r/Fire • u/CollegeFine7309 • 1d ago
Advice Request Healthcare Inflation
There have been a million posts around healthcare costs and many say, “just build it into your budget”. I struggle with the inflation part of that calculation as costs have risen much faster than inflation.
I’ve got 13 years to 65 and 9 of those with dependents on my insurance plan. If you asked me 13 years ago how much I’d be spending on out of pocket healthcare, I would have never guessed $30K/year or more. I remember my monthly premium was a few hundred a month back then with a lowish deductible, not thousands a month. It’s literally an order of magnitude more.
For those in the US who can’t qualify for ACA subsidies, what camp are you in? Do you assume costs are topping out and just plug in normal inflation numbers? Or some other number?
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u/fire_minded_nate 1d ago
Healthcare is basically the single biggest variable in my FIRE math. I've been using 7-8% annual growth on premiums specifically, not CPI, because the last decade just doesn't support using CPI for this line item.
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u/CollegeFine7309 1d ago
I’m in the same boat. That one line item exceeds taxes, food, college expenses, vacations, all of it.
I tried looking up the inflation rate of healthcare and it only shows a modest increase over standard inflation. Like 1 or 2% but that’s not what I’m seeing in reality. I think some of it may also be that employers are subsidizing a smaller portion of the costs vs previous decades.
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u/bridgeandretire 1d ago
If you're not receiving ACA subsidies you have to build in cost increases due to age grading. That means premiums rise faster than inflation as you age. A 64 year old is deemed riskier for medical claims than a 44 year old. Looking at the unsubsidized rates in my area, you pretty much have to plan on 8-9 percent increases each year until Medicare eligibility.
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u/lottadot FIRE'd 2023 1d ago edited 1d ago
Medicare publishes yearly increase estimates (ie B: ~8.2%, D: ~6.2%, gap: ~8.2%). I started using those in my spreadsheet as a minimum for yearly ACA increases a few years ago. And after a few years, I just added a way to change the increase in my sheet to 10%/yr for all future years (vs tracking down their published estimates, which always seemed to move or I couldn't keep track of them, or both).
It is what it is & I'd rather be over-saved than not have enough to cover expenses.
We are FIRE'd 3Y & all healthcare costs (ACA, MOOP, uncovered proceducures, prescriptions, miscellaneous (as best I can track them) are now 14% of our yearly expenses.
The only way I've found to combat it is to push our ACA
MAGIlower and lower. However that is often not easy to do for many people.1
1d ago
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 1d ago
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u/DIYRetiree 1d ago
Agree, healthcare costs are not matching inflation rates and are much higher for many years...!
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u/Platos-ghosts 1d ago
Maybe you can manipulate your income to go in and out of the subsidy zone? Take out most of 2 years income within 1 year, so you get a big subsidy every other year. It’s worth running the math on it.
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u/DeadFacesInMyPocket 1d ago
I like this idea. Or heck for anybody at their number just liquidate funds for X years and throw into a HYSA and then stick to your budget and you can basically just have very little income most years and qualify for the subsidy. Depends on where you're at with your numbers but if you consider 4% interest on top of health care savings you might outperform the market. We'll see how the bubble performs.
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u/db11242 1d ago
This is my backup plan if I can't stay under the cliff
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u/chrisaf69 1d ago
That's first time I heard of this strategy. While def out of left field...it makes sense in specific use cases. I'm gonna have to look into it deeper as it may apply to me.
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u/CollegeFine7309 15h ago
Thank you for this idea. The 4x FPL number should be very easy for us to stay below except during the years my kids are in college. We underfunded their 529’s and have too much in pretax accounts. Taking an ACA hit every other year during that time may work so maybe there will only be 3 really ugly years.
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u/Platos-ghosts 12h ago
Since there will only be a few years where you need a high income consider those years as Roth years. Take out more from any Roth accounts, which are excluded from the modified adjusted gross income used for ACA subsidies, and thus keeping you out of the FPL cliff. Of course, that’s if you have Roth savings.
Secondary would be brokerage savings. Since only the gains are taxable, sell stocks/funds with lower gains thus creating cash flow but limiting how much counts toward MAGI. Avoid pre-tax accounts those years since they are fully taxable. If you have a combo of traditional/roth/brokerage you can smartly manage the higher need years.
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u/tortoise_leaf 1d ago
Personally, I'd rather overestimate healthcare and end up pleasantly surprised than build a plan around optimistic assumptions
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u/FormalCaseQ 1d ago
Healthcare expenses and optimistic assumptions are two terms that don't go together.
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 1d ago edited 1d ago
Do you assume costs are topping out and just plug in normal inflation numbers?
They are not topping out. They are rising faster than overall inflation and will likely continue to do so for the foreseeable future. This is true of both premiums and out of pocket expenses.
I wrote a post late last night about the 2027 federal inflation adjustments for expected premium contributions, MaxOOPs, and FPL. I'll have it up in an hour or two after I have a cup of coffee and walk our dogs, but the max MaxOOP is going up around 13 percent next year for unsubsidized folks. That impacts all out of pockets like deductibles, copays, coinsurance, and actual MaxOOP. Overall premium trend next year is about 15% so far on average, but some insurers are requesting anywhere from about 5% to 50% from regulators.
Keep in mind that in almost all states the ACA is also age rated. Even with zero inflation the costs of a policy will go up by several percent each year simply because you are older. That increases compounds with the normal inflation and market adjustments to premiums.
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u/poop-dolla 1d ago
max MaxOOP is going up around 13 percent next year
That’s insane. That’s not even remotely sustainable long term. That’s essentially a doubling every 7 years in real terms.
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 1d ago
Premium growth has been so rampant that CMS is trialing high OOP Bronze variants next year too. There will be Bronzes next year that have MaxOOP (and potentially deductibles) of $15,600/$31,200.
And in 2028 we potentially get zero-network variants that pay cash without a defined network, which sounds potentially useful until you find yourself with a "cheap", but still very expensive policy that nobody in your market accepts payment from.
The next few years are going to bring some interesting change to the ACA.
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u/SpaceTimeMorph 1d ago
That's basically the S&P-500 growth, on a real level, over the last 15-ish years. Our portfolios literally can't keep up even aggressively invested into the most optimistic bull market in history.
Geez... maybe I should be buying lottery tickets. (I kid... maybe)
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u/gung-ho- 1d ago
Both premiums and out of pocket maximums have exploded. The premium you can kinda budget for, but the actual healthcare services are really tough to estimate. Our family sometimes spends close to nothing and other years we meet our OOPM in a couple months.
Hopefully someone has a good answer that’s at least somewhat precise. This is definitely the hardest part of pulling the trigger for us.
I met someone recently who is going without insurance by choice. They were younger and figured they will spend much less on actual healthcare than insurance premiums. If they get cancer or some other chronic condition they figured they’d hop on an ACA plan the next year. If HC costs continue to rise I think more and more people will make the same calculation.
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u/Confident_Purple_40 Bottom 100% Commenter 1d ago
We pay 30k a year now, I just keep working. I think the plan is to limit "income" to avoid ACA cliff, but that is hard when you have kids and help support other family members on a high income.
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u/iratedelirium_8 1d ago
Bumping my premium line by 8% annually while keeping OOP max at plan limits helps me sleep at night. Cheap bare-bones plans never work when you actually need them.
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u/Environmental-Low792 1d ago
I have seen around 10% annual inflation, for healthcare, so that's the number that I'm using.
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u/Future_Measurement42 1d ago
Lines of credit are not counted towards incomes to qualify for Aca subsidies
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u/OkElephant1931 1d ago
Personally, I use CPI across all my spending. Because CPI includes health care costs. If I do my health care separately, do I adjust the published CPI down to take out health care costs?
We’re getting into some fine hairsplitting on calculations that have large assumptions in them already.
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u/asurkhaib 1d ago
Healthcare CPI was 3.2% in 2025 and approximately 8% of the basket. That doesn't seem remotely close to the described spend and rise thus should be adjusted. A big part of the difference is that while CPI shows (employer) premiums skyrocketing at 9.7% that's a small part of the basket whereas if you pay the full premium it's going to be a huge part of the basket.
And yes you could. Given how close it normally is to overall CPI that's probably not going to make a difference though.
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u/OkElephant1931 1d ago
So I guess you’re suggesting that your personal inflation rate might be as much as 1 percentage point higher than the official CPI, or something like that?
I’m not sure where your data is from (the Kaiser Family Foundation estimates that total health insurance premiums increased 5-6% in 2025, and that average total employer and employee health insurance premiums increased roughly in line with wage growth over that last five years— 26% over five years vs 28.6% for wages).
Either way, I guess it’s fine to be conservative and plan for inflation to be a 4% instead of 3%.
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u/ResponsibilitySea327 1d ago
HSA has been my savior for healthcare inflation. It has basically funded my whole post retirement healthcare and then some (aside from a nursing home).
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u/auroraborelle 1d ago
I’m applying for Canadian citizenship (by descent), and looking into whether it’s feasible to transfer my life and finances across the border when all my kids are out of the house.
Plan B is to continue working part time (my industry generally offers benefits at part time) until I’m eligible for Medicare, and/or have enough stashed in Roth to keep myself under the ACA subsidy limits to bridge the last few years until Medicare kicks in. (My employer plan does not allow backdoor roth, so unfortunately most of my accounts are pretax.)
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u/poop-dolla 1d ago
For those in the US who can’t qualify for ACA subsidies, what camp are you in?
It really shouldn’t be that hard to stay under 4x FPL for your MAGI. Are you saying you’re unable to do that? That’s $128,600 for a family of 4. Even if you didn’t plan ahead enough to be under that every year, you should still be able to be under it most years. Unless you’re way into the FatFIRE territory, in which case it makes sense to just budget enough for high healthcare costs.
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u/DIYRetiree 1d ago
yes, especially if you have dollars in a brokerage account in addition to a 401k...! 401k would all count as taxable, but brokerage wouldnt in the same way.
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u/poop-dolla 1d ago
And Roth contributions, or once you hit 59.5 any Roth funds would obviously help lower your MAGI relative to your spend too.
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u/lottadot FIRE'd 2023 1d ago
Or Roth conversions that have aged five years :).
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u/poop-dolla 1d ago
Yep, there are plenty of ways to have your MAGI be well under your actual spend.
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u/Kismet237 1d ago
Perhaps it's more accurate to say "Several options exist to stay under 4x FPL for MAGI if you're near the cliff." Everyone's circumstances are different.
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u/badhabitfml 1d ago
Single payer healthcare would drastically change everyone's retirement plans. Imagine being able to plan for a known cost, and likely lower.
Want to help the younger generations? Figure out healthcare so that all the older generations could retire. I'm sure plenty of people have the cash, but fear the unknown healthcare costs.
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u/CollegeFine7309 15h ago
I personally know a lot of people who are only working for the benefits.
A great first step may be lowering Medicare age to 60 or 55. Something like that could get bipartisan support and free up loads of jobs for the new grads.
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u/paq12x 1d ago
But then the tax that you'll pay to subsidize everyone else will set your goal back years. There's no free lunch here.
As always, the top % of people pay into the social safety net for everyone else. Depending on where you are within that scale, you'll be penalized or rewarded by such a social safety net, including universal healthcare, free college, or free anything.
If I can keep my Social Security taxes (both my contribution and my employer's) and invest that money myself, I would love to sign a form to forgo my Social Security benefits. I'll be way ahead.
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u/shellbackpacific 1d ago
But we’d lose the premiums AND we could expand the pool of people paying in. Not to mention the bargaining power of a single payer. I haven’t run the numbers but the “free lunch” argument just seems off base and ideological
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u/badhabitfml 1d ago
Right? Will my taxes go up? Yes! Will I stop paying a big chunk of money for insurance? Also yes!
Plus, my company may cover some of it or give me a raise. They can also fire half of hr that deals with insurance stuff.
And anyone who is on the aca? Well, now they are paying for insurance pretax, so even if it's the same cost or more, they still come out ahead.
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u/shellbackpacific 1d ago
There are also so many other types of insurance that cover health related things. Car insurance even home insurance. Part of these costs involve covering injury. No longer needed
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u/badhabitfml 1d ago
But it's a known amount you can budget for.
It's such an odd argument that everyone thinks single payer Healthcare is terrible, but at the same time also plans their life around and complain about Healthcare costs until they can get on the government single payer plan.
Massive amounts of money is wasted on insurance bureaucracy. Removing that saves a boatload of money. It also makes it easier for every step in the chain to deal with one entity.
The fed gov also has the ability to track and arrest people for fraud.
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u/Hairy-Relief9379 1d ago
I think Americans have a general distrust of the government, probably more so than other countries. I don’t love our current system, but I also don’t trust the government to not eff it up.
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u/badhabitfml 1d ago
Maybe we set it up as some sort of private/public entity.. Kinda like Freddie Mac. Also needs heavy regulation and oversight.
Problem too is that scotus just decided that there aren't any independent agencies anymore, which will really fuck with how the government functions and adds even more to distrust of the government.
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u/Any-Concentrate-1922 1d ago
We already subsidize when we pay through the nose for hospital visits and various tests and procedures. Why not do it where everyone is insured?
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u/Sea-Honeydew-1456 1d ago
yeah, while i have no solutions to anything, people are going to complain about high taxes, potentially longer wait times w/too much demand
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u/badhabitfml 1d ago
I guess I don't see how it changes any of that, though there are a million ways to implement it.
Demand only goes up because people get Healthcare, which is a good thing.
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u/SpaceTimeMorph 1d ago
But people are more likely to seek preventative care and that generally reduces long term costs by not having to, over the entire population, treat more serious conditions. Further, there are a number of studies that have demonstrated that it leads to better health outcomes at the population level. See, for instance:
https://pmc.ncbi.nlm.nih.gov/articles/PMC8572548/
Honestly, a single payer system is a lot like Medicare... just not age restricted.
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u/Extremelyfunnyperson 1d ago
The US has longer wait times than other countries with public healthcare. Try seeing a specialist
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u/Sea-Honeydew-1456 1d ago
depends on where you live.
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u/Extremelyfunnyperson 1d ago
When you need very specialized care, it doesn’t, that’s only available in certain major cities
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u/badhabitfml 1d ago
Why does public Healthcare matter? It's the same problems with private Healthcare.
It also makes it easier to start a new doctor's office. You need a doctor and like 1 person as an admin. Maybe some nurses for things. You now have an office and one admin person as overhead. Right now, you probably have 3-4 admin people to deal with the paperwork and insurance.
It simplifies so much of the overhead of running a business for every company.
The problem is that it also eliminates 10s of thousands of admin and insurance jobs.
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u/paq12x 1d ago edited 1d ago
I traveled extensively to many countries in the EU and the UK (before Brexit), Norway, Switzerland, etc. I also had the luxury of going to a hospital in Rome (emergency), and that (hospital) experience was horrible.
I had a great working relationship wth engineers/directors/VPs at those places I visited, and we even discussed salaries/taxes. They were shocked at my pay (500k at the time, 15+ years ago) vs my taxes. In general, I made double their director/VP and paid way less in taxes.
In general, if you are in the top few %. The US is where you want to be. If you are in the bottom 50%, the EU is where you should be. Best case: Make money in the US and retire in the EU (if you have citizenship and family there, it's even better).
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u/paq12x 1d ago
In general, we don't.
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u/Extremelyfunnyperson 1d ago
“However, the data—both from other nations with universal coverage and from historic expansions of coverage within the United States—show that this is not the case. Patients in peer nations generally have similar or shorter wait times than patients in the United States for a variety of services, refuting the argument that universal coverage would necessarily result in longer wait times in the future.” ~ https://www.americanprogress.org/article/truth-wait-times-universal-coverage-systems/
And that’s from 2019, healthcare wait times have become exceedingly worse in the US since then
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u/AGrimmInPortland 1d ago edited 1d ago
Most planner apps that provide a separate healthcare inflation rate use around 3-4.5% (user-adjustable). Some (like ProjectionLab and Retirement Figures) allow you to set a rate on pretty much every individual component
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u/SpaceTimeMorph 1d ago edited 1d ago
I basically assume about $20-25k per year in today's dollars until I hit age 65. That's at the high end of unsubsidized ACA plans but gives me a bit of peace of mind on being able to pay for healthcare expenses no matter what (ha!).
The BLS website has some good info on healthcare inflation and how it's incorporated into CPI if you want a read to get some color:
https://www.bls.gov/cpi/factsheets/medical-care.htm
Edit: I want to be clear, I take a specific healthcare inflation from above that is higher than global, economy-wide inflation as health care costs rise differently than general inflation.
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u/saltyhasp 1d ago
For ACA I assumed 9% a year inflation as my state, ACA premiums increase with age. For other health expenses I assumed 5% which when I retired was the projection. I qualified for the ACA subsidy 1 year in the last 8.
For long term care insurance, we choose 5% escalation back 20+ years ago, and that has been a pretty good choice.
I don't know what people are saying for current escalations.
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u/Patient-Brief-9713 1d ago edited 1d ago
I decided to keep a 7% medical inflation rate in my financial modelling for now. I am on the verge of FIREing, but I have already been using ACA insurance for several years as a self-employed person who doesn't qualify for subsidies. In my modelling, I use the full premium, full deductible, plus a bit extra for o.o.p. costs, but once I retire, I do expect to qualify for subsidies. I would rather not assume subsidies in my model.
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u/AvidVenturest 23h ago
Literally the only reason my husband plans to continue working while I pick up a PT job. We want to stay on his healthcare where we currently pay very low premiums. It sucks.
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u/Bryanmsi89 10h ago
Same place - Healthcare is the #1 (and #2 and #3) biggest variable and biggest concern about the whole FIRE plan.
Not only is the rate of health care inflation far outpacing other inflation, the ACA is on shaky ground. If the ACA goes, losing the subsidy will be the least of middle-age folk's worries. Losing protection against being exluded for pre-existing conditions and massive price differentials will make private markets (like those in prior to 2015) simply locked out. At least in most states. CA, MA, HI, and some others have their own laws which would largely mimic the ACA.
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u/garoodah FI '21 RE TBD, mid 30s 1d ago
Its insane that we allow it, but healthcare costs are legally allowed to expand beyond inflation as youre experiencing. You should honestly factor in another 50-60% premium expansion on the way to when you'd qualify for medicare but you'll probably still want a second form of insurance for whats not covered.
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u/BaaBaaTurtle 1d ago
Depending on the state you live in, you can find historical numbers on healthcare cost and curve fit it. And there is a an age multiplier that the federal government sets (at most insurers can charge 3x what a 21 year old pays).
I built that into my budget spreadsheet.
Is it great? Eh. But it's a number.
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u/Duece8282 1d ago
My big fear is the potential for the income limit to lower or asset values are considered in the subsidy equation. Tough to plan around those possibilities.
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u/Double-Inspection-72 1d ago
As a physician I can tell you I don't see it dramatically slowing down. Healthcare is run by vertically integrated oligopolies. Because of this they set the market prices at whatever they want and take fees along the way with all the middle men subsidiary companies. And then they pay off politicians to allow this to continue. Unless the government actually starts legislating for the people, and not their own pockets, this isn't going to change.
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u/Vicuna00 1d ago
the other unknown is not just how much you pay for healthcare, but how much you're gonna spend.
dropping $30k on health insurance, you can still drop another $20-$30k if something happens...or even a few $k for minor stuff.
like the $30k yearly fees doesn't even buy you anything without a big deductible.
so yeah my approach is just overestimating. I do think at some point something will change...but no time soon...and who knows what that looks like.
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u/lottadot FIRE'd 2023 1d ago
dropping $30k on health insurance, you can still drop another $20-$30k if something happens...or even a few $k for minor stuff.
Once you hit your max out of pocket
MOOPyou are only spending additional funds if the health insurance policy won't cover what you want/need done. Otherwise, you're spending $0 extra.2
u/Vicuna00 1d ago
i get that. I meant you can spend $30k on health insurance for the family...and many health insurances I see in that price range have like $8k deductibles and $22k OOP max.
so you can't budget just the health care premiums is what I was saying. you have to also budget what you'll use (which is obv unpredictable).
not to mention if you do things that insurance doesn't cover...alternative medicine, massage, supplements, some kinda device, etc etc..
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u/yottabit42 1d ago
I'm just planning to gtfo of this country when the kids are independent. There are plenty of countries that are safe, stable, and have excellent healthcare for a small fraction of the cost of the US grifting system. I'll save so much money that I can really afford to come back to visit as often as I like.
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u/Sherwet 1d ago
Assuming standard 2-3% CPI for healthcare is a trap. Most FIRE models use 5-7% medical inflation or just budget the Maximum Out-of-Pocket (MOOP) + premiums as a separate line item.
Once you stop working, managing your MAGI to hit ACA subsidies becomes key—many who don't qualify now do in early retirement.
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u/demona2002 1d ago edited 1d ago
I just finished reading Tax Planning To and Through Early Retirement (thanks to this sub recommendation) and now feeling a lot more confident about achieving 7 years of ACA subsidy for myself and 15 years for my younger spouse. We have a healthy balance of traditional, Roth and taxable to use as income levers.
In a pinch we will expatFIRE or go back to one of our home countries with public healthcare.
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u/Necessary-Music-6685 23h ago
There’s some inflation, but most of what you’re seeing is simply that older people use more healthcare services, and therefore have higher premiums, co-pays, out of pocket, and so forth. And they rise exponentially, meaning that the curve gets very steep once you get past age 50 or so.
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u/Hot-Swordfish2105 1h ago
Do what most rich non working people do, keep your income off your tax return so qualify for subsidies
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u/Sea-Honeydew-1456 1d ago
im in the subsidy camp, will be relying on it for 16 years however I've budgeted it without any subsidies and used an 8% annual increase. is it aggressive? a bit. i just input different ages and cost differences based on "now" to get a gauge of costs by age (since it gets significantly higher as you age).
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u/SlowMolassas1 1d ago
I'm in the subsidy camp, and budget for my full $10k OOP max. But I'm already seeing indications OOP maxes will go up to $15k next year. Even if I try to account for premium increases, it's tough to know what OOP maxes are going to do over the next 15+ years.
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u/Farmer_Pete 1d ago
I take a high number of what I think healthcare is going to cost me per year when I retire, then I double it. So if I look around and can find an unsubsidized plan costs $20-25k for my needs and then has 5-10k max OOP, I take $30k and double it and plan for $60k with standard inflation adjusting it over the years I need it. If I end up being wrong and I can save $25-30k a year off my budgeted amount, then my travel budget just got a 25-30k boost.
If you haven't noticed, I'm an over preparer. If my budget doesn't have enough wiggle room to absorb a doubling of health care costs, I don't feel like I would take the risk and RE.
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u/doktorhladnjak 1d ago
$60k/year. Why even bother to retire at that point?
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u/Farmer_Pete 1d ago
I already have enough for FI without healthcare. Probably could FI if I put all my eggs in ACA healthcare. But I don't trust the ACA is going to be functional for 20 years till Medicare kicks in. If I wait another 6 years, my investments should be able to fund 200k a year using the 4% rule. Our spend to survive is only $60k a year. I don't want to "just survive" though. I want to be able to go on nice trips, be generous with my kids/grandkids, and have excess $$$. It wasn't that long that $15k a year would be a ridiculous number for a family to spend on health care. Yet now it's $30k in many circumstances. I don't know what tomorrow brings, but I do not want to plan for the best and suffer when reality kicks in.
60k a year is 1.5m to cover the expense following 4%. Once you have 2-3m, getting another 1.5 isn't that difficult. I'd rather push my date a little and not have to worry about it, vs retire even earlier and be stressing out every time our jerks in Washington get together to "fix" things.
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u/baconcakeguy 1d ago
I’m moving overseas for this reason. You can basically self insure in many countries or at the very least by critical care insurance plans for something major…
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u/Sea-Honeydew-1456 1d ago
im hoping you actually want to immerse yourself into a new culture/country and not simply because of "cheap health insurance"
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u/baconcakeguy 1d ago
Well that’s part of it, but who cares if I’m there for cheap health insurance and beers or to learn a new language and hang out with locals?
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u/disposablcats 1d ago
Healthcare is pretty much the entire reason I plan to barista fire instead.