Medical aid premium increases outstrip consumer inflation each year by between 3% and 5%, meaning that healthcare costs should be carefully assessed when developing a retirement plan.
While medical aid contributions increase in excess of CPI each year, this does not account for other medical expenses and associated costs that are not covered by medical aid. In addition, late joiner penalties and exclusions can mean extra out-of-pocket medical expenses. As you age, moving onto a more comprehensive medical aid plan with a gap cover benefit is an imperative, and the costs of a higher plan option should be part of your post-retirement expense calculations.
While your retirement income is likely to keep pace with inflation, greater than CPI increases in your medical costs means that your healthcare expenses will consume a bigger portion of your income every year.
The effects of ageing
This can have severe implications for post-retirement cashflow at a time when one’s health is generally deteriorating as well. It is wishful thinking to not plan accordingly for the high costs of post-retirement healthcare, because ill-health goes hand-in-hand with ageing. As people grow older, so their ability to see, hear, communicate, walk, remember, concentrate and care for themselves is affected.
In its ‘Profile of older persons in SA’, Statistics SA estimated that around 38% of South Africans over the age of 60 use chronic medication, around 20% use assistive devices such as spectacles, 10% wear hearing aids and 5% use wheelchairs. These assistive devices and other aids are expensive and not always covered by medical aid. While a Zimmer frame costs around R2 000, hearing aids can cost anywhere between R5 000 and R60 000, and wheelchairs can cost between R2 000 and R90 000 depending on the need of the patient.
Over 50% of people aged 60 and over live in extended households which reinforces the fundamental role that family plays during one’s retirement years, especially as one ages. The same report shows that 11% of over 60s have problems communicating, 45% have difficulty walking or climbing stairs, and 34% have problems remembering or concentrating, making some form of at-home care essential.
Mental illness is a big cost driver in retirement, especially when it comes to depression and anxiety.
According to a study by the London-based Institute of Economic Affairs, the likelihood that someone will suffer from clinical depression actually goes up by about 40% after formal retirement.
Dementia, which is an acquired degenerative brain syndrome, is the leading cause of disability and dependency in the elderly – with age being the single biggest risk factor for its development. It is estimated that between 20% and 40% of South Africans over age 65 have dementia, with the average life expectancy between eight and 12 years.
There are enormous economic and medical costs associated with caring for someone with dementia, which can cost anything between R3 million and R7 million over the expected life span of the sufferer. Prescribed minimum benefits are only required to cover admission for the initial diagnosis of dementia and management of acute psychotic symptoms for one week. Thereafter, medical schemes are not obliged to cover the medical costs of dementia, and cover depends on the benefits of your particular plan option. Most medical schemes don’t provide cover for accommodation and care services associated with dementia.
When it comes to caring for a family member who has been diagnosed with dementia, the only options available are either home-based care or specialised care facilities.
Most families undertake to care for their family member at home but completely underestimate the enormity of the job they are taking on. Having a dementia patient live at home is disruptive and all-consuming and can put emotional strain on the whole family. Many family members who assume the role of carer attest to suffering from burnout, fatigue and general deterioration in health. In addition to this, many carers are required to cut back on their work hours or resign altogether, and this loss of income impacts the whole family.
It is estimated that in the last five years of life, total healthcare spend for dementia patients is almost 60% greater than the costs associated with death from other diseases, including cancer and heart disease. However, this doesn’t account for the costs incurred in the years before the diagnosis is made. Post-diagnosis expenses include geriatrician consultations (which start at around R3 000 for a one-hour consultation), prescribed medicines, personal care items, adult diapers and therapy. Home nursing costs between R65 and R110 per hour, while full-time accommodation at a high-end dementia care facility costs between R55 000 and R75 000 per month. Other hidden costs include home alterations, safety-related expenses, security gates, panic buttons and other lifestyle modifications.
Your past medical history is no indication of your future healthcare expenditure. While you may be fit and healthy now, your chances of falling ill increase as you age especially when it comes to illnesses such as cancer, dementia, heart and arterial disease, arthritis, cataracts, osteoporosis, type 2 diabetes and hypertension.
Be thorough and realistic when planning for your post-retirement healthcare expenses, and don’t assume that the ailments of old age won’t affect you.