiver role to the recipient of care, which requires planning. The best time to plan is well before the need for long-term care arises; setting a clear strategy makes future healthcare wishes unambiguous, and decisions around care less daunting to you and your loved ones. Bernstein can help you start these conversations and incorporate your wishes into your long-term financial plan.
*Healthcare expenditures as a percent of GDP
** Source: Social Security Administration, Society of Actuaries, and M Financial Group
***Source: Assistant Secretary for Planning and Evaluation, February 2016
For more tips on becoming financially engaged, explore Women & Wealth, a new Bernstein podcast series designed to educate, empower, and inspire female investors, and for additional thought leadership, check out the related blogs here.
The views expressed herein do not constitute and should not be considered to be legal or tax advice. Please consult with your legal or tax advisor regarding your specific situation.