Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 267

Can you cover healthcare costs in retirement?

This article is the first in a series written by leading retirement website, YourLifeChoices. It reports on the major healthcare burden of many retirees and governments.

Every 1 April, retirees with private health insurance hear one piece of news that they wish really was an April Fool’s Day joke – the announcement of a big increase in premiums.

In 2018, the hike was, on average, 3.9%, which, when grouped with medical services, was the biggest contributor to June quarter inflation. Australian Bureau of Statistics figures show that the Consumer Price Index (CPI) rose 0.4% in the quarter. The category that increased inflation the most was health, rising 1.9%.

Retirees want to keep private health insurance

Retired Australians are among the biggest group with private health insurance. In YourLifeChoices’ Retirement Income and Financial Literacy Survey 2018, 71% of respondents said they had private health cover. While they said the rising cost of insurance was a major burden on their budgets, they were still anxious to retain their cover.

Older Australians are heavy users of the health system. Those aged 65 and older comprise just 14% of the population, according to the 2016 Census, but account for 28% of the 123 million claims for GP visits in 2014–15.

In addition, of the 12.5 million specialist visits claimed through Medicare in 2014–15, 43% were lodged by those aged 65 and over.

The Australian Council of Social Service (ACOSS) believes that affordable health and aged care are just as important in retirement as a decent income. ACOSS Senior Adviser Peter Davidson says:

“It’s vital that we avoid a two-tier healthcare system – one for the top half of the population and another for the bottom half, of the kind that has long existed in the United States and still exists in dental care in Australia.”

He says the challenge for governments is how to pay for the inevitable increases in the cost of existing healthcare programs given increasing longevity, while closing the worst gaps in services, such as dental and mental health services and the National Disability Insurance Scheme (NDIS).

“The Parliamentary Budget Office estimates that to maintain existing commitments in health, aged care and the NDIS, governments will need to spend an extra $21 billion a year by 2027,” he says.

Lower-income households cut back on health insurance

The Australia Institute Senior Economist Matt Grudnoff says that low-income households traditionally spend a larger proportion of their income on essential goods, but that this principle breaks down when it comes to healthcare. Healthcare can easily be regarded as a necessity, he says, but lower-income households view it as a non-essential category that they can cut back on because their budgets won’t stretch that far. As a result, a greater burden is placed on those who can afford to pay.

Mr Grudnoff says that in the past 30 years, the CPI has doubled whereas healthcare costs are 3.7 times higher. He also warns of the dangers of a two-tiered system and questions the Government’s strategy.

“In recent decades, Australia has reduced its emphasis on direct government spending on specialised healthcare and has increased indirect funding by subsidising private health insurance. It might be time for the Government to consider if it is getting a big enough benefit from this strategy or if the $6.4 billion it will spend on subsidies to private health insurers next year might be better put directly into the healthcare system.”

Aged Care Steps Director Louise Biti recommends that senior Australians consult a financial adviser to help them plan for the potential high cost of healthcare later in life. She says:

“Having adequate savings opens up your choices and your ability to control the level and type of care you receive. While we don’t know what your future holds, with some planning, we can help make your retirement a comfortable one. For example, we could ensure you have a safe and secure income in place for life. This might be pension income, lifetime income streams or drawdown strategies from other investments.”

Founder of MyLongevity.com.au, David Williams, says that while we can’t predict how long we will live or what health issues may crop up later in life, it is possible to make informed calculations. He has developed a free tool called SHAPE, which analyses your personal factors, current health and daily habits to give an indication of your life expectancy. He says:

“There is no plan without a timeframe and the best timeframe is the one that you develop for yourself. You can then have a constructive conversation with your financial adviser, just as you will have had with your medical adviser. Understanding more about the chapters in your longevity is a step towards taking more control of your life and achieving a more fulfilling future.”

 

Olga Galacho is a Writer with YourLifeChoices, Australia’s leading retirement website for over-55s. It delivers independent information and resources to 250,000 members across Australia.


 

Leave a Comment:

RELATED ARTICLES

Compelling investment opportunities in healthcare

Where is superannuation research heading?

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.