Yes! Medicare will cover some weight loss surgery as long as certain conditions are met related to morbid obesity.  It is really going to depend on your current health situation as to whether or not Medicare will pay for weight loss surgery.

What if Medicare Won’t Cover Weight Loss Surgery?

What happens if you need or want weight loss surgery but Medicare won’t pay for it?  The good news is there is an alternative way to pay for weight loss surgery.

You’ve probably already aware that weight loss surgery can be expensive depending on the type of surgery that you’re getting.  According to WebMD average cost for weight loss surgery can be between $20,000 to $25,000, which for a lot of people in retirement and living on a fixed income that is a big  Stretch financially.

How are you going to pay for your weight loss surgery if Medicare will not cover it. You would to pull money out of retirement savings, use credit cards, or use some other sort of financing to pay for the surgery.

As I mentioned there is an alternative way to pay for surgery. And that is to pay for it with a reverse mortgage. There’s several different reasons to consider the reverse mortgage and there’s lots of different ways to structure the reverse mortgage to help pay for the surgery.

If you own your home free and clear or have a small loan balance. You could potentially use the reverse mortgage to get access to enough cash to be able to pay for the surgery.

The other option you have is to consolidate debt into the reverse mortgage to free up cash flow.  You could consolidate your mortgage, car loan,  credit cards etc, into the reverse mortgage. This could free up enough cash flow to allow you to finance the surgery and be able to afford the new month payment comfortably.

Also, by getting the reverse mortgage you could be better prepared for other large expenses during retirement such as future health care costs, home repairs, car repairs and other financial shocks that are likely to pop up at some point during your retirement.

Example of Using a Reverse Mortgage to Pay for Weight Loss Surgery

Let’s take a look at the scenario of Jill.

• Jill is 65 years old.
• She has $3,000 a month income from Social Security.
• She owns her home free and clear.
• She has $65,000 in retirement savings.

A reverse mortgage is not something that Jill would typically consider. However, Jill really wants to get the weight loss surgery, but she doesn’t want to use her retirement savings. The reason is because if she pulls out $25,000 from her retirement, it puts a big dent in her retirement savings. She  knows she is  going to need those funds at some point in the future.

Jill considered getting a medical loan to pay for the surgery, but she’s a little uncomfortable with the idea of taking on a monthly payment.

Jill reached out to me to see if the reverse mortgage might be an option for her to pay for her weight loss surgery.

We came up with a couple different options for Jill.

The first option was to draw the money out of the reverse mortgage to pay for the surgery. That’s represented by the bar chart below.

The  blue bar represents the home value assuming a 4% appreciation rate.

The orange represents the loan balance. You can see this loan balance is increasing over time. The reason it’s increasing is because we are making the assumption that Jill is not going to make a monthly mortgage payment towards the reverse mortgage.  (she still has to pay her property taxes and  homeowners insurance) Because she’s not making a payment, the interest and mortgage insurance is getting added to the loan balance. Therefore it’s growing over time.

The green represents the line of credit. Initially we can see we have $124,000 line of credit. That’s what’s available to her after lumping in the closing costs and drawing out the $25,000 to pay for the surgery.

Now we can see this line of credit is also growing over time. The reason the line of credit is growing is because it grows at the current interest rate plus a half a percent. This growth has nothing to do with the home value whatsoever.  So, even if home values went down, the line of credit would still continue to grow.

Initially we can see we’re starting off at $124,000 and that’s actually almost twice what Jill has in her retirement savings. She’s setting herself up financially to have more funds available should those large expenses pop up at some point in the future.

Let’s say in 10 years Jill needed to get a new roof and it was $40,000.  She could draw that money out of the reverse mortgage line of credit. Check out HELOC vs Reverse Mortgage – Which is Better in Retirement.  The great thing is that she still does not have to make a monthly mortgage payment.  (she still has to pay her property taxes and her homeowners insurance) She is not required to make a payment on any  funds she draws out of the line of credit.

Jill didn’t really like this growing loan balance and she figured if she was going to finance my weight loss surgery in any other way, she’d be making a monthly payment.

Jill said I feel comfortable making a payment of $500 a month. And that is her second option. She is going to  get the reverse mortgage, draw the funds needed for her weight loss surgery,  and make a payment of $500 a month. This is represented by the bar chart below.

The blue bar is the home value assuming a 4% appreciation rate.

The orange bar is the loan balance. We can see by year 10 she’s got that loan balance paid down to $4,800. We’re making the assumption that she just stops making payments in year 10.  (she still needs to make her property taxes and insurance payments)

We can see the loan balance does increase slightly over the next five years due to the assumption that Jill is not making a monthly mortgage payment.

The green bar is line of credit.  You can see that the line of credit has grown significantly.  By making that monthly payment and not drawing any money out of that line of credit, in 15 years when Jill is 80 she’s expected to have over half a million dollars sitting in this line of credit.

And at 80, Jill’s health care expenses are likely to be higher, she may need help with cleaning the house, paying for  a yard keeper, or she may even need in-home care. Now she’s got a giant chunk of cash that she can draw from to help supplement her income and pay for other expenses.

Looking at year 10 with this option,  she owes $4,800 there’s a $347,000 line of credit. With the first option she has a $93,000 loan balance and a $259,000 line of credit. By making that $500 payment she’s essentially reduced her loan balance by $89,000 and she’s increased her line of credit by about the same amount.

By her making a payment, she’s not only paying the loan balance down, but dollar for dollar it’s increasing her line of credit.  And all the funds in the line of credit are growing. By making the payments, she is basically saving that money for her to use again at some point in the future.

There Are Several Reason to Consider Using a Reverse Mortgage to Pay for Weight Loss Surgery

First and foremost, Jill is not getting into credit card debt which living on a fixed income  can be a really slippery slope.

She has the ability to retain her retirement savings which is important because pulling a bunch of money out of her retirement savings could come with tax consequences.  Plus, she’s more than likely going to need that money at some point in the future to deal with other financial shocks at some point in the future.

The reverse mortgage creates flexibility in the monthly mortgage payment.  She doesn’t have to make a payment, she can make a full payment, or she can make a partial payment. She could pay as much or as little as she wants whenever she wants. (she still needs to pay property taxes and homeowner’s insurance) Unlike any other type of debt, the reverse mortgage creates financial flexibility.

Beyond paying for the weight loss surgery, is that it creates an additional source of retirement funds.  Jill is likely to face other large expenses at some point in the future whether that’s health care costs, long-term care needs, or home maintenance.  There’s a lot of future expenses that can be quite hefty and being prepared with an additional source of funds can be critical.

And of course Jill gets an improved quality of life with the weight loss. She is probably going to feel a lot better about herself as well as feeling physically better.

Want to see if and how this could work for you? Want to look at your numbers, look at your scenario, and  options? I’m happy to answer any and all questions that you have about the reverse mortgages. There’s no cost to speak with me.