Fidelity Retiree Health Cost Estimate Drops Back 8%

March 31, 2011 ( – The annual Fidelity Investments estimate of the retirement health-care costs for a 65-year-old couple fell back 8% to $230,000, driven by Medicare changes in the new health reform law.

A Fidelity news release said the figure has jumped an average 6% annually since Fidelity issued the first estimate – of $160,000 (see Fidelity Retiree Health Cost Estimate Jumps to Quarter of a Million).

According to the news release, reduced out-of-pocket expenses for prescription drugs for many seniors, resulted in the reduced estimate.

“While the savings generated through the health care reform laws is a welcome relief to many seniors, it should be considered a one-time adjustment, at least for the time being,” said Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business, in the news release. “Today’s workers still face the prospect of significant medical expenses in retirement and must begin to include those costs in their retirement plan strategies. Looking forward over the next few years, Americans should expect health care expenses to continue to increase annually due to a number of factors including higher costs for medical services, the introduction of new technology and an increased utilization of health care services like diagnostic testing.”

HCR requires pharmaceutical companies beginning this year to offer a 50% discount on brand name drugs that fall into the so-called “donut hole” — a gap in Medicare’s drug benefit plan that begins when an individual’s prescription drug costs exceed the initial coverage limit ($2,840 in 2011) and continues until their total out-of-pocket spending qualifies them for Medicare’s catastrophic coverage (a $4,550 threshold in 2011).

As in years past, the estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program Medicare. The calculation takes into account cost sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.