8 'Good News, Bad News' Updates on Retiree Health Care Costs

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For the first time in a decade, the projected retirement health care costs of a 65-year-old leaving the workforce have stayed flat year over year, according to new data published this week by Fidelity.

Fidelity’s 2023 estimate of $157,500 in average retiree health care and medical expenses remains the same as last year due to expected limits to retiree out-of-pocket costs for prescription drugs starting in 2025.

In addition, recently enacted Medicare Part D protections on prescription drug costs are moderating what retirees can expect to pay for health care in the future.

“While this year’s estimate offers a welcome reprieve from a decade of increasing health care costs, retirees are still expected to cover significant costs above and beyond what Medicare covers,” warns Hope Manion, senior vice president and chief actuary of Fidelity Workplace Consulting, in a press release. “Understanding what your health care costs may be in the future is an essential part of the retirement planning process.”

Fidelity’s estimate assumes retirees are enrolled in traditional Medicare, which between Medicare Part A and Part B, covers expenses such as hospital stays, doctor visits and services, physical therapy, lab tests and more, and in Medicare Part D, which covers prescription drugs.

“Our analysis finds that limits on how much retirees can spend on prescriptions covered by Medicare Part D from the Inflation Reduction Act are likely to temporarily offset the overall inflationary trend of health care costs for retirees,” Manion explains. “Even so, those planning for retirement need to build a plan that incorporates the still-high cost of health care and the medical and drug expenses not covered by Medicare.”

See the slideshow for eight key insights about retiree health care costs and the ways workers can act now to prepare for higher costs. With such information in hand, Fidelity says, advisors can help their clients better prepare for any projected expenses.