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Life Health > Health Insurance > Medicare Planning

Medicare Beneficiaries Again Face Higher Projected Costs: Study

By Michael S. Fischer

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Continuing a recent trend, the amount of savings that Medicare beneficiaries could need for health-related expenses rose again in 2023, the Employee Benefit Research Institute reported this week.

To project how much Medicare beneficiaries may need to save to have a reasonable chance of paying for their health care spending requirements in retirement, EBRI uses a simulation model that allows for uncertainty due to mortality and rates of return on assets in retirement, according to Jake Spiegel, an EBRI research associate. 

This model incorporates recent changes to Medicare Part D enacted by the Inflation Reduction Act of 2022, and tests different assumptions about Medicare Advantage and Medigap plans that beneficiaries may purchase.

“The output of this updated simulation model is the basis of this new report,” Spiegel said.

The study found that a woman will need to have saved $217,000 in order to have a 90% chance of meeting her health care spending needs in retirement, while a man will need to have saved $184,000. 

Couples enrolled in a Medigap plan with average premiums will need to have saved $351,000 to have a 90% chance of covering their medical expenditures in retirement.

The model also projects an extreme case, that of a couple with particularly high prescription drug expenditures. These folks will need to have saved $413,000 to have that same 90% chance, up from the $383,000 savings target last year.

Enrollees in Medicare Advantage plans generally have lower savings targets, the report said, although there is significant individual-level variation. 

To ensure a 90% chance of being able to meet health care costs in retirement, a woman enrolled in Medicare Advantage will have to have saved $116,000, and a man $99,000. For couples, the savings requirement is $189,000.

The report noted that tradeoffs exist for people considering Medicare Advantage plans. These often have limited networks, or they may require approval before certain medications or services are covered.

“The results from EBRI’s projection model indicate that basic health care costs incurred by Medicare beneficiaries are high,” Spiegel said. “While the savings targets tend to be lower for Medicare Advantage enrollees relative to Medigap enrollees, there are important limitations to take into account.”

Michael S. Fischer

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