1. Planning for Health Care in Retirement
Health care is consistently among the primary concerns of retirees and pre-retirees as they consider their post-employment finances.
This concern is due, in part, to the historical growth in health care expenses relative to overall inflation, the on-going debate among our political leaders is how to best fund, manage and deliver health care to retirees, and the shift in retirement income and retiree health care responsibilities from employer-sponsored defined benefit plans and retiree medical insurance plans to the individual’s personal savings and private insurance. There is also a growing awareness of the effects of increased longevity and better medical care on an individual’s potential need for non-medical long-term living assistance.
Today, we’ll examine how you can place the health care expense question in your overall retirement income plan, understand the importance of planning for health care related expenses in retirement, and the options available to address and manage your health care expense risk

2. Important things to keep in mind
• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value
The data presented in this presentation are hypothetical and may not be used to project or predict actual performance. This material should be regarded as educational information on health care only and is not intended to provide specific health care advice. If you have questions regarding your particular situation, you should contact your health care, legal or tax advisor. While Financial Advisors may discuss health care costs as part of a client's retirement plan, Financial Advisors may not provide specific advice on health care coverage options.
Federal income tax laws are complex and subject to change. The information in this brochure is based on current interpretations of the law and is not guaranteed. Neither Nationwide nor its representatives give financial, legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.
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3. Agenda The Retirement Income Challenge Understanding Health Care
Creating a Plan to Address Health Care Costs
So today, specifically, we’ll cover: the retirement income challenge and the health care dilemma. We’ll also discuss how you can work with your financial advisor to create a plan to address your health care costs.

4. The Retirement Income Challenge
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5. The Retirement Income Challenge
Retirees need to make a series of important decisions between ages 55 and 70½1
Retirement Decision Points
Retirees must plan for many decisions, most of them guided by law, between the ages of 55 and 77½. These decisions may largely influence retirement success as well as long-term financial adequacy – how and when you withdraw, and how to get the most from retirement benefits like Social Security and Medicare.
This means that everyone needs to be educated before and after retirement to make decisions at these key ages.
1 The Retirement Income Reference Book, 2012, LIMRA

6. The Health Care Dilemma
[READ SLIDE]

7. The Health Care Dilemma
Managing the cost of health care is one of the most complex issues facing society4
Likely among your greatest expenses in retirement
Ranks as a top concern of retirees5
As I mentioned at the beginning of the presentation, the rising cost of health care has become one of the biggest and most complex issues facing our country—in fact, it’s likely to be one of your greatest expenses in retirement. And while it ranks as a top concern, most Americans aren’t thinking about—much less planning for—their health care costs in retirement.
When you think about future health care costs, it is important to consider inflation. Health care spending continues to rise at the fastest rate in our history. In 2005 (the latest year data are available), total national health expenditures rose 6.9 percent—two times the rate of inflation. Total spending was $2 TRILLION in 2005, or $6,700 per person. U.S. health care spending is expected to increase at similar levels for the next decade reaching $4 TRILLION in 2015.
Experts agree that our health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of families.
4 “Fidelity Investments Estimates Couples Retiring in 2013 Will Need $220,000 to Pay Medical Expenses In Retirement.” Fidelity Annual Survey of Retiree Health Care Costs
5 Nationwide Financial Retirement Institute Health Care and Long-term Care Costs in Retirement Consumer Survey. December 2013.

8. The Health Care Dilemma
Health care spending has far outpaced inflation over last decade
5.8% − Health care6
2.5% − Inflation7
...and they can have a significant impact on your finances8
38% Have difficulty paying bills
27% Use up savings
16% Borrow money
Health care spending is expected to experience inflation rates of 5.8% on average. Compared to overall inflation in the past 10 years, this is more than double the rate of inflation we’ve been experiencing.
The cost of health care has had a serious impact on American’s household finances. The 2013 Health and Voluntary Workplace Benefits Survey, sponsored by the nonpartisan Employee Benefit Research Institute (EBRI) and Matthew Greenwald & Associates, a market research firm, found that increased health care costs affected household finances.
The increased health care costs are forcing people to shift resources:
38% have difficulty paying for other bills
- 27% have used up all or most of their savings
- 16% of people need to borrow money due to the rising health care costs
6 “National Health Expenditure Projections, 2012–22: Slow Growth Until Coverage Expands And Economy Improves.” Health Affairs, September 2013.
7 US Bureau of Labor Statistics. Consumer Price Index (CPI-U) average inflation rate from
Health and Voluntary Workplace Benefits Survey: Nearly 90% of Workers Satisfied With Their Own Health Plan, but 55% Give Low Ratings to Health Care System, by Paul Fronstin, Ph.D., EBRI, and Ruth Helman, Greenwald & Associates. EBRI Notes, Vol. 34, No. 9, September 2013.

9. The Retirement Income Challenge
Percentage of Private-Sector Workers Employed By Establishments Offering Health Insurance to Retirees, 1997–20119
Fewer employers offer retiree health insurance and benefits. According to EBRI:
Fewer employers are covering retiree health insurance; in addition, the retirees covered in employer plans face rising premiums, higher out-of-pocket expenses and strict eligibility requirements.
Many employers are not obligated to continue retiree health coverage, and retirees presently enjoying the benefit may face cancellation.
This means:
The uncertainty of company-provided retiree health insurance adds another level of complexity, particularly for retirees not yet eligible for Medicare; therefore, increased health insurance premiums and care costs may negatively impact their ability to pay for other basic needs.
This, together with the spiraling cost of Medicare to the government (and taxpayers), may well explain why retirees and pre-retirees are so concerned about health care costs; if their programs are eliminated, what will they do and will they be able to shoulder the cost?
9 Employment-Based Retiree Health Benefits: Trends in Access and Coverage, 1997‒2011. EBRI. October No. 377.

10. The Health Care Dilemma
Consumer Estimate of Annual Health Care Costs in Retirement10
$10,000:
$6,000 to $9,999:
$3,000 to $5,999:
$1,500 to $2,999:
$0 to $1,499:
Don’t Know: 8%
13%
25%
12%
16%
26%
79% have underestimated,
or don’t know their medical costs
According to a new study by Nationwide titled “Health care costs in Retirement”, over three-quarters of consumers underestimate, or have no idea about health care costs.
Retirees’ access to employer-sponsored health insurance continues to decline, and there are potential changes in Medicare benefits due to the program’s projected funding shortfall. Citizens need to realistically plan to be responsible for their own health care in retirement.
Considering that the average 65-year-old couple retiring today living for 20 years needs more than $280,000 to cover their medical costs during retirement (in other words, one person needs an average of $7,000 per year), the following data from a recent consumer study from Nationwide on healthcare costs in retirement suggests that the majority of workers are not adequately factoring health care costs into their retirement planning.
The data outlined in green represents the people who have underestimated their medical costs or simply do not know their medical costs in retirement:
16% of people think they will need less than $1,500 a year to cover their healthcare costs in retirement
12% think they will need between $1,500-$3,000 to cover their annual healthcare costs in retirement.
25% think they will need $3,000-$6,000 to cover the annual healthcare costs
26% of workers have no idea how much they will need.
One reason people may underestimate the amount of money needed to cover their health care costs in retirement is that many workers do not think they will ever need long-term care. Only 1 in 10 (or 10%) think it is very likely they will need long term care, but studies have found that 70% of those reaching age 65 will need some form of long-term care (LTC Tree, “What are the Chances of Needing Long Term Care?” June 2010)
10 Nationwide Survey “Health Care Costs in Retirement.” Consumer study of 625 respondents, January 2012.

11. But what about Medicare?
Myth
Fact
It covers only about 62% 11
Medicare will cover most/all of my expenses
Medicare will cover my long-term care if I need it
It does not cover long-term care 12
So, the health care picture can seem a little scary and daunting.
And this is typically the time in the presentation that someone asks “but what about Medicare?”
Well, there are a few myths we should address up front.
[Read slide]
11 "How Much Does Medicare Cover?" EBRI Fast Facts. #251. Oct. 17, 2013.
12 Medicare and You Medicare.gov.

12. Understanding Health Care
Health care expenses
Premiums for Medicare, Part B & D
Medicare cost-sharing provisions
$255,000 – $360,000:
Out-of-pocket health care expense estimate for a 65-year-old couple13
To do this, let’s break down health care expenses for the average retired couple.
Nearly half of their expenses are Medicare cost-sharing provisions such as co-pays and deductibles. It’s important to note that Premiums for Medicare Parts B and D as well as out-of-pocket expenses make up over half their expenses.
It’s been estimated that a couple retiring now will need between $255,000 and $360,000 to cover their out-of-pocket health care expenses.
It’s important to note that the figures in the pie chart do not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.
Out-of-pocket prescription drug expenses
13 Savings Needed for Medigap Premiums, Medicare Part B Premiums, Medicare Part D Premiums and Out-of-Pocket Drug Expenses for Retirement at Age 65 in Assuming a 90% chance of having enough savings. Source: Amount of Savings Needed for Health Expenses for People Eligible for Medicare: More Rare Good News, by Paul Fronstin, Ph.D., Dallas Salisbury, and Jack VanDerhei, Ph.D., EBRI. October 2013.

13. Understanding Medicare
Option 1
Rx Coverage
Part D or GHI
Original Medicare Part A and Part B
Secondary Insurance GHI, MedSup +
Option 2
Medicare Advantage (Part C)
1. Hospitalization,
2. Medical
3. Rx (MA-PD) OR
Let’s talk more about Medicare to get a better understanding of what we’re dealing with. [OPTIONAL] Medicare is a federal health insurance program administered by the Centers for Medicare and Medicaid Services (CMS) for people 65 and older, Disabled under 65, and at any age for those diagnosed with End Stage Renal Disease (ESRD).
You’ve probably heard about the Medicare alphabet (Parts A, B, C, D, etc.) and terms like Advantage or Medigap. Let’s see if we can take away some of the mystery.
First, you should know there are two options. Option 1 centers around what’s called “Original Medicare” and provides the opportunity to add additional pieces, like supplemental and prescription coverages.
Option 2, or Medicare Advantage packages are offered by private companies approved by Medicare. They offer almost all of Parts A and B from Original Medicare but also generally include prescription drugs, and many plans offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs.
Ok, let’s take a look under the hood now.

14. Understanding Health Care
Option 1 – Medicare Part A: Hospital Insurance14
Inpatient Hospitalization
Skilled Nursing Facilities
Home Health Care
Hospice
Patient costs for an in-hospital stay (2014)
Days
$1,216 deductible
Days
$304 per day copay
Days
$608 per day copay
Days 150+
All costs
Let’s just look at an overview of what Medicare Part A doesn’t cover. Notice the high out-of-pocket cost for an extended hospital stay.
14 Medicare.gov. Medicare 2013 & 2014 costs at a glance.

15. Understanding Health Care
Option 1 – Medicare Part B: Medical Insurance15
Doctors/Providers
Preventive Benefits
Durable Medical Equipment
Outpatient Services
Individual Pays (2014)
Monthly premium (based on MAGI)
$147 deductible
20% coinsurance on doctors’ services and outpatient care
Let’s look at an overview of what Medicare Part B doesn’t cover. Please also note that your income in retirement determines the monthly premium for Medicare Part B — the higher the adjusted gross income, the higher the premium.
Changes to original Medicare:
No out-of-pocket costs for most preventive services beginning January 1, 2011
Part B Deductible and Coinsurance will be waived
Annual Wellness Visit beginning January 1, 2011
Comprehensive health risk assessment
Personalized Prevention Plan
Health advice and referral to education and preventive counseling
Part B income thresholds are frozen at 2010 levels through 2019
15 Medicare.gov. Medicare 2013 & 2014 costs at a glance.

16. Understanding Health Care
Option 1 – Medicare Part B: Monthly Premiums (2014)16
If Your Yearly Income in 2012 was:
You Pay
Filed Individual Tax Return
Filed Joint Tax Return
$85,000 or less
$170,000 or less
$104.90
$85,000 - $107,000
$170,000 - $214,000
$146.90
$107,000 - $160,000
$214,000 - $320,000
$209.80
$160,000 - $214,000
$320,000 - $428,000
$272.70
above $214,000
above $428,000
$335.70
Premiums are paid monthly, starting at just over $100, and scale up based on your modified adjusted gross income (your adjusted gross income plus your tax exempt interest income). Note that your income in retirement determines the monthly premium for Medicare Part B — the higher the adjusted gross income, the higher the premium.
16 Medicare.gov. Medicare 2013 & 2014 costs at a glance.

17. Understanding Health Care
Option 1 – Medicare Part D: Prescription
Drug Coverage
Available two ways:
Stand-alone Prescription Drug Plans (PDPs)
Through Medicare Advantage Plans (MAPDs)
ALL people with Medicare can get Part D
Open Enrollment Oct 15th to Dec 7th 2014:
Other enrollment times based on circumstance
Coverage begins Jan 1, 2015
All people with Medicare have the option to join a plan that covers prescription drugs, with coverage beginning January 1, This prescription drug coverage is different from the discounts that were offered by the Medicare-approved drug discount cards in 2004 and 2005.
Anyone who has Medicare Part A (Hospital Insurance), or Medicare Part B (Medical Insurance), or both Part A and Part B is eligible to join a Medicare prescription drug plan and must enroll in a plan to get Medicare prescription drug coverage. However, those who live outside the US or who are incarcerated may not enroll and are not eligible for coverage.
Costs will vary depending on the plan; at a minimum, plans must provide a standard level of coverage as shown here. Plans may offer more coverage and additional drugs for a higher monthly premium.
For standard coverage (the minimum coverage Medicare prescription drug plans must provide), enrollees will pay:
A monthly premium, estimated at about $32 on average
The first $250 per year for their prescriptions (the deductible)
After the deductible, part of the cost of drugs up to $3,600 out of pocket
5% of drug costs (or a small copayment) for the rest of the calendar year

18. Understanding Health Care
Option 1 – Medicare Part D: Prescription Drug Coverage (2014)17
** Premiums vary by insurer
You pay
95% Medicare benefit
(catastrophic coverage)
Beneficiary pays 5% (min. co–pay)
$2.55 generic or $6.35 brand
Medicare pays
$4,550 out-of-pocket reached
$6,765 in total drug costs
100%
No Medicare coverage
in doughnut hole
Beneficiary pays 100% or $3,605
47.5% of the cost for brand name medications
72.0% of the cost of generic medications
The doughnut hole is large and expensive
This slide provides an overview of what Medicare Part D covers and what it doesn’t.
Some recent changes to Medicare Part D include:
• Monthly Premiums: $16 – $100 (2011)
•  Annual Deductible: $0 – $310
•  Co-pays: 25% or flat co-pay amounts based on formulary
•  Coverage Gap (doughnut hole): $2,580 – $6,765 in total drug costs
•  Coverage Gap discounts: 52.5% discount on brand name medications and 28% discount on generic medications during coverage gap
•  Catastrophic Coverage: approximately 5% co-pay after coverage gap
The “doughnut hole” discounts will increase each year until the gap is closed in After that, retirees will be responsible for 25% of all prescription drug costs and the deductible.
$2,850 in total drug costs
75%
Medicare benefit
(initial coverage)
Beneficiary pays $635 (25% or flat co-pay amounts based on formulary)
$310 Deductible
Beneficiary pays 100% or $310
17 Medicare and You, Medicare.gov

19. Understanding Health Care
Option 1 – Medicare Part D: Prescription Drug Coverage (2014)
Over the next six years the amount paid out of pocket during the Medicare Part D doughnut hole will gradually decrease.
In 2014, once you and your plan have spent $2,850 on covered drugs (the combined amount plus your deductible), you're in the coverage gap and you have to pay a significant portion out of pocket until you reach catastrophic coverage (at $4,550)
From 2014 until 2020, this coverage gap slowly closes.
By 2020, you'll pay only 25% for covered brand-name and generic drugs during the gap—the same percentage you pay from the time you meet the deductible (if your plan has one) until you reach the out-of-pocket spending limit (up to $4,550 in 2014).
The Doughnut Hole gradually closes
18 Medicare and You, Medicare.gov

20. Understanding Medicare
Option 1 — Medigap: Medicare supplemental insurance
Pay only after Original Medicare (Parts A & B)
Flexibility to see any doctor who accepts Medicare
Open Enrollment - Six months beginning with Part B effective date at age 65 or older
Does not cover prescriptions
This slide provides an overview of Medigap coverage, which is designed to cover some of the expenses Parts A and B don’t cover. Read bullets.
Additional talking points:
10 standard plans offering different levels of coverage (A – L).
The number of standard plans was reduced from 12 standard plans to 10 standard plans as of 6/1/2010.
Different premiums for same coverage, depending upon insurance company
No coverage for prescription drugs, dental, hearing or vision
Guaranteed Issue

21. Understanding Health Care
Cost of Medicare Premiums (2014):
Monthly
Annual
Medicare Part A $0
Medicare Part B
$104.90
$1,
Medicare Part D
$39.90 $
Medigap Plan C $
$ 2,
Total Per Person
$3,957.60
$7,915.20
$329.80
$659.60
Before we look at Option 2, let’s see just how the premiums for Medicare coverage can impact expenses during retirement.
For this discussion let’s look at a couple who is married, filing jointly with an MAGI below $170,000. Both husband and wife are healthy and will not have any additional health care expenses besides required premiums.
Medicare Part B premiums are based on your MAGI. This grid shows you the actual cost of premiums based on investor’s annual income below $170,000 married filed jointly is $ per month.
Medicare Part D premiums are on average about $478 per year (varies by state) and are subject to the plan a person selects. The plan would be selected based on the prescription drugs being taken.
Medigap insurance can vary by carrier. The median premium in Ohio for 2014 is $158 per person per month for an annual cost of about $2,220. This would cover plan C, which is considered to be a benchmark plan.
Medigap plan F is the most popular and covers all the same categories as C, with the additional coverage for Medicare Part B excess charges.
Per Couple
19 Medicare.gov. Medicare 2013 & 2014 costs at a glance.
20 Kaiser Family Foundation. "Medicare Part D: A First Look at Plan Offerings in 2014." October 10, Weighted average premium for Medicare Part D Stand-Alone Prescription Drug Plans".
21 Medicare.gov. Median cost for Medigap Policy C in Columbus, Ohio. Ranges from $117 to $253.

22. Understanding Medicare
Now, let’s go over Part C and what is included (and not included) in Medicare Advantage.

23. Understanding Medicare
Applying for Medicare:
Enrollment automatic if you get Social Security or Railroad Retirement benefits prior to Medicare eligibility
All others must apply with Social Security (or Railroad Retirement) during their seven- month Initial Enrollment Period (IEP)
Three months before 65th birthday
Month of 65th birthday
Three months after 65th birthday
The sooner the better!
Social Security tells people it is best to apply for Medicare three months before age 65. But you don’t have to be retired to get Medicare. The retirement age for full Social Security benefits is slowly going up to age 67, but you can still get full Medicare benefits at age 65. You can’t get Medicare benefits before age 65 unless you have a disability or End-Stage Renal Disease. If you’re already receiving Social Security benefits (for example, getting early retirement), you will be automatically enrolled in Medicare without having to apply again. You will get a Medicare card and other information about three months before age 65 or before your 25th month of disability benefits.

24. Understanding Medicare
Leverage these health care planning resources
Medicare
1-800-MEDICARE
Eldercare.org
State Health Insurance Programs (SHIP)
Benefitscheckup.org
Social Security Administration − −
Here are a few resources for furthering your health care planning knowledge. Please note that SHIP programs and contact information vary by state.

25. Creating a plan to address Health Care costs
[READ SLIDE]

26. Create a plan to cover health care costs
Americans underestimate retirement health care costs
The majority of pre-retirees have underestimated the cost of health care in retirement
Help eliminate the guesswork with a personalized health care cost assessment from Nationwide Financial®

27. Start with a Health Care Cost Assessment
Determine individual health care costs
The Nationwide Financial Health Care Cost Assessment
Powered by calculations from one of the world’s leading actuarial firms
Provides a personalized estimate of possible annual health care expenses
Includes estimates for Medicare, out-of-pocket and long-term care expenses
We know that a couple both age 65 today living to average life expectancy of 85 could need as much as $280,000 to cover premiums for health insurance coverage and out-of-pocket expenses during retirement. A couple who lives to age 95 could need as a much as $550,000. This example is for an average couple. This is an important number, but a realistic number for you, based on your personal health history, will be much more valuable.
Fortunately, we can help with a tool called the Nationwide Personalized Health Care Cost Assessment. This tool was developed by a team of professionals including leading physicians and experienced actuaries using proprietary health risk analysis and up-to-date actuarial cost data. These experts analyze personal health and lifestyle information, healthcare costs, actuarial data and medical coverage. The result is a meaningful, personalized cost estimate that can help you plan for future health care expense, including Medicare, out-of-pocket and long-term care costs.
With the Nationwide Personalized Health Care Cost Assessment, we can assess your health status and how it may affect your future medical costs. Then we can estimate years in retirement and health care costs during those years. We can also assess alternative scenarios. For example, what is the financial impact if you retire one year earlier or one year later than you currently plan.

28. Health Care Cost Assessment

29. Health Care Cost Assessment

30. Health Care Cost Assessment

31. Health Care Cost Assessment

32. Health Care Cost Assessment

33. Health Care Cost Assessment
Client Fact Finder
Health Care Cost Assessment
[TALK ABOUT Fact finder]
The information collected on the Health Care Cost Assessment will be kept confidential and used to provide an estimate of your potential health care costs in retirement.
The estimate is based on your specific financial situation and goals, plus their current overall health condition. As your financial situation and health conditions may change over time, these changes may affect future changes. Please keep in mind that the estimates resulting from this fact finder are for hypothetical purposes only and are not guaranteed.

34. Creating a plan to address health care costs
Personalized health care cost assessment
Health profile
Longevity
Total investment needed at retirement
Impact of not taking action
Allows you to easily and quickly receive a possible annual health care cost estimate based on your individual profile.
The Nationwide Personalized Health Care Cost Assessment starts with a 3-part questionnaire on your health history, lifestyle and history of medical conditions. It also allows you to choose a metro region for retirement, which will more accurately calculate the cost of long-term care in that area.
Completing this assessment is a critical first step for planning. The report will tell you about your health profile, health risks, estimated life expectancy based on those risks and hypothetical estimates for health care costs in retirement. Costs are broken out into Medicare, out-of-pocket and long-term care expense categories so you can take an even more detailed look into what your costs will be.

35. Summary The Retirement Income Challenge Understanding Health Care
Creating a plan to address health care costs
Now that we have covered these topics in detail, let’s summarize our discussion:
Retirees face a challenge in creating and managing secure and sustainable income to last throughout retirement
The increasing cost of health care in retirement compounds the retirement income challenge for retirees
To start planning adequately for these likely expenses, it’s important to understand first what Medicare covers and what costs you’re likely to pay in the form of premiums, deductibles and copays
To help you and your advisor plan for retirement health care costs, the Nationwide Personalized Health Care Cost Assessment offers a picture of the costs you’re likely to pay based on your individual health profile and medical history.