A Fidelity news release said that the latest annual health-care cost estimate is a 4.7% increase over the 2007 estimate of $215,000. Since the estimate was first calculated in 2002, it has risen a total of 41%, with an average annual increase of 5.8%
As in past years, the 2008 estimate assumes individuals do not have employer-sponsored retiree health-care coverage and includes expenses associated with Medicare Part B and D premiums (30%), Medicare cost-sharing provisions — co-payments, co-insurance, deductibles, and excluded benefits (39%) – and prescription drug out-of-pocket costs (31%), Fidelity said.
It does not include other health-related expenses, such as over-the-counter medications, most dental services, and long-term care.
“With health-care costs continuing to outpace wage increases and companies trimming retiree health benefits, financing health care has to be central to retirement planning,” said Brad Kimler, executive vice president, Fidelity Investments, in the news release. “Given current economic conditions, this is especially true for those planning to retire in the next few years or before they qualify for full Social Security or Medicare benefits.”
Significant drivers of the retiree health-care cost estimate’s increase from 2007 to 2008 include higher unit costs (e.g., the price of a doctor’s visit) and higher utilization rates for health-care services (e.g., more doctor visits per person), Fidelity said.
Additional contributing factors include rising costs associated with new technologies, such as better diagnostic testing, prescription drugs, and an increase in certain chronic conditions such as diabetes.
To help individuals better plan for retiree health-care costs, Fidelity offers companies an online calculator that allows employees to estimate their future health-care liability. The tool produces a projection of future health-care costs factoring in a person’s age, location, retirement date, and family members.
Employees can access the calculator via Fidelity’s NetBenefits Web site, the company said.