September 27, 2011
Medicare: the Future is Now
When health care is factored in, more than half of Americans haven’t saved enough money for retirement.
But that price tag could become more unattainable under President Obama’s proposal last week to cut $248 billion from Medicare by raising premiums, copayments, and other health costs. With Republicans also talking reform, the impact of Beltway belt-tightening is coming into sharper focus for more than 45 million Americans covered by the federal program.
It’s a good time to revisit 2010 research by Anthony Webb, an economist with the Center for Retirement Research at Boston College, which hosts this blog. Webb calculated how much a “typical” retired couple, both age 65, needs today to cover out-of-pocket expenses over their remaining lives. The numbers are shocking:
- A couple needs $197,000 for future Medicare and other premiums, drugs, copayments, and home health costs;
- There is a 5-percent risk they need more than $311,000;
- Including nursing-home costs, the amount needed increases to $260,000;
- There is a 5-percent risk that will exceed $517,000.
To arrive at the estimates, Webb simulated lifetime healthcare histories by drawing on a national survey of older Americans. The difficulty for individual retirees who might want to use these estimates, however, is that their actual spending will vary widely depending on how long they live and their health outcomes. That’s where the risk comes in.
In this video, Alicia Munnell, director of the Center, interviews Webb about his research. To read a research brief, click here.