Report: Medicare beneficiaries need as much as $413,000 in savings for uncovered health expenses

Medicare beneficiaries need thousands to cover all expenses: ©Prasert - stock.adobe.com

A report from the Employee Benefit Research Institute found an upward trajectory in the projected savings that Medicare beneficiaries may require for health expenses in 2023. The study indicates that some couples might need up to $413,000 in savings to cover various health-related costs.

Jake Spiegel, a research associate in Health and Wealth Benefits Research at EBRI, explained the methodology behind the report. "To project how much Medicare beneficiaries may need to save, our simulation model factors in uncertainties related to mortality rates and returns on assets during retirement. Incorporating recent changes to Medicare Part D and testing assumptions about Medicare Advantage and Medigap plans, the updated model serves as the foundation for our findings," stated Spiegel.

Key findings from the research report include:

• The projected savings target for Medicare beneficiaries, encompassing premiums, deductibles, and prescription drugs in retirement, has risen in 2023. This reflects a slight increase from the $383,000 savings target observed the previous year.
• To achieve a 90% chance of meeting health care spending needs in retirement, a man should have saved $184,000, while a woman should have saved $217,000. Couples enrolled in a Medigap plan with average premiums will need to have saved $351,000 for a 90% chance of covering their medical expenditures in retirement.
• In an extreme case scenario, a couple with particularly high prescription drug expenditures may need to save $413,000 for a 90% chance of having sufficient funds to cover health care costs in retirement.

Medicare Advantage enrollees generally have lower savings targets. A man in Medicare Advantage with median drug expenditures and average health care service utilization needs to have saved $99,000 for a 90% chance of meeting health care spending requirements. Similarly, a woman will require $116,000, and couples will need $189,000 for a 90% chance of covering their health care expenditures in retirement.

Spiegel stated: "The results from EBRI's projection model indicate that basic health care costs incurred by Medicare beneficiaries are high. While savings targets are generally lower for Medicare Advantage enrollees compared to Medigap enrollees, it is crucial to acknowledge the tradeoffs, as Medicare Advantage plans may entail limited networks or require pre-approval for certain medications or services."