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.

  •   15 August 2018
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Compelling investment opportunities in healthcare

Where is superannuation research heading?

banner

Most viewed in recent weeks

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

Latest Updates

Taxation

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Taxation

Taking from the young, giving to the old

Despite soaring retiree wealth, public spending on older Australians continues to rise. The result: retirees now out-earn the young, exposing structural flaws in the tax system and challenges for fiscal sustainability.

Investment strategies

An obsessive focus on costs may be costing investors

As a relentless fee war grips Australia’s ETF market, investors may be missing the real battleground. Beyond basis points, index design itself - not cost - may be the most powerful driver of returns.

Taxation

Clearing up confusion on how franking credits work

It seems the mere mention of franking credits generates a lot of heat but not much light. Here's a guide to how franking credits work, and the impact they have on both companies and shareholders.

Investment strategies

Are the good times about to end?

As the bull market revs up, some investors worry about a possible correction. History shows the real question isn’t timing the top, but whether you have the time and liquidity to ride out inevitable downturns.

Superannuation

Australia slips in global pension ranking

The 2025 Mercer CFA Institute Global Pension Index shows Australia has dropped to its lowest ranking in the 17 years of the index. This explores why we're falling and what can be done about it.

Property

Where wine country meets real estate

High-profile wine regions don’t always see strong property growth - volume, exports, and infrastructure investment often matter more than reputation in driving regional property markets.

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.