Retirees Need More Savings for Out-of-Pocket Healthcare Costs

 – Retired Medicare beneficiaries need to see their savings accounts swell by 9 percent if they want to cover their out-of-pocket healthcare costs, according to new data from the Employee Benefit Research Institute (EBRI).

Those out-of-pocket healthcare costs include premiums, deductibles, and the financial responsibility patients bear when purchasing some prescription medications. Premiums include those incurred in Medicare Parts B and D and Medigap Part F.

Using data from between 2011 and 2018, EBRI concluded that retired patients will need more money to cover those expenses. Since 2011, the amount of money retired Medicare beneficiaries have needed to cover their medical expenses has increased by 9 percent. In 2017 alone, those increases have reached up to 13 percent.

This increase in retired persons’ healthcare spending is due to changes in the Medicare program, the rising cost of prescription drugs, and the decline in private companies offering retirees some health benefits as they transition out of the workforce, the report noted.

The analysis revealed some disparities between different patients. For example, recently retired women will likely need more savings than men. On average, a 65-year-old woman will need about $99,000 to have a 50 percent chance of having enough money to cover premiums and median prescription drug costs. A man of the same demographic will need $75,000.

But 50 percent odds that a patient will be able to cover his or her healthcare costs aren’t necessarily high. In order to increase that likelihood to 90 percent, a man will need $148,000 and a woman will need $161,000.

Couples will need even more cash in the bank, the report revealed. For a 50 percent chance of covering their healthcare costs, couples will need $174,000 saved. For a 90 percent chance, the couple will need $296,000 in the bank.

But those are just the odds for average healthcare consumers. Patients who are sicker or who utilize high-cost services or drugs will need more money saved, the report authors explained. For example, a couple with drug expenses at the 90th percentile and who want a 90 percent chance of meeting their health expenses will need just shy of $400,000 saved.

There is some good news in the report. For patients using prescription medications at the 90th percentile for price, projected cost needs fell by 2 percent. And if the healthcare industry succeeds in its efforts to cut out-of-pocket prescription drug costs for Medicare beneficiaries, those cost needs may fall even lower.

Nevertheless, these study results paint a concerning picture for retirees and Medicare beneficiaries. While EBRI found that patients will need up to $400,000 saved to meet healthcare costs during retirement, that only includes some parts of their healthcare needs.