Volume Vol. 38, No. 1
Projected savings targets needed to cover health care in retirement went up last year after several years of decline, but are still generally lower than they were five years ago, according to new research by EBRI.
This EBRI Notes article examines the amount of savings Medicare beneficiaries are projected to need to cover program deductibles, premiums and other health expenses in retirement. For the purposes of this study, health expenses include premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs.
Data come from a variety of sources and are used in a Monte Carlo simulation model that simulates 100,000 observations, allowing for the uncertainty related to individual mortality and rates of return on assets in retirement.
Here are the key findings:
- In 2016, a 65-year-old man would need $72,000 in savings and a 65 year-old woman would need $93,000 if each had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement. If they wanted a 90 percent chance of having enough savings, the man would need $127,000 and the woman would need $143,000.
- A couple with median prescription drug expenses would need $165,000 if they had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement. If they wanted a 90 percent chance of having enough savings, they would need $265,000.
- For a couple with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings would be $349,000 in 2016.
- From 2015 to 2016, projected savings targets increased between 0 percent and 6 percent. In contrast, savings targets declined between 2011 and 2014, but then they increased from 2014 to 2015 as well. Despite the increase in savings targets since 2014, the 2016 savings targets continue to be lower than they were in 2012 almost across the board.
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Washington, DC: Congressional Budget Office, July Some Couples Could Need as Much as $350,000 Part D Premiums and Out-of-Pocket Drug Expenses for Retirement at Age 65 in 2011 –2016 t single heir e num xpens ber es a that a nd $2 n i 65 ndivi ,000 dual to can haveuse t a 90o p set retir ercent ce hme anc nt e savings of covergoa ing lts, a num heir expe ber nse based on s. These avera estima gtes w es ar ill e be 2– too 6 pe r- 2014. Jan. 31, 2017 • Vol. 38, No. 1 ___ ___. “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Good News Not So Rare Percent Change c small for ent highe appr r thoximately o an the savings ne-half targ of et the s est po impulation. ated in 201 5. Figure 2 Conclusion Median Prescription Drug Expenses Throughout Retirement By Paul Fronstin, Ph.D., and Jack VanDerhei, Ph.D., Employee Benefit Research Institute Anymore” EBRI Notes, Vol. 35, no. 10 (Employee Benefit Research Institute, October 2014). Where the world turns for the facts on U.S. employee benefits. Employee Benefit Research Institute. Measuring and Funding Corporate Liabilities for Retiree Health Benefits. Washington, Chance of Having Betw een Source of Payment for Incurred Health Care Expenses, th th Individuals should be concerned about saving for health insurance premiums and out-of-pocket expenses in DC: Em Enop ulg o hy S ee av Be ingn sefit Re 2011 search Insti2012 tute, 1988. 2013 2014 2015 2016 2015?2016 This an alysis u 75 Perc ses a Monte C entile in Drug arlo simulatio Expens nes model : Nee that ded tr saeats healt vings in 201 h in 6 for surance pr a man emiu with d ms and o rug expe ut-o ndit f-pocket ures at hea the l75 th Noninstitutionalized Population of Medicare Beneficiaries, ______. “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Unlike the Last Few Years, the Men retirement for a number of reasons. Medicare generally covers only about 62 percent of the cost of health care Retirement and health benefits are at the heart of workers’, employers’, and our nation’s In p care e ert ce rnt o xpenses duc ile thrtoug ion in r hout e tirem rete irnt em as known ent would valu be es but $79,000 deals w if he w ith the anted u a n cert 50 p ainty of ercent how chan l ce o ng th of hae i ving ndivi enoug dual or cou h savings to ple wil l Ages 65 and Older, 2013 News Is Not Good” EBRI Notes, Vol. 36, no. 10 (Employee Benefit Research Institute, October 2015). ______. Retiree Health Benefits: What Is the Promise? Washington, DC: Employee Benefit Research Institute, 1989. 50% $71,000 $70,000 $65,000 $64,000 $68,000 $72,000 6% serv Sa economic security icv es for ing Me sd ic Me are bd ene ic . Fo fica iar runded in 1978, EBRI is iee s B ages 65 a ene nd fici oldea r, r wi hile es the most authoritative and objective source of out Ne -of-pe ockd et f spe onding r He aca count lth s fo Ex r 13 p pee rcen nts . es: c survive an over heald th c what rate of ret are expenses in r urn th etirey emwoul ent. d ach For ai eve on t woman, htei he r savin savings t gs in a retirem rget would ent b by e simulatin $102,000 ga 10 t t0,00 he 50 0 o -pb eserva rcent tions Medicare was never designed to cover health care expenses in full. Deductibles for inpatient and outpatient services 75% 107,000 105,000 96,000 93,000 99,000 103,000 4% Furtinformation on these critical, complex issues. hermore, the percentage of private-sector establishments offering retiree health benefits has been falling. This is Levine, Michael, and Melinda Buntin. “Why Has Growth in Spending for Fee-for-Service Medicare Slowed?” CBO Working Fronstin, Paul. “Retiree Health Benefits: What the Changes May Mean for Future Benefits.” EBRI Issue Brief, no. 175 So t for eac arg eme t. h I sourc f eit Co hee r of inu st suppleme ep adles wan tntal covera eCo d a 90 u ld pege. rcNe e In some nt cha enc de of as of th ha e simulate M ving u enoug ch d o as h sa utcomes, the vings, $3 $5 139 0 in ,0 ,00 divi 00dual w0 ould or co , p. be uple 2 ne e wi ded ll o for nly a man, were part of the 90% program when it 136 ,w 00 a0 s esta1 b 3li5sh ,00 e0 d in 196 1225 ,0 . 0For 0 exa 11 m 6p ,0le 00 , in 200 123, w 4,000 hen o1 ut 27 p,a 0t 0ie 0nt prescripti 2%on drugs TRICARE, 1% Other private, 1% also truePa in t pe he r 2 p 0ublic 13-06 sect (Con org . re ssional Budget Office, August 2013). (Employee Benefit Research Institute, July 1996). a survive a nd $156,00 few W 0 w years and thu om ould en be nees d woul ed for d on a w ly h omave a r an. elatively small aggregate value for h ealth ex penses in retirement. In Other, 1% were added as an optional benefit, the program included a then-controversial coverage gap known as the so-called EBRI focuses solely on employee benefits research — no lobbying or advocacy. EBRI Employee Benefit Research Institute Notes (ISSN 1085 ?4452) is published by the Employee Benefit Research Institute, 1100 50% 95,000 93,000 86,000 83,000 89,000 93,000 4% Medicaid, 4% other cases, they may live far longer than the life expectancy for an individual or couple at age 65 and generate a th “donut hole” in which beneficiaries had to pay 100 percent of the cost of prescription drugs (Figure 1). While the Salisbury, Dallas L., and Paul Fronstin. How Many Medicare Beneficiaries Will Lose Employment-Based Retiree Health 13 St. NW, Suite 878, Washington, DC 20005-4051 th , at $300 per year or is included as part of a membership subscription. _ Thi __s __ N_ ot . e “E sm aEBRI p rtliocy le e ee stand Be stim ne as fi te ts alone in em s , Ret the ire tam rge en tt e pl P doyee asa tte vrings to c nben s, an efits d Im ovrese p elr ic he ati ar o an ch lts h ins fa os r I ur an nca re nc inde ae s ep d pend r e W m oiu re km n Lt, s t ife nonprofit, and no o .” su EBRI I pples m se unt e Bri Me enpa d f, ic na ortisan r.e 1 8 a4 nd 75% 124,000 122,000 111,000 106,000 114,000 118,000 4% An couple both with drug expenses at the 75 percentile would need $181,000 to have a 50 percent chance of having correspondingly larger aggregate value. Patient Protection and Aff U.S or. d Depa able rtm C en ar t e of A Vete ct rof ans20 10 (ACA) included provisions to reduce the size of this coverage gap, Benorga efits inization. f Medicare It analyzes a Covers Outpnd atierep nt Pr ort es scre ripsea tionr Dru ch data gs? EBRI Sp without espin o cial Rerp unde ort SR rlying -43 Wa agend shinga. tonAll fin , DC: dings, th out-of-poc (Em kep t le o 90% xpe yee Be nsen s for efit Re hesa e 1lt a 5h c rc 6,0 ha 0 Ir 0 n es ti ser tute v 15 ic , 4 A e A ,0 s in p 0T ri 0l 1 r9 e9 tir 7 1e ). A 3m 9 ,e 00 nt 0G . A C LA 1 3 A is 1 ,r 0N e 0d 0 uc Cing E 1 4 c0 o,st 00 0 sharing 143 in t ,00he 0 Part D c 2% overage Affairs (VA), 4% enoug Preh mone sorted sty a ntd o arcdov pe os r ta he gea lrtah ca te pa re id e in xpe Duns llee s,s in r VA. e Pt OST irem Me Ant ST . E They w R: Sendould add rne ess e d c h$2 an41 ges ,000 to: EtB o Rha I N vo et ea s , 75 11 0 p0e r 1c3ent S tc . ha NW nc , e ACA did not wheth elimina etr eon fi it. Bnan y 20 cial 20, data, enrolle option es will s , por tre ay 25nds, percare reve ent of the aling costan of d preli resable cription d — the re rugs aso when n th EBRI informatio ey are in the n is Employee Benefit Research Institute, July 18, 2003. Married Couple Suite 878, Washington, DC 20005-4051. Copyright 2017 by Employee Benefit Research Institute. All rights reserved, Vol. 38, gap, or so-called “donut hole.” By 2020, coinsurance in the coverage gap will be phased in to 25 percent. This year- Because of covering thet a ho ggre se egxpe atens valu es, a e of nd savings $289,00fo 0 t r healt o havh e e ax pen 90 p se es in ret rcent ch irem ance e nt of woul coved ring be tspent heir egraduall xpenses. The y over time se est in ima tes the gold standard for private analysts and decision makers, government policymakers, the media, and ______. “Retiree Health Benefits: Trends and Outlook.” EBRI Issue Brief, no. 236, (Employee Benefit Research Institute, donut no. hole 1. for both generic and brand-name drugs. 50% 166,000 163,000 151,000 147,000 158,000 165,000 4% to-year reduction in coinsurance will continue to reduce the savings needed for health care expenses in retirement, all retirement, th are 0–4 percen e proc t highe eeds av r than ailabl the sa e at vings aget a 6r5 g c etos e uldst be im inve ated sin 201 ted un5ti.l su ch time that each annual expenditure takes The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. The 2016 the public. Augus75% t 2001). 231,000 227,000 207,000 199,000 213,000 221,000 4% This EBRI Notes article examines the amount of savings Medicare beneficiaries are projected to need to cover else equal, for individua Privls ate w ins ituranc h the, e 13 highe % st drug use, which is one reason why this analysis finds reductions in needed place. ThAn e sim nuaulation mo l Report of del the Bo used i ards n o th f Tru is an stalysis assumes ees, Federal Horates of retu spital Insuranrn with a ce and Fe medi deralan Su nomi pplem nal val entaryu M e of ed 7. ica32 l per- 90% 287,000 283,000 255,000 241,000 259,000 265,000 2% Figure 1 program deductibles, premiums and other health expenses in retirement. For the purposes of this study, health savings for 90 th he perc alth cen areti ele in xpens Drug es in r Ee xtp iren ems ees nt. : IIm ndivi prov dua em lse nt ats in t the 90 het h p oute look for rcentile g in d rowrtug h in spe prnding emium as r t ae nd late th dr oug to thout he ______. “The Impact of the Erosion of Retiree Health Benefits on Workers and Retirees.” EBRI Issue Brief, no. 279 Percent Change cent were In ear sura nn ed dur ce Truing ret st Fund irement. s (June In m 22, 20 o1 st cases, this re 6). https://www.c sults i ms.go nv pre /Res sent values earch-Stati of sticfunds s-Dat ne a-an ede d-Sy d s at age tems/St 65 a t tis htat ics are - EBRI explores the breadth of emplo Medicare Py aee ben rt D Cos efits and related issues. t Sharing Information The Employee Benefit Research Institute (EBRI) was founded in 1978. Its mission is to 75th Percentile of Prescription Drug Expenses Throughout Retirement expenses include premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket r Me etir de icm areen (Em t p reog xpe plr oa yrm e ie e nc a Be ls eo d n e cafi on t 1Re – tr4 p ib sut ee ae rrc c de h tnt o In t s inc he titu r e d te a e, se cM lin a in ne e rc in sa h 2e0d0 v e5 in d ) .g sa s t va ings in rgets. How the Ee BvRI er , m the odse el. d In 2016 eclines w , ae m rea offs n we ould t by ne laregde r Chance of Having Betw een Tren EBRI ds-and studie -Repo srt the worl s/Reports d Tof health and retirement ben rustFunds/Downloads/TR2016.p efit dfs — issues such as 401(k)s, IRAs, retirement smaller than the aggregate values ment contribu io te ned above. to, to enco u rage, and to enhance the development of sound employee benefit Initial Benefit Catastrophic Amount of spending for outpatient prescription drugs. Enough Savings 2011 2012 2013 2014 2015 2016 2015?2016 Who we are $9 inc7,00 reases 0 in in out sincom avings -ofe -p a ade oc nd ka e q tuacy, w sp om ending an w co pnsu ro ould on gra m m p ne er-drive s re ae sc nd dr ipti $1 sou24 n on ndb ,000 p enefits, du rb ugs li if c p e a oa s a li Socia cch ha y r th esu ro d l u lSecurity, a tg of h g oa or be jec l o -bti f h avselining. tax treatment of both retireme ea re ving searc a h 50 an d p e ed rc ue ca nt ti oc nh . a EBRI nce of is th ha nt ev and health oing nly Deductible Limit Threshold Donut Hole ______. “Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement.” EBRI Issue Brief, no. 295 Men VanDerhei, Jack. “Measuring Retirement Income Adequacy: Calculating Realistic Income Replacement Rates.” EBRI Issue private, nonprofit, nonpartisan, Washington, DC-based organization committed exclusively to benefits, cost management, worker and employer attitudes, policy reform proposals, and pension assets These enoug observa h moneyt ions wer saved to ec use oved r to hea det lth c ermin are e targets for expenses in r a ed tir eq em uate ent savin . If eit ghe s to cover r instead an w individu anted a al’s 90 pheeralth costs cent chanc 50 e of per- 2006 $250 $2,250 $5,100 $2,850 Medicare, 62% 50% $80,000 $79,000 $74,000 $72,000 $76,000 $79,000 4% Data com (Em e fp rom loye a e Be van rie efi tt yRe ofs sou earc prces a u hb Ili nc s tip n to ud a li te c, yre J u re lu y se se 2 arc 0d in 0 h6 ) a.n a d Mon educt ae ti Ca on rlo sim on econu ola mic tion se m curit ode y a l ntd h a etm sim ployu ela e tbees n e1 f0 it 0issu ,00e0 s. It is impor Bri ta eand nt f, nto o . fundi not 297e ng. (E th m aThere is wi p t lm oya en ey Be indiv nede fiidua t spread Res lse a arre cre hlik Icog n es ly ti tu n to ition te ne , Se ethat if employee be d p tm em or be e rt ha 20n th 06).e amn ou efits nts c data exist, EBRI kno ited in this report. Thi ws s it. 2007 265 2,400 5,451 3,051 cent, 7 having 5 e noug perce h sa nt, an vings, d 90$1 per 68c,000 ent of w th ould e time. Estimates are be needed for a maalso jointly presen n and $187,000 wted fo ould b r a styliz e needeed opposite-se d for a woman. x cou ple, EBRI’s membership includes a cross-section of pension funds; businesses; trade associations; 75% 120,000 119,000 108,000 104,000 110,000 113,000 3% observations, allowing for the uncertainty related to individual mortality and rates of return on assets in analysis does not factor in t 2008 he savings ne 275eded to cov 2,e 5r 1 0 long-term c 5a ,7r2 e6 expenses a 3nd ,216 other expenses not covered by both of whom are assumed Out-of-to retire simul pocket, 13% taneously at age 65. ______. “Sources of Coverage and Ch laboa r ra un cite on ri s; s ti hc es a lt ohf c th ae re Un proin vid su ere rs an d: An d in asu lyre sis rs; og f o th ve ern M m ae rc nt ho 2 rg 0a 0n 7 iza Cu tio rr ne s; an nt Pdo se pu rv la ice tio n fir ms. 90% 154,000 153,000 137,000 129,000 138,000 139,000 1% ______. “Retirement Savings Shortfalls for Today’s Workers.” EBRI Notes, Vol. 31, no. 10 (Employee Benefit Research 7 retire EBRI delive ment. rs a stead 2009 y stream of invaluable research and anal 295 2,700 6,154 y 3sis. ,454 A Me cd oup icale re ,b ot nor h w dit oe h me s it d ta ia kn d e int rug o ae cxpe couns nt ets w he fould act tne hae t d m $2 any 21 indiv ,000 idua to hls a vre e ta ir e 50 p rpio er r cte o nt b e cc ha om nc ing e of eligib having le for enou Meg dh icare. Women Survey.” EBRI Issue Brief, no. 310 (Employee Benefit Research Institute, October 2007). Institute, October 2010). 2010 310 2,830 6,440 3,610 EBRI publications include in-depth coverage of key issues and trends; summaries of research The data m How one ey v etro , for c som o t ve his study c e r w he or alkte h c rs w a ame from re ill ene xpe ed ns a vari to es in r save ety of sources. e le tirss em tha enn w t. They ha Data on t iw s r ould epor Part ne ted e d B if t $2 and Part he 93 y,000 choo D pr tse o hta o emiums, an vw e or a k 75 p a psetr d a ce g Part D deduct nt e 65 ch, atnc heer e of byib les, 50% 107,000 106,000 97,000 93,000 99,000 102,000 3% EBRI’s work advances knowledge and understanding of employee benefits and their 2011 310 2,840 6,448 3,608 findings and policy developments; timely factsheets on hot topics; regular updates on legislative and Here are the key findings: 5 ______. Testimony. U.S. Congress. im Se po nrtan atec S e p to e c th ia el Co natim on m ’si tte ece o o non m Ag y aim ng o. nS g c pra oli m cb ym lin ag k f ers, or H the ea n lth ew Is ns m uera dia, nce an Co d th ve e ra pu gb eli : cHe . Ita lth initial c pov ost ep r be ing oning nef the ie t li ir nr e 75% mits, and cata ollm xpee ns ne t s a in Me nd d $3 strophic thr ic149 a 4r0 e ,00 , 0P 0a 0 0 t rts B o esholds ha 1a 3v nd 9e ,0 a 0 D come 090 if t p he e fr 1ry 2 c om 20 5 e r,e nt 0c 0 e 0 civ h16 e a nc he Medi 1 e1 a 9 of lt,h b 0care truste 0 c0 oe vne ering fit 1s a 27 the ,es r 0 s a 0ir 0c e e tiport. xpe ve 1w ns 2or 8 Medi e ,0 k s. 0e0r s. ga p Plan 1% F premiums VanDerhei, Jack, and Craig Copeland. “Can America Afford Tomorrow’s Retirees: Results From the EBRI-ERF Retirement 2012 320 2,930 6,658 3,728 regulatory developments; comprehensive reference resources on benefit programs and workforce ? In 2016, a 65-year-old man d w oes ou th ld nee is by d co$ nd 7u 2c,0 tin0 g0 i an nd sa pu vbin ligs a shingn d a poli 6 cy5 re yse ea arc r-h old w , analy om sis, an a w nd ou spld nee ecial red po $rts 93,o0 n0 0 Securi90% ty for People betwe 176 e,n 0 5 005 –64 Y 17e 6a ,0 rs 0 o 0 f Age 1,5 6 Ap ,0r 0i0 l 3, 201 04 86 . ,000 156,000 156,000 0% What we do were generat Secued for rity Pro n je ecw Medicare tion Model.” enroll EBRI ees Issu aged e Brie65 in f, no. 2016 263 (E by stan mployedar e Be d metro nefit Res politan earch statistical area. Out-o Institute, November 20 f-pock 03). et 2013 325 2,970 6,734 3,764 issues; and major surveys of public attitudes. employee benefits issues; holding educational briefings for EBRI members, congressional and Married Couple if each had a goal of having a 50 percent chance of having enough savings to cover health care expenses Finally, issues surrounding retirement income security are certain to become an even greater challenge in the future, spending on outpatient pres 2014 cription drugs 310 was derive 2,8 d fr 50om the 20613 ,45 Medical 5 Expen 3,60 d5iture Panel Survey (MEPS), the EBRI meetings present and explore issues with thought leaders from all sectors. federal agency staff, and the news media; and sponsoring public opinion surveys on employee Fro Exn plaini stin, Pang the ul, and Nev In in Ad cra e m as s. e “E m in p lo S yavings ment-Bas eTar d Reg tire ee t He s be altht Be we ne e fin 2 ts: Tre 01 nd5 and 20 s in Access a16 nd C overage, 50% 187,000 186,000 170,000 165,000 175,000 181,000 3% as polic in re ymta ire kem rs b ene t. If gin t th o ery e aw lis atn ic ta ell d a y a 9 dd 0r pe essrce fina ntn c cia ha l iss nce u o es in t f havhe in g e Men do icu agh re sa prog vin ra gs, the m with solut man w ion ou s t ld nee hat md ay shift 2015 320 2,960 6,680 3,720 most recent year of dat EBRI regula a availabl rly provides e. be nefit issu co es. ngre EBs RI sion ’s Ed al utestimony cation and , Re an se d ar briefs p ch Fund o licy (EBRI make -ERF rs, ) pmem erform ber s the o r cga harit nizations, able, 75% 260,000 258,000 233,000 222,000 237,000 241,000 2% 1997-2010.” EBRI Issue Brief, no. 377 (Employee Benefit Research Institute, September 2012). As Figur Soe u rc3 show e: EBRI ess, s timate asv fro ings m thet a 20r1g 3e Mtes d dicae l Ex clin pee ndd itu b ree Pa tw nee l Su en 2011 rvey, https :/a /m nd eps20 .ahrq 14 .go, v/s au nd rveyt _he comn th p/MEPSICC ey inhcarrtb ea oosed k.pdf from 2014 to 2015. $127,000 and the woma 2016n would nee 360 d $143,3 0,0 31 00 . 7,063 3,753 more responsibility for health care e dcuocst ati s ot no alMe , and dic sc aien re ti bfe ic ne fu fic n cia tir oie ns s.o f the Institute. EBRI-ERF is a tax-exempt organization and the media on employer benefits. Endnotes 90% 323,000 321,000 286,000 270,000 288,000 289,000 0.3% The savings targets increased Sour a ce: g a EB su in fr p Rp I c oo al rted m cul at 20 b io y15 ns co f n ro ttri o mb 2 Tu 01 ab tile o6, n V. s an E2 wit in dh inc 20 gr1 a 6 n M r ts. e ed a ic ses are T aru s la stee rg s e R ep as 6 p ort. ercent in some cases. For a EBRI issues press releases on newsworthy developments, and is among the most widely quoted Fronstin, Paul, and Dallas Salisbury. “Retiree Health Benefits: Savings Needed to Fund Health Care in Retirement.” EBRI 1 Percent Change th Savings T Medicare Partargets to Cover He B covers outpatient 9me 0thd P ic ea ralth Insuranc c l e sn etrv ileic oe fs P a re ss w cre ipllt io an s D e Premiums and Out-of- prru eg v e Entiv xpen es s ee srv Tic hre os u,g lh ao bu tte Rs ets tir,e x m -e ra ntysPocket Costs in , and durable medical ma ?r rie A cou d coup plele w b itot h m h w eit dia h d nr pre ug e sc xpe ript ns ion es a drug t the e 90 xpe npse ers w cent oile ul d nee throug d $1 hou6 t 5r,0 et0 ir0 em ife tnt he w y h ho aw d a ant goa ed l of a 90 h p ae vrin ce g a nt sources on employee benefits by all media. Chance of Having Betw een While it is Is s pu oss e Bri ible ef ,t o nop . ur 25 c4 ha , (E se mMe plod yiga ee Be p ins neur fit aRe nce s eta o rc ch om Inp sle titu te te ly , F av eoid bru adry ed 2uc 00t3 ible ). s and other cost sharing associated CHECK OUT EBRI’S WEBSITE! equipment. EBRI Issue Briefs is a serial providing expert evaluations of employee benefit issues and Retirement More 5 r0 ec pe ent rce l y , nin 201 tEBRI chan 3, M c direct e o efd ic h s a amembe v re in c g e ove nr rou e s da g 62 nd h sa p other constit e vrin ce gs t nt of o ctov he uen e cr ost h cie e a of slt h to he car a the informatio lth c e eaxpe re serv nses icn e in s for they need an reti re Me m de icn atr. eIf d b t unde eh ne efic y w rtakes iaa rie nts ed a new chance of having enough money saved for health care expenses in retirement by age 65, the targeted savings Enough Savings 2011 2012 2013 2014 2015 2016 2015?2016 with Medicare Parts A and B, it is not possible to avoid the deductible and other cost sharing associated with Part D trends, as well as critical analyses of employee benefit policies and proposals. EBRI Notes is a Our research on an ongoing basis. 2 inc a _ Figure g __ e r_ e s _ a 9 65 _ sed 0 3 co . pe “Hea a nd frrce nta om old lth n ins the C $3 te c ra, 42 h re w a,00 Ex n hil savings estimates fo ce e p 0 in o e out nfs h 2014 e -of a s i v-n in p Re oc g e to kti $3 e n re tou 4 m spe 9,00 e gr a n h nding t sa a 0 in person nv di t n 2 a hgs, t 01 c ec Us o 6, a wh unt h ee o o e y 2 p f turns d w Hea for e oru c a lld nee th e 13 nt g Sa ep 65 inc e vrid $ c n r in e e gnt a s2 se. A 20 , 6c a 5 16 c nd , o 0 an u 0p n 0tr.d s iv .” a who EBRI I te ins purch ur ss au na e cs Bri ee s c both M e ov f, enro e. d2 edi 13 71 , ga pep Pl rcent an Men Medicare Part D covers outpatient prescription drugs. serial providing current information on a variety of employee benefit topics. EBRIef is a outpatient prescription drugs. Under Part D, for expenses above the deductible, beneficiaries are responsible for EBRI maintains and analyzes the most comprehensive database of 401(k)-type programs in the (Emplo 50% yee Benefit Res $e 1a 0rc 6,h 00 I0 nstitu $te 10 , 2 J,u 00 ly0 2004 $)9 . 6 ,000 $88,000 $93,000 $97,000 4% (Figure 2). In the future, individuals are likely to have to pay greater shares of their overall costs because of the F to s EBRI’s website is easy to use and packe upplement Medicare and Medicare Part D outpatient dr d with useful information! Look for ug benefits. It also includes EBRI prior-year estimates. As weekly roundup of EBRI research and insights, as well as updates on surveys, studies, 3 publications 25 percent coinsurance on expenses between the deductible and the initial benefit limit. Once the initial benefit limit world. Its computer simulation analyses on Social Security reform and retirement income adequacy Medigap Plan F covers Part A and Part B deductibles, Part B excess charges, Part B coinsurance for preventive care, Part A ? For a cou75% ple with drug e1 xp 54e ,0 n0 se 0 s at t 14 h7e ,0 9 00 0th pe 1rce 37,0n 0t0ile throu 126,g 0h 00 out re 1t3ire 3,0m 00 ent w1h 3o w 7,00a 0nted a 903% percent The EBRI model includes several factors that could result in an increase or decrease in targeted savings, but the main litigation, legislation and regulation affecting employee benefit plans, while EBRI’s Blog fin discussed a ancial cond boit vie, ther on of te is he Me und certainty r icare prog erlat am e d to and a cu numbe tbacksr of var to emp iabl loye m s, ent such as h -based reealth tire care e hea costs, longevity, a lth programs (Fron nst d in and these special features: are unique. is Fro re na sc tihe n, d P, ab ule , Da nefic llaia s S rieas a lisb re u rin t y, ahe nd J donut ack Va hole nDer unt heil t i. “Sa hey v ir ne ga sc Ne h th ed ee c da to ta F stu rop ndhi He c a lim lthi tIn , a sb ura ovn ec e w a hic nd h th Hee ay lth p Car ay 5 p e ercent 90% 194,000 185,000 172,000 156,000 164,000 168,000 2% hospital and coinsurance costs for an extra year after Original Medicare benefits run out, Part B coinsurance and supplements our regular publications, offering commentary on questions received from news reason fo chan r cte he of inc ha re va in se g e in ne noue gh m ded sa onveings fr y save om d f 20 or 13 he a to lth 2 car 016 is r e expe elatn ese d ts in o the re a tire djus mtem ne t b nty t ha age t is 6 5 m, ta ade rge eatceh ye d saavrin to gs Ada ms, 2012). interest rates. Among people with Medicare Part D, there is also the uncertainty related to health status and coinsurance. W W om he en o n utpatient prescription drug coverage was added to Medicare in 2006, be neficiaries in the donut Expenses in Retirement: Fre inp doin rters gs f , rp oom lic a y Si mam keu rs, lati ao nn d M oth oe d rs. el .” Th EBRI I e EBRI ss Da ueta Bri boe ofk , n oo n. E 3m 17 p l(E oye m ep Be loy ne efit e Be s isn a e sta fit Res tistice aa l rch copayments, three pints of blood for approved procedures, Part A copayments or coinsurance for hospice care, coinsurance • wou EBRI’s entire library of re ld be $349,000 in 2016. search publications starts at the main Web page. Click on EBRI re-establish the baseline for out-of-pocket spending associated with prescription drug use. Out-of-pocket spending is outpatient prescription drug use. EBRI make 50% s information freel 138 re ,0fe 00 rency e av w 13 o2 rk ailable to al ,0 o 0n 0 emplo 1y 2e 4e ,0 b 0l e 0 .n efit p1 ro 14 g,ra 00 m 0s and w 12 o0 rk ,0 0 fo 0rce-re1 lat 24 ed ,0 issu 00 es. 3% hole paid In10 sti0 p tutee,r M ce ant y 2 c0 oin 08su ). rance. When ACA was enacted, it included a provision to phase in a reduction in the for a skilled nursing facility (SNF), and emergency coverage during foreign travel. t Thi ieds st to udy up tIssue Briefs he Med daic te as p l Ex rp e and v eio ndit us EBRI Notes u e re st im Paa ne tel Sur s by for our in-depth and v te he y (E M m Ep Ploy S) e ae nd Be 20 ne 13 fit dRe nonpartisan pe atsea a isr now ch Ins the tit ut me riodicals. os (tE B re RI ce )nt on ye the ar of sav dings ne ata avaeild ae bd le t. o EBRI 75%assumes a publi 178,0c 0 0service re 170,00 spo 0 nsi1bility 58,000 to make 144,its finding 000 15s 2,co 000 mpletely 155,0 acce 00 ssible at 2%www.ebri.org donut hole to 25 percent coinsurance by 2020. Thi th s mode th l includes estimates on out-of-pocket spending for ? From 2015 to 2016, projected savings targets increased between 0 percent and 6 percent. In contrast, 4 cover health insurance premiums and health care expenses in retirement (Fronstin, Salisbury, and VanDerhei, 2015). A Projections of ctual out-of-psavings needed to cov ocket spending at thee m r out edia -n, of-pocket 75 and ex 90 penses for percent pr ileescription s were highe drugs r tha are hi n proje ghly ct depende ed for 201 n3 w t onhe thn e 90% 221,000 210,000 195,000 176,000 185,000 187,000 1% Medicare Pa — rt A so that all deci covers inpatient sio sns ervthat ices, relate to emp skilled nursing loyee facilityben care efits, , certa wheth in nurs er ing m ade home in Cong care, ho ress spiceor bo care,ard androom homs e or ______. “Savings Needed to Fund He Con atac lth t InEBRI suranc Pe u a bli ncd a He tiona s, lth(2 Care 02) 6Ex 59p -0 e6 n7 s0 e ; s fia nx Re pu tib re lim cae tin ot n: An ord Ex ers am toi n(2 ati 0o 2n ) o 7f 7Pe 5-6r3 s1 o2 n . s prescsa ripv tion d ings t rugs argeb ta s de sedc on linedd be ata ftrw om ee n the 2 0Me 11d a icn ad l Ex 20p1e4 n, bu ditur t et h Pe an ne tl Sur hey in vecyre (MEP ased S)f. rom 2014 to 2015 as well. • Visit EBRI’s blog. p L assumptions u ik roje e E cB tio RI ns ’s 20 w families’ Me a 1 s rre ed for 5 ri e b rde a C p sed o or dr ho ut p ,lon m ug u ethis ep s, r te a ilization. are na -20 ly S 13 based si ub s fin d sc Th a rip ta d er on the highe ti . s t o A e are nh s a s ato t r t thre EB e he su RI sa lte se Iss of v st ings utqualit ts e he of colum Brie traery, - fs gb ea amost depe tre selining, s for ns inc lu of estimates a d65 ed d- a nda a ys teaa p a r on bl - rt old e o out fiinformatio n r EBRI Figur e -of tir-ing pm oc e e in 201 3: In k m n. e bte EBRI’s Web rsh spe the f 6 ip nding inc , oir r rst, e aa s for sed pa rt , site o w f it a h po sts health ser Ag vic ee ss 5 . 5 and 65 in 2009.” EBRI Notes, Vol. 30, no. 6 (Employee Benefit Research Institute, June 2009). Orders/ Despite the increase in savings targets since 2014, the 2016 savings targets continue to be lower than they 50% 244 $,0 10 90 9 annu2 a3 l 4 su ,0b 0sc 0 riptio2 n2 0 to ,0 EB 00 RI No 2tes 02, 0 a0 n0 d EBRI 21Iss 3,0 u0 e0 Briefs2. 2Ch 1,0a 0n 0ge of Addre 4% ss: EBRI, all research findings, publications, and news alerts. EBRI also extends its education and public service the increase as high as 6 percent, relative to the targets for a 65-year-old retiring in 2015. This Notes article discusses prescript prescription d ion dr rugs ug use is at for 2013 th ae me nd be dian yond thro incughout reased. retir ement; in the second set, prescription drug use is at the 75th 5 It does not include as health expenses any expenses associated with long-term care, or spending for health care Se• e TaEBRI’s reliable health and retirem ble V.E2 in https://www.cms 11.0 g0 o v 1/3 R te h sS et. a rc NW e hnt surveys ar -S , ta Stis uitteic 8 s7 -Dat 8, W a- e just a click away through the topic boxes at aa sh nd in-g Sy tos nte , DC, ms/S2ta 00 tis 05 tic -4s0-5 Tre 1, nd (20 s2 -) and 65- 9-0670; fax number, 75% 332,000 317,000 295,000 270,000 284,000 293,000 3% were in role 201 to improving Ameri 2 almost across thc ean boa s’ rd. finan cial knowledge through its award-winning public service campaign ______. “Funding Savings Needed for Health Expenses for Persons Eligible for Medicare” EBRI Issue Brief, no. 351 perce the mS n od tile ubs el, thro the cript ughout savings ions retir targ ee ment; an t s, and rd ea in t sons he th forird set, pres the increase cription in sav dr ings t ug use arge is at ts. the 90th percentile throughout ® (202) 775-6312; e-mail: firstname.lastname@example.org Membership Information: Inquiries services not tra 90% ditionally covere 4d 0 7b ,0 y0 Me 0 dica 38 re 7, ,0su 00ch as d 360 e,nt 00a 0l care3.2 6,000 342,000 349,000 2% Reports/ReportsTrustFunds/Downloads/TR2016.pdf the top of the page. ChoosetoSave and the companion site www.choosetosave.org The incre (Em ase pin lo yte ae rg Be ete nd e fisa t Re vings searc reh su In lts ing titute from , De highe cembr e r 2 ou0 t- 1of 0). -p ocket spending on prescription drugs was offset by retirement. Under each set of columns, a comparison of the savings targets is presented for 2011–2016. regarding EBRI membership and/or contributions to EBRI-ERF should be directed to EBRI Source: Author simulations based on assumptions described in the text. 6 6 ® ot her factors. This EBRI model us es Congressional Budget Office (CBO) and Centers for Medicare & Medicaid President Harry Conaway at the above address, (202) 659-0670; e-mail: email@example.com EBRI also created a simulation model (the EBRI Retirement Security Projection Model ) with both a stochastic H __e _• _ alt __. h Expe Need a number? “The Impa n cs t o e f Re s in p Check out the ea R lin e gt PPACA iremeont n Sa EBR vinI Databook on Employee Benefits. gs Needed for Health Expenses for Perso ns Eligible for Medicare” EBRI EBRI is supported by organizations from all industries and sectors that appreciate the value of Mode Se Separat rvices ( e esti ling T CMS mates are ) p erc ohnique jections presented for m for and Da premium e tan an a nd he d a women. lth care Beca cost use incrwomen hav eases in thee lo futnger life expectan ure, and their proje cies than ctions of men spe,nding accumulation and decumulation module that includes long-term care expenses. See VanDerhei and Copeland (2003) for 1 2 Median Drug Expenses: As shown in Figure 3 in 2016 a man would need $72,000 in savings and a woman Notes, Vol. 32, no. 8 (Employee Benefit Research Institute, August 2011). unbiased, reliable information on emplo Editorial Board: Harry Conaway, publisher; Stephen Blakely, edy itee b or. Anyenefits. views expr Vis essed iit n www.e this publib ca ri.o tionr g an/about/join/ d those of the a u for more. thors should not For the purposes of this study, health expenses include premiums for Medicare Parts B and D and for Medigap Plan women growth wil havl ege slnerally owed in r nee ec de lnt arger yea savings rs (Congthan me ressionan to l Budg coe ver hea t Officelth , 20 in1surance 4) (Levine premi and ums and he Buntin, 201 alt 3) h. care There exha pev nses in e been additional detail. Determining how much money an individual or couple needs in retirement to cover health insurance premiums and • be ascri Instantly get e-m bed to the officers, trust aeil noti es, memb?ecations of the latest EB rs, or other sponsors of the EmploRI data, yee Benefit surveys, publications, and m Research Institute, the EBRI Education an eetings d Research would 3 need $93,000 if each had a goal of having a 50 percent chance of having enough money saved to cover health F, as well as out-of-pocket spending for outpatient prescription drugs. Modeling premiums takes away the retirement regardless of the slight Fu nim d, p orr ov thee irm ste ant ffs. s in t Nothhe ing c host esavings targ rein of is Me to bd e ic ca oet n rst e s. Also, wome ru Pea dr t a s D a na nd attemp Cn wi MS t to- ll p airnee doje or c d ht ie n gr d deeater savi rg trhow e at dh r optia ngs ot ne o s in fthan men an y P a pe rt n dD in g p even when both s r le egm islium ations. I , reg n a ulad tio dnit ,e io o t the rn, ______. “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News” EBRI Notes, Vol. expenses is a complicated process that depends on numerous variables. The amount of money a person needs will 7 and seminars by clicking on the “Notify Me” or “RSS” buttons at the top of our home page. expenses in retirement. If either instead wanted a 90 percent chance of having enough savings, $127,000 would be See VanDerhei (2006) for estimates of the impact of long-term care expenses on the amounts needed for sufficient uncie nr te tra pin ret ta yt iv re e lra ut le e , d o rt ao s lus ega el , of acche ouna tlt inh c g, ac atr ue a riser al, o vric oe ths o er su vc ehr pone rofessi ’s lif onae l taim dve ic. e.I nstead of trying to predict when a Medicare same goal— using a p3e3r, son a n fo or exam . 10 ge (Em 65 ple, p in 201 lo of ye e having a Be 6 ins ne te fit aRes d 90 of percent ein 201 arch In5 mea chanc stitutens ,e O of o cto ne havin b e le r 2 ssg 0 e y 1e 2n a ). o r uunt gh money to il the cove rcover hea age gap in P lth a erxtpe Dnses in phases down depend on the age at whicth h he th or she reth tires; length of life after retirement; the availability and source of health nee ded for a man and $143,000 would be needed for a woman. retirement income at the 50 , 75 , and 90 percentiles. beneficiary may use health care services and thus incur health expenses, which are highly dependent on whether the retirement. to 25 percent coinsurance. insurance coverage to supplement Medicare; health status and out-of-pocket expenses; the rate at which health care EBRI Notes is registered in the U.S. Patent and Trademark Office. ISSN: 1085 ?4452 1085 ?4452/90 $ .50+.50 4 There’s lots more! individual reaches their Medicare Part A and/or Part B deductibles, this analysis assumes that beneficiaries have th 1100 13 Street NW · Suite 878 Washington, DC 20005 Visit EBRI online today: www.ebri.org ebri.org Notes • Jan. 31, 2017 • Vol. 38, No. 1 4 e e e e e e eb b b b b b br r r r r r ri. i. i. i. i. i. i.o o o o o o or r r r r r rg g g g g g g N N N N N N No o o o o o ottttttte e e e e e es s s s s s s • • • • • • • J J J J J J Ja a a a a a an n n n n n n....... 3 3 3 3 3 3 31 1 1 1 1 1 1,,,,,,, 2 2 2 2 2 2 20 0 0 0 0 0 01 1 1 1 1 1 17 7 7 7 7 7 7 • • • • • • • V V V V V V Vo o o o o o olllllll....... 3 3 3 3 3 3 38 8 8 8 8 8 8,,,,,,, N N N N N N No o o o o o o. . . . . . . 1 1 1 1 1 1 1 8 2 6 7 9 3 5 (202) 659-0670 www.ebri.org © 2017, Employee Benefit Research Institute ?Education and Research Fund. 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