One of the key concerns among retirees is health care costs, including potential long-term care costs. Given the uncertain nature of these costs for a given individual, retirees will often save excessive amounts to cover these expenses, leaving behind dollars that they might have used for other spending needs. Amid this background, a recent analysis suggests that thanks to insurance coverage, retirees might face fewer out-of-pocket health care costs than they think.
According to Arapakis’ research (using data from the Health and Retirement Study, the Medical Expenditure Panel Survey, and administrative Medicare and Medicaid data, a 65-year-old can expect to incur an average of $310,000 of health care costs during the remainder of their life. However, almost 80% of these costs are covered by insurance, leaving them to pay a mean total of $67,000 during their retirement (not including insurance premiums). Even an individual at the 90th percentile of medical expenses would ‘only’ have to pay a total of $138,000 out of pocket (out of a total of $642,000 of costs incurred) from age 65 until their death.
According to Arapakis’ research (using data from the Health and Retirement Study, the Medical Expenditure Panel Survey, and administrative Medicare and Medicaid data, a 65-year-old can expect to incur an average of $310,000 of health care costs during the remainder of their life. However, almost 80% of these costs are covered by insurance, leaving them to pay a mean total of $67,000 during their retirement (not including insurance premiums). Even an individual at the 90th percentile of medical expenses would ‘only’ have to pay a total of $138,000 out of pocket (out of a total of $642,000 of costs incurred) from age 65 until their death.
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