Health care costs for retirees continue to rise

High inflation has made everything in the US more expensive – including health care and medical expenses for retirees.

Research published by Fidelity shows that a 65-year-old retiring today can expect to spend $165,000 on health care in retirement, a 5% increase from last year and more than double the 2002 rate. .

However there seems to be a gap for many Americans between the actual cost of health care in retirement and how much they expect to spend on those costs. The average American thinks they will spend about $75,000 on health care and other medical expenses, less than half of Fidelity’s figures, according to the survey.

RICH AMERICANS ARE CONCERNED ABOUT LIVING

“Health care costs are one of the most unpredictable expenses, especially when it comes to retirement planning,” said Robert Kennedy, senior vice president of career consulting at Fidelity.

The estimate assumes that a person is enrolled in Medicare — including Part A and Part B, which covers most hospital care and doctor visits — and Part D, which covers prescription drugs. Other expenses such as Medicare premiums, prescription drugs, dental and vision care and other expenses not usually covered by Medicare “leave retirees to fend for themselves,” the report said.

As of April 2024, about 67.3 million Americans are enrolled in Medicare, according to the Centers for Medicare and Medicaid Services. Among them, about half were enrolled in a Medicare Advantage plan, while 80 percent were covered by Medicare Part D.

THE COSTS OF PRECAUTIONARY DRUGS WILL COME 40% UPON PREVIOUS YEARS.

Americans are also dealing with rising prescription drug prices, which have risen nearly 40% in the past decade, easily outpacing inflation.

A separate report from GoodRx, a drug inventory company, shows that the price of prescription drugs has risen nearly 37% since 2014. Although price increases have slowed this year , the cost continues to pose a “significant burden” to many consumers.

In 2024 alone, Americans spent $21 billion on out-of-pocket prescriptions. That equates to $16.26 per person, according to the data.

Although health care is often covered by insurance, much of the cost burden is shifted to consumers as physician insurance coverage becomes more complex and restrictive. These restrictions are what GoodRx called “the big pinch” — insurance plans, Medicare and commercial, cover fewer drugs and add more restrictions on coverage.

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About 54% of medicines are covered by insurance, based on Medicare plans. Half of the drugs covered by Medicare have insurance restrictions, such as step-in treatment or prior authorization. And at least a quarter of Americans have a prescription that is not covered by insurance.

“For many Americans, the problem of affordable drugs doesn’t stop at those that cost thousands of dollars,” said Tori Marsh, director of research at GoodRx. “It’s about prescribing generic drugs for chronic conditions, and finding out that their insurance doesn’t cover what they used to do.”