There is plenty of guidance on financial planning during retirement. Still, many soon-to-be retired adults struggle with navigating the complexities of the American healthcare system.
Planning for healthcare costs presents new challenges for many adults who have already retired or will retire in the coming years. In most instances, healthcare costs can be the most unpredictable expense in retirement planning.
These cost uncertainties, coupled with having to navigate the multi-layered healthcare system, are especially challenging for older adults who often rely heavily on medical and social benefits.
For one thing, the cost of healthcare in the United States is not cheap. The average 65-year-old who plans to retire in 2024 is expected to spend an average of $165,000 on healthcare and medical expenses throughout retirement, according to Fidelity Investment’s annual Retiree Health Care Cost Estimate.
The most worrying part is that this estimate is up 5% over 2023 and has more than doubled since 2002, based on Fidelity’s inaugural annual estimates. Finding reliable and, more importantly, affordable healthcare coverage and social security support often pushes many would-be and current retirees to relocate for better medical and healthcare benefits.
Senior Healthcare: The Best States For Senior Health Benefits And Services
When planning their retirement, many adults will consider relocating to cities or states that offer them a well-balanced combination of things. These often include a high quality of life, accessibility to various recreational amenities, safety, and, most importantly, proper healthcare and medical treatment facilities.
However, for many retirees, finding affordable, accessible, and effective healthcare can become a challenge, resulting in many switching providers or relocating elsewhere. Finding the best available healthcare benefits and services can help improve their standard of living and maximize their retirement.
Each state offers a different level of healthcare benefits and services from coast to coast, and knowing where the best places for these services are can aid retirees, including those planning to step into retirement in the coming years, in their retirement planning.
According to the 2024 Senior Healthcare State Report Cards by SeniorLiving.org, the following states are the best places for healthcare services and benefits.
Montana
Montana has one of the largest retirement populations in the country, with over 20% of the population being aged 65 years and older, according to data from the U.S. Census Bureau. With a population of just over 1.1 million residents, the state has been ranked as the best overall state for healthcare benefits and services in the nation due to its high frequency of accessibility to primary care services.
The Montana healthcare system provides residents with various healthcare options, including Montana Medicaid, which provides medical benefits to eligible low-income Montanans. Other programs, such as the Montana HELP/Medicaid Expansion Plan and Comprehensive Primary Care Plus (CPC+), can also provide further healthcare benefits to eligible residents.
Investment in Medicare services allows the state to have multiple Medicare hospitals and facilities available for residents aged 65 and older. Programs, including the Montana Rural Physician Incentive Program, are state government-subsidized programs that help attract younger medical professionals.
Montana has moderately lower insurance premiums and annual drug costs, over 40% lower than the national average. The state’s Medicare Retiree Only Plan starts at $504.00 monthly, and rental rates start at $42.37 monthly for retirees only.
North Dakota
Next is North Dakota, the only other state outside of Montana that obtained an A+ rating. The state obtained high rankings across the board, including a high accessibility score for retirees and seniors seeking healthcare services.
The state has an elaborate healthcare program for seniors and retirees over 65. Several plans can cover up to 100% of medical costs, depending on whether a patient has reached their out-of-pocket limit.
State medical costs, including insurance premiums, were roughly 18% lower than the national average. Nursing facilities across the state have provided approximately 2,400 Medicaid-eligible residents, including those requiring regular or daily licensed nursing services.
North Dakota has over 76 licensed facilities, with approximately 5,079 beds available, all participating in the Medicaid program. The state has become well-known for its state-of-the-art nursing facilities, primarily driven by superior staffing and housing.
South Dakota
One state down, South Dakota, boasts an overall senior healthcare rating of A. The state has well-established elder care programs and facilities, with plenty of Medicare providers and hospitals across the state.
There are four different healthcare plans to choose from, each named after one of the four presidents featured on Mount Rushmore. Most plans cover the basic in-network costs, with the higher-end plan, the Roosevelt, costing approximately $493.92 per family.
In-home care costs around $5,911 per month, while care in an assisted living home averages $3,350. Nursing home care is slightly more expensive, averaging around $7,118 monthly. South Dakota provides financial support and assistance to eligible retirees and cash contributions for seniors.
In 2024, South Dakota ranked as the state with the 8th-lowest out-of-pocket medical spending in the United States. Most residents pay the second-lowest average cost for in-patient treatment at community hospitals, with costs averaging $1,700.06. Drug expenses are 21 percent below the national average.
Massachusetts
Massachusetts was ranked the third-best state to retire in 2023. The state is ranked ninth best in terms of senior healthcare services. However, in terms of cost of living, entertainment, safety, wellness, and healthcare, Massachusetts falls in the top percentile of places to live for those nearing or already in retirement.
The Bay State, sometimes known as the “Old Colony State,” has some of the best healthcare services for seniors. The state ranks as having the lowest percentage of uninsured individuals over 65. With many nursing homes and a well-established network of hospice care facilities, Massachusetts has rightfully claimed its position as one of the go-to places for senior healthcare.
However, despite the overall positive remarks surrounding the state’s healthcare offerings for retired individuals, there have been looming issues regarding the cost of healthcare and, more importantly, the cost of prescription drugs and fees charged by medical professionals.
Associated health risks most prevalent among the older population are cognitive decline, fall-related injuries, hearing and vision loss, diabetes, and substance overuse. Massachusetts sees a high percentage of excessive drinking among adults and records around 554,000 or 9.8% of the state’s adult population being classified as current or active tobacco smokers.
The state has introduced stricter measures to lower the overuse of dangerous substances, including various state-sponsored initiatives. Furthermore, the state further promotes tobacco-free zones through more stringent laws and regulations, such as tobacco monitoring, installing hospital vape detectors in public spaces, and limiting barred substance use.
Despite the multiple hurdles, Massachusetts remains among the highest-ranking states in terms of healthcare services for older individuals. It seeks to improve through public engagement and promote an overall improvement in the quality of life for all residents.
Minnesota
A combination of factors has helped Minnesota become one of the best places for senior healthcare services. For starters, the Minnesota Northstar Geriatrics Workforce Enhancement Program (GWEP) is a five-year federally funded program grant developed to improve healthcare services for older adults across the state.
Secondly, the state has reasonable medical pricing, with insurance premiums roughly 27 percent lower than the national average, which has seen the state rank second. Then there are things such as quality measure improvements.
Since 2022, statewide rates for diabetes care, mental health screening for adolescents, follow-up for depression care, and the use of specific tools for assessing symptoms in people who have depression have experienced strong improvements in the last couple of years.
However, despite the overwhelming positive developments in recent years, the statewide rate for a handful of quality measures, including colorectal cancer screening, adult depression remissions and response one year following diagnosis, and optimal vascular care, has decreased.
Despite the challenges, Minnesota features excellent medical outcomes. In recent years, the state has introduced a new program allowing Minnesotans to receive credit for supporting and comforting older citizens with medical problems.
In addition, the state has established a program that ensures all eligible senior citizens will keep their homes, regardless of their age or medical conditions, and provides adequate training and payment for family caregivers.
California – Honorable Mention
Americans planning their retirement should look to California for health care benefits. The state has a range of subsidized programs, which not only support medical needs but look beyond and include programs for the prevention of elder abuse, such as the California Department of Public Health’s CalFresh Healthy Living program.
The state provides financial assistance for senior citizens through Supplemental Security Income (SSI), which is available for adults older than 65 or disabled individuals categorized as low-income earners.
SSI payment amounts can vary; however, single individuals may be eligible for $954.72 per month, and couples are eligible for $1,598.14 monthly, provided they live independently. Other programs provide up to $3,0000 in senior assistance for individuals ages 65 years or older. These funds are also available for those with disabilities, including those who are blind and seniors living in nursing homes or immediate care facilities.
It’s also worth mentioning that California is home to some of the most advanced medical technology facilities, including the holistic CalAIM program and the CalPACE initiative, an all-inclusive care option.
Nearby Silicon Valley allows hospitals and medical care units to access a wide range of highly sophisticated medical technology. The Golden State provides high accessibility to premium healthcare and boasts below-average mortality rates for cancer, heart disease, and falls, according to the data by SeniorLiving.org.
How To Manage And Plan For Medical Expenses During Retirement
Before packing up and relocating to one of the states on our list, it’s best to consider how you can manage medical expenses and other healthcare costs during retirement. There are several key things that a person will need to consider while planning for healthcare expenses in their golden years.
Policy Terms
In some instances, having a long-term care insurance policy can be beneficial. It will provide protection against savings and reduce the risk of medical savings being depleted by healthcare service costs.
A long-term insurance policy provides expense coverage for various services, including nursing homes, assisted living, and in-home care services. Policy premiums are determined by age and health condition, making it a beneficial option for individuals still a few years away from retirement.
Open a Health Savings Account
Many individuals ignore the importance of having a health savings account (HSA), which offers tax advantages and a beneficial way to save for unexpected medical costs. A HSA allows you to make contributions, depending on your needs, and is tax-deductible.
In addition, all withdrawals made from an HSA are tax-free, meaning that in the event of a medical emergency, the capital withdrawn from this account will not be subject to standard taxation.
Finally, funds can remain in the account annually, depending on where the account was opened. Funds are allowed to roll over from year to year, and should you not need them shortly, you will have built a decent healthcare nest egg for yourself.
Long-term care
Around 7 in 10 Americans over 65 years will require long-term care. Planning for retirement means considering that your health conditions will change over time, meaning that your medical needs might need to be adapted to suit your new lifestyle.
Unexpected accidents, falls, or sickness can happen at any given moment, and without proper planning, this may cause a significant financial burden for you and your family.
While it’s not easy to plan for the future, it’s best to consider how a person’s healthcare needs might change over the coming years. Considering what these changes might be or how they may affect you will help shed more light on the importance of proper retirement planning.
Consider a health reimbursement arrangement
Retired individuals should consider opting for health reimbursement arrangement (HRA) benefits. Simply, an HRA may be offered by an employer and would allow employees to be reimbursed for qualified medical expenses. These may include things such as Medicare premiums and other health insurance costs. An HRA is a smart way to offset unnecessary costs, especially for individuals who are looking to save more for retirement.
Choose appropriate Medicare options
Once you begin to reach retirement age, or at least nearing 65 years, it’s important to consider how Medicare benefits will change once you exceed the threshold. Medicare options differ across the board, and knowing how each differs will help ensure you choose the right plan.
Here’s a short breakdown of each Medicare Plan:
Plan A: Will cover various costs related to in-patient hospital visits, palliative care, home care, and skilled nursing facilities care.
Plan B: This will cover several additional services, including outpatient care, medical equipment, medically necessary physician services, and a handful of specialized services such as X-rays and laboratory tests. Premiums are based on a person’s monthly income.
Plan C: Private healthcare insurance providers offer these plans, which may cover additional services such as hearing, dental, and optometry visits. This plan is also known as the Medicare Advantage Plan.
Plan D: This limited plan only provides coverage for Medicare prescription drugs, which may include vaccines and seasonal shots. These plans are usually added as an additional option and priced separately from the existing plan.
Consider Medigap options
Medicare plans provide coverage for essential medical and healthcare needs; however, these plans do not always cover all medical expenses. In this case, individuals must take up supplementary insurance, often known as Medigap.
A Medigap plan helps to pay for those expenses not covered by the principal medical plan and can help reduce copayments, deductibles, and out-of-pocket costs for drugs. There are plenty of Medigap insurance options, often cheaper with the primary insurance company you plan with.
Medigap is necessary when out-of-pocket costs could become a financial burden. It’s important to review all the various options and to talk to an accredited insurance broker about the type of Medigap options you have available.
The Importance Of Planning
Planning for the future is often challenging for retirees, and considering how healthcare plays a big part in the process can make it even more difficult for many to navigate an already complex healthcare system.
In some states, healthcare services and benefits are more geared towards helping senior citizens and those aging in place. These states provide retirees with the necessary resources and assistance and can help them live a more stress-free lifestyle.
Healthcare planning should be a priority for anyone nearing retirement age. Making a smart move now will help reduce the financial burden of medical expenses during your golden years while allowing you to benefit from state and federally-funded healthcare programs offered only for retirees.
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