Plan for Healthcare Expenses
It's a solid starting point to plan for healthcare expenses based on the out-of-pocket maximum (OOP max), but it’s not the whole picture. Here are a few considerations to keep in mind:
1. OOP Max Doesn't Cover Everything
- The OOP max applies to covered services under the insurance policy. Expenses like experimental treatments, certain drugs, or services outside the network may not count toward it.
- Long-term care (e.g., nursing homes, assisted living) often isn't covered by regular health insurance or Medicare, so costs could significantly exceed the OOP max.
2. Non-Medical Costs of Illness
- Serious illnesses may lead to additional expenses, like hiring help at home, modifying a house for accessibility, or paying for travel to specialized facilities. These costs can add up.
3. Inflation and Cost of Living
- Future increases in healthcare costs and living expenses could outpace your FIL's pension income. Planning for how these costs may change is essential.
4. Insurance Changes
- OOP max amounts and coverage details are subject to change. If your FIL’s insurance plan changes (or if he transitions to Medicare with supplemental plans), his OOP could increase or coverage could decrease.
5. Long-Term Care Insurance or Savings
- It’s worth considering whether long-term care insurance, Medicaid planning, or a dedicated healthcare savings plan might help offset the potential costs of aging-related care.
A Balanced Approach
Your FIL’s approach makes sense as a baseline, but it’s wise to:
Keep a buffer fund: Have extra savings for uncovered expenses.
Review insurance regularly: Ensure the policy covers likely needs.
Consider long-term care planning: Explore Medicaid, long-term care insurance, or setting aside additional funds.
Ultimately, combining his plan with a safety net for unexpected or non-covered expenses will offer better peace of mind.