ON-Lion Letter
Many people assume Medicare will cover most of their health-care costs when they retire, and that Medicaid, the health-care program for the poor, will cover them if they need nursing home care.  However, neither program guarantees a low-cost ride through retirement, according to a May brief from Pamela Villarreal, a senior policy analyst at the National Center for Policy Analysis (NCPA) in Dallas, and Devon Herrick, an NCPA senior fellow.

Research has shown that seniors can expect Medicare to cover only about half of their medical expenses, on average, Villareal and Herrick point out in NCPA's "Health Care Costs During Retirement."  The average senior retiring at age 65 this year will need $240,000 to pay the out-of-pocket costs of health care for the rest of his or her life, Fidelity Investments estimates.

Seniors spend more per capita on out-of-pocket health care expenses than any other age group, the NCPA researchers note.  The 2004 National Health Expenditure Survey found that seniors age 65 and over spent an average of $4,888 per capita annually out of pocket for deductibles, copayments, premiums and other health care expenses not covered by insurance.  Their spending is more than twice as high as the average nonelderly adult, the NHES also found.  The largest expenditures occurred among those 85 and older, who spent an average of $8,304, compared to $5,066 for seniors ages 75 to 84, and $3,851 for those 65 to 74.

Public policy changes should be made, say Villarreal and Herrick.  Health-insurance retirement accounts should be used to provide current workers with incentives to partially prepay future Medicare costs through savings.  Plus, seniors could also save for post-retirement medical expenses if they were allowed to continue funding a Health Savings Account after they reach age 65.  Finally, premiums for private long-term care insurance should be tax-deductible, regardless of the purchaser's age or how much of a household's adjusted gross income goes toward health-care costs.

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports NCPA.
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