COVID-19 has impacted the nation and the world like no other pandemic. A significant part of the fallout – which is primarily due to the social distancing and stay-at-home orders throughout the period of the virus – has been job loss and businesses going under.
But while it is easy to see why the retail and food services industries have suffered immensely because of lost business, another area of reduced spending has been healthcare, especially by those who are seniors. This is a bit surprising, at least at first glance.
As the recent pandemic moved swiftly into the U.S. in the first quarter of 2020, it was unclear how healthcare utilization and spending would change. But, while it would be expected that healthcare costs would rise during a pandemic, there were some other factors that actually drove both spending and healthcare utilization down during this period of time.
Why Healthcare Spending for Seniors was Down in the Early Stages of COVID in the U.S.
There are actually several reasons why seniors’ healthcare spending, on average, dropped during the COVID-19 pandemic. One of the primary catalysts was the cancellation of elective procedures by both patients and medical professionals, in large part to make room for patients who were receiving treatment for the COVID-19 virus in hospitals.
Non-essential or non-emergency care was either delayed or canceled altogether early in the pandemic. Although as time went on, and as testing for COVID-19 became more readily available, healthcare use did pick up, at least somewhat, by the end of the year.
Many consumers also took part in online healthcare “appointments” in order to help stop the spread of COVID. But even though telemedicine use increased substantially, it was not enough to compensate for the fall of in-person care. As of year-end 2020, spending on healthcare services was still down by roughly 2.7% over the same time period one year prior. It remained down in January 2021.
As compared to the 3.5% fall in U.S. GDP in 2020, though, healthcare is presumed to have represented a larger share of the overall United States economy than it did in previous years. It is expected that as the year 2021 moves forward, more people will again be scheduling elective procedures.
In addition, the cost of the COVID-19 vaccine administration may also have an upward impact on claims costs for insurers – and in turn, will increase the overall spending on healthcare services in the U.S.
How Will You Pay for Healthcare Costs in Retirement?
As we age, healthcare tends to make up a larger percentage of our overall expenses. It is estimated that an average 65-year-old couple who retired in 2020 will spend approximately $295,000 on out-of-pocket healthcare costs over their remaining lifetimes – and that does not include the cost of a long-term care need.
If you require medical and/or long-term care services, it could have an impact on your savings, as well as on your retirement income stream. But there are ways that you can lock in a guaranteed lifetime income that will continue flowing in no matter how long you may need it. That is through an annuity.
If you’d like to learn more about how annuities can keep you from running out of money in the future, set up a time to chat with an Annuity Gator retirement income specialist. You can reach us at (888) 440-2468 or via email by going to our secure online contact form. We look forward to assisting you.