The True Cost Of Expatriate Healthcare

As an expatriate living overseas, you will spend approximately US$ 13,000 a year on healthcare once you reach retirement. In many cases the modern expatriate will not have considered the long terms costs of healthcare, or what they may have to pay in medical costs once they reach retirement age. However, with medical inflation, the global financial crisis, and the increase of global disease, expatriates the world over may not be in a position to cover the costs of their medical treatment in their old age.

An average British national living in the United Kingdom and earning between US$782 and US$5,585 per month will contribute 11% of their monthly salary towards the UK’s National Insurance Fund, and consequently the National Health Service (NHS). If the individual in question earns more than US$5,585 per month, they will pay 1% extra to the National Insurance Fund for all wages over the Upper Earnings Limit (UEL); in this case US$5,585 per month. This means that for a British wage earner at the UEL, they would make a yearly National Insurance Contribution of approximately US$ 7,375, and with an average 45 year working career (age 20 – 65) would mean a total lifetime contribution of US$ 331, 893.

The average expatriate salary is less than US$ 100,000 annually, with almost 50% of the global expat population making less than this amount each year. A reasonably average wage for a modern expat living overseas would be US$ 77,000 per year. If the expatriate did not reside overseas but rather in the UK, and still earned that annual wage, they would have made a National Insurance Fund contribution of US$ 615 per month. This is equal to a yearly contribution of US$ 7,425, and a total lifetime payment of US$ 334,404. To put this in perspective, the total lifetime earnings of this person over their 45 year career would be US$ 3,465,000, which means that the individual in question would have paid almost 10% of their lifetime salary towards the Healthcare system in the United Kingdom.

BUPA, one of Britain’s foremost health insurance providers, has an average policy premium for a family of four set at US$ 3,000 annually. This means that the insurance industry in the UK will reasonably assume a person to need US$ 3,000 worth of medical treatment each year. If, rather than paying into a socialized healthcare system for the entirety of their working career, an individual had purchased a private medical insurance policy, in 45 years they would have spent approximately US$ 135,000 on premium payments. As the open market has established a reasonable yearly risk for healthcare costs (US$ 3,000) the question must then be asked why there is so much additional money being contributed to the NHS? The answer is that the remainder of the funds which an individual has contributed to the system is meant for use after the worker has retired.

A typical life expectancy in the UK would be around 80 years from birth. If the retirement age is 65 there will usually be a period of 15 years where the individual is receiving healthcare, but not contributing to the National Health Service. With a total lifetime contribution of US$ 334,404 and a historical medical expenditure of US$ 135,000 until the age of 65, it is then evident that the medical costs for a retiree will equal an approximate US$ 13,000 per year.

As this is the expected cost of healthcare for an individual over the age of 65, it would therefore follow that health insurance premiums at this age would be at a similar level; that is to say that expat medical insurance premiums for a person over the age of 65 will be no less than US$ 13,000 per year – as this is the amount of medical treatment that they will reasonably be expected to use annually. However, this annual expenditure is based on current figures, and does not take into account medical inflation or recent medical developments. New prescription medications which have been designed to combat illnesses like cancer are extremely expensive and may cost upwards of US$ 50,000 for a single year of treatment. As such, the estimated cost of healthcare for an individual over the age of 65, while being stable at US$ 13,000 per year presently, is highly likely to rise and could end up being significantly more in the next 10 years.

Expatriates residing overseas for lengthy periods will often enjoy significant financial benefits over having stayed in their home nation and may often not be aware of these long term healthcare costs. More importantly, living outside of their home nation will often mean that they have not contributed to their national insurance fund, or a scheme of a similar type. With the state of modern finances and the issues being faced by governments around the world trying to balance their books, the very serious proposition facing expatriates is with regards to the fact that they have not contributed to the social safety net and should they choose to return to their home nation after they retire, they run the very real risk of being excluded from the National Health system completely.

The simple fact is that as you age the cost of your healthcare increases, due to both medical inflation and the increased propensity that older individuals have towards developing a serious illness. The problem, however, is that many expatriates are unprepared for these inflated costs, often having had the luxury of living outside of these types of social healthcare systems.