Encompass Health Retirees Face Rising Health Care Costs: Insights from Patrick Ray & Tyson Mavar

'With health care inflation outpacing general costs, Encompass Health employees should consider building personalized strategies that include HSAs and emergency reserves to help manage future medical expenses.' — Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement.

'As medical expenses continue to rise, Encompass Health employees benefit from proactively incorporating health care costs into their retirement planning through customized approaches like HSAs and dedicated emergency funds.' — Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

1. How health care inflation impacts retirement planning for Fortune 500 employees.

2. Strategies with Health Savings Accounts (HSAs) and emergency medical funds.

3. The need for tailored planning to meet Medicare gaps and long-term care needs.

Managing retirement health care costs calls for thoughtful planning, especially as medical expenses continue to outpace general inflation. Yet, for Fortune 500 professionals approaching retirement, generic guidance often misses the mark. Patrick Ray and Tyson Mavar of The Retirement Group, a division of Wealth Enhancement, recommend a customized approach that factors in health care inflation, coverage choices, tax-efficient tools, and access to liquid funds for unexpected medical events.

Health Care Estimate for Retirees

According to the Fidelity Retiree Health Care Cost Estimate, a 65-year‑old retiring in 2025 may need approximately $172,500 saved to cover health and medical expenses during retirement—an increase of over 4% since 2024. ¹  Notably, this estimate assumes enrollment in Medicare Parts A, B, and D and excludes the costs of long‑term care.

Of that estimate, 44% of the costs would go to Medicare Parts B and D premiums, 47% relate to standard out‑of‑pocket costs (such as co-payments and deductibles), and 9% would be needed to purchase prescription medications. ¹

These trends are particularly concerning given that roughly 20% of Americans say they haven’t considered health care in retirement planning, while 17% haven’t taken any planning steps yet. ²

For its part, the Employee Benefit Research Institute (EBRI) notes that a 65‑year‑old couple with higher prescription drug expenses may need as much as $413,000 to have a 90% likelihood of covering their medical needs in retirement. ³

The Value of a Personalized Retirement Health Care Approach

In light of this data, Ray and Mavar recommend developing a retirement health care strategy tailored to each individual's situation, particularly for those at large employers like Fortune 500. Key components could include:

• - Estimating expected medical needs

• - Using Health Savings Accounts (HSAs)

• - Keeping readily available funds for emergencies

• - Aligning health care coverage with lifespan and income expectations

1. Estimating Your Health Care Budget

Although industry research offers a baseline for average health care costs, it does not consider the full range of medical expenses Encompass Health employees could face post-retirement. For instance, if you factor in costs related to long-term care, estimates could balloon by an additional $26,000 to $127,750 per year. ⁴

Beyond long-term care, additional cost categories could include:

• - Medicare premiums

• - Prescription medications and co‑pays

• - Services not covered by Medicare (e.g., dental, vision)

Ray and Mavar caution Fortune 500 professionals not to underestimate these figures when planning.

2. Gaps in Preparedness

With 17% of Americans having taken no action to plan for health care in retirement, Ray and Mavar emphasize treating health care planning as a central component—not an afterthought.

3. Making Full Use of HSAs

Ray and Mavar suggest consistently contributing to HSAs during working years. For instance, a 35‑year‑old contributing up to $4,300 annually and assuming a 7% return might accumulate over  $500,000  by age 65, including approximately  $140,000 in tax savings . Only about  30%  of HSA holders currently invest those balances.

In their recent webinar, ' Leveraging HSAs to Reduce Health Care Costs ,' Mavar described benefits such as tax‑free growth and withdrawals for qualified medical expenses for those with high‑deductible health plans.

4. Building an Emergency Medical Reserve

Unexpected diagnoses or emergencies can quickly drain resources. Mavar recommends a separate cash reserve—such as in a money market or high‑yield savings account—outside primary retirement accounts. This may help retirees handle health care shocks without impacting long‑term investments.

• Broader Economic Landscape: Health Care Inflation and Trends

Health care spending is projected to continue rising. In a report published by federal actuaries, U.S. health care spending is expected to rise by 7.1% in 2025—well ahead of general inflation. ⁵  Reasons for this rise range from growing personal health care spending and hospital spending growth, to prescription drugs and physician services. As a result, health care expenses could account for 20% of U.S. GDP by 2033. ⁵

At the same time, many health care insurers report higher medical-loss ratios, indicating increased spending on care—including chronic disease management and mental health services—costs that could be passed down to retirees.

Key Recommendations for Retirement Health Care Preparation

• As Mavar and Ray note, the $172,500 estimate for those retiring in 2025 is simply a starting reference point. Early retirement or long-term care needs could push your total higher.

• If you are among the percentage of people who has not yet considered health care costs in your retirement planning, now is the time to start. By leveraging the triple tax advantages available through HSAs, putting aside sufficient reserves to address medical emergencies, and exploring individual strategies that take your personal coverage choices, retirement timing, and health conditions into account, you can build a safety net that considers your long-term health care spending needs.

Final Thoughts

Health care outcomes and personal circumstances vary widely—especially among long‑time Fortune 500 professionals. A tailored planning strategy—covering realistic spending projections, full use of HSAs, dedicated medical reserves, and thoughtful coverage choices—can help support a more predictable and manageable retirement journey.

Featured Video

Articles you may find interesting:

Sources:

Encompass Health offers a comprehensive benefits package that includes both a 401(k) plan and other retirement options. In 2022, 2023, and 2024, Encompass Health continued to provide the Encompass Health Retirement Investment Plan, which allows employees to contribute up to 100% of their pay on a pre-tax basis, subject to IRS limits. The company matches 50% of the first 6% of employee contributions to the 401(k). There is also a Roth option available for those preferring post-tax contributions. Employees aged 50 or older are eligible for additional catch-up contributions​ (Encompass Health). In terms of eligibility for the 401(k) plan, all full-time and part-time benefit-eligible employees of Encompass Health can participate. The plan is administered by Charles Schwab Investments and offers a variety of mutual funds for investment. This is an employer-sponsored defined contribution plan​ (Encompass Health)​ (Encompass Health). Encompass Health employees also have access to an Employee Stock Purchase Plan (ESPP), which allows them to purchase company stock at discounted rates through payroll deductions. Although this is a voluntary program, it provides a supplementary method for employees to invest in the company​

Restructuring and Layoffs: Encompass Health has recently undergone significant restructuring aimed at streamlining operations and reducing costs. In 2023, the company announced a series of layoffs affecting several departments to align with its strategic goals. This move is part of a broader trend in the healthcare sector to enhance operational efficiency amid economic pressures and rising costs. Importance: Given the current economic and investment climate, understanding these changes is crucial. The healthcare industry is adapting to economic uncertainties, and such restructuring efforts can have widespread impacts on employees and the overall market. Additionally, changes in company operations can influence investment decisions and tax implications.

Encompass Health offers stock options and RSUs to executives and key employees as part of their compensation package. These benefits are designed to align employee interests with the company's performance. Stock options allow employees to buy shares at a set price, while RSUs provide shares after certain conditions are met.

Encompass Health Careers: Check the company’s official careers page for specific details on health benefits. Encompass Health Benefits Information: Look for detailed benefits descriptions, plan options, and any recent updates in their employee benefits section. Glassdoor: Review employee reviews for insights on health benefits and any recent changes or updates. Indeed: Explore employee reviews and salary data, focusing on health benefits. LinkedIn: Look at company updates and posts that may include information on health benefits. Business Insider: Search for any articles related to employee benefits at Encompass Health. HR News Sites: Check specialized HR and benefits news websites for articles or reports on Encompass Health's employee health benefits. Healthcare-Related Terms and Acronyms: Health Savings Account (HSA): A tax-advantaged savings account used to pay for qualified medical expenses. Flexible Spending Account (FSA): An account that allows employees to use pre-tax dollars for eligible healthcare expenses. Co-Pay: A fixed amount paid by the insured for covered services. Deductible: The amount an employee pays out-of-pocket before insurance coverage begins. Premium: The amount paid for insurance coverage, typically monthly. Out-of-Pocket Maximum: The maximum amount an employee has to pay for covered services in a plan year.