New Retirement Reality - Disappearing Healthcare Safety Nets

Twenty years ago, Medicare covered most bills, and insurance, hospitals, and drugs were cheaper, too, with Americans spending an average of $3500 per year on medical care, according to the U.S. Department of Health and Human Services. For a generation of people, many of whom worked for a single company for decades, company-sponsored retirement health insurance plans eliminated much of the worry and planning surrounding retirement medical issues.


Even a decade ago, the cost of a year in a nursing home was just $48,000, a National Institutes of Health study says. But given our increasing longevity, abandonment of retiree health benefits by most major corporations, soaring medical costs (6–7% on average per year, according to the Bureau of Labor Statistics) and political threats to Medicare—and with long-term hospitalizations and catastrophic illnesses looming like a shadow in every aging person's mind—health care is suddenly a top issue in retirement planning.

Fidelity Investments estimates the average couple retiring in 2013 will spend about $220,000 on medical care. That $220,000 includes premiums for Medicare Plan B (doctors) and D (prescription drugs), as well as copays, deductibles and non-covered expenses like hearing aids and dentistry. Meanwhile, the HHS estimates 70% of retirees will need to spend an average of three years in long-term care. According to a study by Nationwide Insurance, about half of that care will be provided in the person's home, at a current cost of about $40,000 a year. Over one-quarter of retirees will need nursing home care at a current cost of around $90,000 a year (predicted by that same study to hit $265,000 in 2030). Costs vary by state, but can easily be double or triple that for assisted-living or tonier homes with private rooms.