The high cost of Medicare is significantly reducing retirement income for a large portion of Americans, according to a study by the Center for Retirement Research (CRR) at Boston College. The organization found that, in 2014, average out-of-pocket (OOP) spending—excluding long-term care—was $4,274 per year. Approximately two-thirds of that, or $2,965, was spent on premiums. Thus, the average retiree had only 65.7% of his Social Security benefits remaining after OOP spending and only 82.2% of total income. In addition, nearly one-fifth (18%) of retirees were left with under 50% of their 2014 Social Security income after OOP spending; 6% fell below 50% of total income.

In its paper “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” the CRR also reports that women, retirees in poor health and those with traditional Medicare excluding supplemental coverage experienced the most increased cost. Across gender lines, the organization notes, the divide is driven by an unexpected cause. “For women, the post-OOP OASI [Old Age and Survivors Insurance] ratio is 62%, compared with 70% for men. Interestingly, the issue is not that woman pay substantially higher costs—they pay slightly lower premiums than men do (by just over $100 per year) and slightly higher other out-of-pocket costs (by about $80)—but, rather, that they have substantially lower OASI benefits ($12,900 vs. $16,600).”

The CRR warns that this issue could be exacerbated if projections of increasing Medicare costs hold true for the long term. The organization stated in the paper, “Medicare costs are expected to resume their decades-long increase after the recent pause, once the effects of the implementation of Part D and the Great Recession have worn off. These cost increases are expected to reduce the portion of Social Security benefits available for nonmedical spending by another few percentage points by 2026, and the Medicare Trustees Report (2017) suggests that medical costs will grow even faster than Social Security benefits in subsequent decades.”

Another important point, according to the paper, is these projections often exclude nursing home care. The CRR found that long-term care can range from $40,000 a year for health aides to more than $80,000 per year for nursing facilities.

The CRR concludes, “If costs resume their rise as expected, Social Security beneficiaries are likely to feel further pressure on their budgets.”

In fact, some studies suggest that Social Security is a bigger part of Boomers’ retirement income plans than previously thought, and the outlook for Social Security is faring no better in 2017. These findings elevate the importance of retirement income outside Social Security benefits such as savings from defined contribution (DC) plans. But the CRR has also outlined some proposals to shore up Social Security. Other organizations, too, have presented strategies for improving retirement outcomes considering low returns and longevity.

The full report “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” can be found at CRR.com.