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Guest Post: Avoiding Medical Debt in Retirement

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By Al Krulick

Because of federal government programs like Medicare and Medicaid and the various health care plans provided by the Veterans Administration and the Department of Defense, as well as private health insurance coverage, the overwhelming majority of seniors’ health care costs  — doctors, hospitals, nursing homes, medications, end-of-life care, etc. — are not borne by America’s 40.3 million seniors, themselves.

However, as retirees age, more and more of their assets are consumed in the struggle to stay healthy. In fact, it is estimated that more than 40 percent of seniors’ expenses go to out-of-pocket, health care-related expenditures like insurance premiums, co-pays, deductibles and prescription drugs. For seniors 75 or older, that percentage is more than half. Therefore, it is not surprising that the most common form of debt for our country’s retirees is health related.

According to a study by the Employee Benefit Research Institute, a retired couple who wants to have a 90 percent chance of being able to pay for their out-of-pocket medical costs will need to have $283,000 saved. A couple retiring in 2012 hoping to afford 75 percent of those costs will need $227,000. So even those seniors who have been steady wage-earners for decades can experience severe damage to their economic security from high health care costs and/or medical debt, once they retire.

Preventing Medical Debt in Retirement

Health insurance is important for everyone regardless of age. But since the chances of having a major health challenge increase with age, it is particularly important that retirees purchase and maintain adequate, comprehensive health insurance that can fill the gaps in coverage and help pay those costs that Medicare won’t.

But even when all necessary precautions are taken, medical debt can still become an issue. Here are some suggestions for avoiding medical debt in retirement:

  • Try to negotiate with physicians and hospital billing departments for discounts if it appears that medical bills will overwhelm available funds. Take advantage of any support programs offered by prescription drug companies.
  • Apply for any state or local government program that offers medical bill assistance in addition to the federal program in which you are already enrolled.
  • Contact any charities or nonprofit organizations dedicated to helping victims of certain medical conditions or illnesses.

Bankruptcy as a Last Resort             

Nobody enters into bankruptcy willingly. However, in the face of mounting medical debt, declaring personal bankruptcy may be the only available option. Medical debt of many thousands of dollars can consume all the cash a senior needs to survive. And that is why bankruptcy exists — to eradicate medical and other types of unsecured debt that an individual simply cannot repay.

If medical debt has become overwhelming, it is necessary to contact a qualified bankruptcy attorney. In most situations, filing a Chapter 7 bankruptcy will not affect assets held in a retirement account, home equity in a primary residence, or current or future Social Security payments. That means that a retiree who has declared bankruptcy will still have access to those funds even after his or her medical debt is forgiven.


Al Krulick is an award-winning journalist with dozens of years of writing experience. He writes and blogs for on how to plan for retirement, how to get rid of student loans and how to be an intelligent consumer. 

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