What, then, is to be done about this shifting healthcare landscape? I believe wealth managers need to add a very fat line item to their clients’ retirement financial plans—private or supplemental healthcare—and help them earmark enough funds to cover it through a long lifetime. Today, this is generally a completely unfunded—and unquantified—liability that clients will be paying out of their own pockets. And even if you don’t believe that the era of defined benefit is nearing its end, at the very least the introduction of needs tests for Medicare, rising insurance premiums (or the disappearance of health insurance as we know it), and the inescapable doctor shortage will still cost clients far more than they are probably prepared to pay. In addition, I believe wealth managers should start forging alliances with concierge medical practices and ACOs, because their clients are going to need referrals for healthcare options just as today they need referrals to good trust and estate attorneys, accountants or tax preparers to manage elements of their financial affairs.
Consumers of healthcare—that means all of us—need to do a few things to prepare for a defined contribution future.
- Estimate that one-quarter of your retirement expenses will be spent on healthcare (the bulk of which will be in the last few years of life); save and invest accordingly.
- Start shopping early for a concierge doctor or ACO that meets your family’s needs. As the demand for these services grows, the available supply of the best providers could dry up rapidly.
- If you don’t choose concierge care or a relationship with an ACO, accept that you likely will be in serious competition for health services.
- Stay healthy. Practice preventive medicine, stop smoking, relax. I believe the best way to beat the system is to practice preventive healthcare and stay out of the system.
- Vote. However you feel about healthcare, it is a public policy issue first and foremost. Make sure your representatives hear your view.
And in general, it pays to protect yourself. The confusion and dislocation caused by the launch of the Affordable Care Act—from policy cancellations to privacy concerns—are just the beginning of a truly sweeping refashioning of American healthcare, one whose ultimate shape we can only guess at, but one that will be far different from the defined benefit model we’ve enjoyed for as long as it could be sustained.
Douglas Wolford was appointed president of Convergent Wealth Advisors in July 2010 after having worked as a consultant to the firm. He oversees all of the day-to-day operations of the company, including sales, client service, research and technology.