Senior Citizens Should Beware of Health Shock: It
Can Drain Your Money
The later in life serious illness occurs, the more
damage to a person’s finances
by Pam Frost Gorder, Ohio State University
April
10, 2008 - A new study underscores the need for seniors to maintain
their health -- in order to maintain their wealth. Building on a 2003
study that found that healthy seniors are more likely to retain their
savings, Ohio State University researchers have now discovered that the
later in life a serious illness occurs, the more damage it does to a
person’s finances.
The study found that when seniors develop a new and
serious health problem -- experiencing what the researchers call a
“health shock” -- early in retirement, they lose a substantial portion
of their savings immediately. But if they experience the health shock
later in life, they will lose even more.
The impact of health problems on seniors’ finances
has been studied over the years, but scientists have drawn different
conclusions -- in part because they measured health and wealth in
different ways, said
Jinkook Lee, professor of
consumer sciences at Ohio State.
This study is the first to gather a long-term
perspective on how chronic illness diminishes seniors’ wealth over time.
“When someone has a chronic health problem, they
tend to find a way to manage in their daily life, but financially, the
negative effect doesn’t go away,” Lee said. “If you develop diabetes,
for instance, it costs you for your entire life.”
The later in life that health shocks occurred, the more they
diminished a person’s wealth, the researchers found. In 1998,
participants who had recently experienced a health shock lost an
average of 5.5 percent of their overall wealth as a result. But
when they were two years older, the average loss for a health
shock was 8.7 percent of wealth.
In a 2003 study of AHEAD data, they found that
seniors who maintain their health are 6 to 7 percent more likely to
retain a significant portion of their savings, compared to those who
suffer from health problems.
This new study compared the long term financial repercussions of
pre-existing chronic health problems with those caused by the sudden
onset of a new health problem late in life. Lee and Kim focused on five
common and serious health conditions: diabetes, cancer, lung disease,
heart condition, and stroke.
They examined how the wealth of more than 5,500
AHEAD participants changed between 1995 and 2002. All were aged 70 or
older at the start of the study.
When participants developed a new and serious
health condition, the researchers categorized those incidents as a
“health shock.”
The later in life that health shocks occurred, the
more they diminished a person’s wealth, the researchers found. In 1998,
participants who had recently experienced a health shock lost an average
of 5.5 percent of their overall wealth as a result. But when they were
two years older, the average loss for a health shock was 8.7 percent of
wealth.
When they were four years older (in 2002), it was
9.5 percent -- 40 percent more than when the participants were first
studied in 1998.
“If you have a chronic health condition, it
diminishes your wealth throughout your life. And if you get a health
shock, it diminishes your wealth even more,” Lee said. “Though over time
the costs associated with that shock may decrease, that illness will
still deflate your wealth continuously thereafter.”
To Lee, this research demonstrates how costly
healthcare is to Americans, even if they have Medicare coverage.
Medicare typically pays a little over half of
someone’s medical bills, and seniors -- most of whom are living on a
fixed income -- are forced to make up the difference by dipping into
their savings. Add to that the fact that Americans are living longer,
and the cost of healthcare keeps increasing.
Even if seniors can recover physically from a
health shock, they can’t recover financially.
“If we have some kind of health shock during our
working years, maybe we are lucky and we have good health insurance from
our job. Or maybe we can go out and get a second job or try to work
longer hours to make up the cost. But seniors are past the age when they
can do that,” Lee said.
The lesson, she said, is that even average
Americans need to give serious thought to the health care system, and
plan for their retirement with healthcare costs in mind. People with
chronic diseases in their family history can talk to their doctor to
learn about the likelihood of developing these diseases themselves. And
then they can try to make better estimates of what their healthcare
costs will be after they retire. They can also try to live healthier
lives with the goal of staving off these diseases.
As part of her continuing research, Lee is
traveling around the world to examine how different healthcare systems
impact people’s wealth. She is focusing on how universal healthcare
systems, such as those in France and Canada -- and now, even in
developing countries like Korea -- are easing the burden of citizens’
healthcare costs.
April
10, 2008 - A new study underscores the need for seniors to maintain
their health -- in order to maintain their wealth. Building on a 2003
study that found that healthy seniors are more likely to retain their
savings, Ohio State University researchers have now discovered that the
later in life a serious illness occurs, the more damage it does to a
person’s finances.