Health Costs Clip Retirees' Income: Report
Even with Medicare coverage and ignoring the cost of long-term care, the average retiree faces considerable out-of-pocket spending for premiums, copays and uncovered health care services.
After subtracting these costs, the typical retiree has only 71% of Social Security and 88% of total income left, according to a recent analysis published by the Center for Retirement Research at Boston College.
With concerns about affordability front and center, the researchers find, the burden of health spending relative to income has become a key measure of retirement well-being. This burden was significant, but also fairly steady, during the 2018 to 2022 period analyzed in the report.
"Over the last decade, much has changed for Medicare beneficiaries in ways that could affect their costs," the report states. "On one hand, some changes would tend to push down cost growth. On the other hand, premiums in Medicare Part B have risen rapidly, driven in part by coverage for expensive prescription drugs."
One source of redress: More than half of beneficiaries are opting for Medicare Advantage coverage, and an increasing share of these plans charge no premiums. Likewise, Medicare Part D's "donut hole" has been eliminated, with more changes on tap that could further reduce the burden of prescription drugs.
However, the report notes, Americans 65 and older are coming off the highest inflation in a generation in the aftermath of the COVID-19 pandemic. With so much income going to medical costs, the authors conclude, retirees' finances are more precarious than Social Security benefit levels alone might suggest.