More than half of retirees spend at least $376 per month on health care costs according to a new survey released June 19 by The Senior Citizens League (TSCL).
If that doesn’t sound like enough of a challenge, at a time when the average Social Security benefit is about $1,400 per month, one-in-five survey participants reported spending $1,000 per month or more on health care.
This can serve as a cautionary tale for pre-retirees to make sure they are saving enough in 401k plans to help offset steep health care costs when they do retire—as well as being a reason to encourage plan participants to utilize the many advantages of a Health Savings Account (HSA).
A recent Money Talks News analysis of federal data found households 65-and-older spend an average of $6,700 per year on health care, which works out to about $558 per month.
The TSCL survey also found that, of those who currently receive Social Security benefits, 48% reported that, in 2019, after the deduction of the Medicare Part B premium from their Social Security benefits, they had only $10 or less left over from their annual cost-of-living adjustment (COLA) boost.
“High Medicare costs and low COLA increases are clearly raising new adequacy issues for today’s retirees,” says Mary Johnson, a Medicare and Social Security policy analyst for The Senior Citizens League.
Medicare premiums and out-of-pocket costs are the most frequently cited challenge for adults age 65 and older.
“Many people underestimate both the impact health care costs will have on their Social Security benefits, and the amount of retirement income and savings they will need in retirement to make up for those rapidly rising costs,” Johnson adds.
In addition to Medicare Part B premiums, there are a considerable number of other costs not covered by traditional Medicare. Most Medicare recipients also have the cost of premiums for additional coverage which can take the form of a Medigap supplement, with a free-standing Part D drug plan, or Medicare Advantage managed care plan with prescription drug coverage.
Even with the extra coverage, there can be high deductibles and out-of-pocket cost requirements which grow each year. Those costs can run into the thousands of dollars each year for the oldest and sickest. Medicare also does not cover routine dental, vision or hearing care, nor is there any coverage at all for most nursing home stays.
Congress might help
TSCL notes that Congress is considering a number of bills which would help older Americans with these challenges three primary ways:
- Strengthening Social Security income by providing a modest boost in benefits and tying the annual COLA to the Consumer Price Index for the Elderly (CPI-E) which would better reflect the inflation experienced by older adults. Another bill in Congress would guarantee a minimum COLA increase of at least 3% in years when inflation is lower than that.
- Giving Medicare power to negotiate drug prices to bring down costs. Since 2000, prescription drug costs have increased 253%, making it the fastest-growing cost for older Americans. In addition to bills that would allow Medicare to negotiate drug prices, other bills under consideration in Congress would allow the importation of FDA-approved prescription drugs from other countries, like Canada, where prices are lower, and would prohibit deals that delay generics from reaching the market.
- Improving Medicare coverage by including coverage for dental, vision and hearing services.
With 1.2 million supporters, The Senior Citizens League lobbies Congress for Americans concerned about their earned benefits and is one of the nation’s largest nonpartisan seniors groups. For more information visit http://www.SeniorsLeague.org.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.