Many assumptions go into any kind of financial plan. One of the biggest nowadays is the amount needed to cover healthcare expenses. Lots of financial planners, and retirees-to-be, approach with a law-of-averages angle: if there are no chronic conditions present, simple assumptions about average Medicare or insurance premiums, average out-of-pocket costs, and average healthcare inflation rates are made.
When you think about it, though, few people are actually “average” when it comes to buying healthcare. Jerome Groopman and Pamela Hartzband, M.D., wrote the book Your Medical Mind: How To Decide What’s Right For You, to explain wide variations in how we choose to purchase medical goods and services.
A thorough financial plan would take into consideration one’s general level of health, first, but also focus on two questions:
1. Are you a healthcare minimizer or maximizer? Healthcare minimizers get basic minimum preventive care. Maximizers are looking to healthcare providers to address nearly any symptom that arises, and some symptoms even before they arise.
2. How much do you favor alternative over conventional medicine?
If we were to take the extremes of each answer, we would have 4 results for your medical mindset:
Conventional minimizer – Getting basic preventive care through the traditional healthcare system.
Conventional maximizer – Seeing many practitioners, frequently, in the traditional healthcare system.
Alternative minimizer – Preferring to get preventive care through non-covered providers such as acupuncturists, shamans, non-traditional therapists, or care in foreign countries
Alternative maximizer – Seeing many alternative (non-covered) practitioners or purchasing many alternative medical products.
Most people are some combination of each. For planning purposes, though, a conventional minimizer is going to need very little set aside compared to the alternative maximizer, who will have very few expenses covered. Some estimates are that the alternative maximizer may need as much as $300,000 more set aside to cover their lifetime medical expenses at retirement.
Before I knew better, I was one of the professionals making average assumptions for all of my clients. After asking more about their preferences and choices for their care, I have learned everyone is different. Practically no one is “average.” Make sure you have a plan, and a planner, who don’t assume you are.
