Retiree Health Care Costs Continue Rising, Milliman Finds
By Rem Samuels | Originally posted on Plan Adviser
The average healthy 65-year-old retiring in 2024 is projected to spend a significant amount on health care over the course of their remaining lifetime, according to the 2024 Milliman Retiree Health Cost Index.
The two most common health care coverage options chosen by Medicare-eligible retirees are Medicare Advantage Part D and Original Medicare with Medigap plus Part D. A healthy 65-year-old man retiring in 2024 with a MAPD plan is projected to spend $128,000 on health care in his remaining lifetime, and a woman with the same coverage is projected to spend $147,000 in her remaining lifetime, according to Milliman.
Health Care Costs on the Rise
In order to afford these costs, Milliman projected that a man with a MAPD plan needs to have at least $86,000 in savings and a woman with the same coverage needs at least $96,000 in savings. The Milliman Index projected that this is the amount of savings (net of taxes) needed at age 65 to pay a retiree’s remaining lifetime health care “total spend,” assuming an investment return of 3% per year.
For a 65-year-old man retiring in 2024 with Medicare plus Medigap plus Part D, the costs are even higher, as they are projected spend approximately $281,000 on health care expenses throughout retirement and a woman with the same coverage is projected to spend $320,000.
The difference in cost is largely because women on average live longer than men, according to Milliman. The retired man was projected to live until 88, and the woman until 90, in Milliman’s calculation.
The cost of health care in retirement will also depend on several other factors, Milliman explained, such as when someone retires, where they live during retirement and what Medicare benefit plan they choose. The cost of Medicare Advantage, Medigap and Part D plans can vary greatly by state. For example, in Florida, a 65-year-old retiring in 2024 with a lifespan of 88 can be expected to spend upwards of $340,000 on health care, as opposed to around $260,000 to $280,000 in Texas.
Retirees have less control over factors such as health status or how long they will live—both of which are primary drivers of how much their health care will cost.