“My doctor gave me six months to live, but when I couldn’t pay the bill he gave me six months more.”
– Walter Matthau
A recent report showed that American couples who retired in 2012 can expect to pay 4% more in health care costs than those who did in 2011, and the total cost will be, on average, $240,000 per couple. Furthermore, most American couples plan on spending half of that amount on healthcare.
There’s quite a disconnect between what we perceive it will cost us to pay for health care and what it will probably wind up costing. Here are a couple of reasons why this happens:
- We’re used to our employers paying the healthcare bills. Most jobs have some sort of employer sponsored health insurance, so employees either pay only a portion of the bill, or they don’t pay the bill at all. Therefore, the true total cost of health insurance is hidden.
- We anticipate continued good health and don’t think about the costs when our health declines. Everyone gets old and dies eventually. Oftentimes, that comes with a period of decline or multiple periods of poor health. Those times are expensive. However, we are victims of the psychology cognitive bias called the recency effect, which means that we look to our recent health history as an indicator of future health. Since we’re generally more healthy when we’re younger than when we’re older, we expect more of the same.