Retirees Blindsided by Out-of-Pocket Medical Expenses

By Lydell C. Bridgeford
Employee Benefits News
November 29, 2007

Before cruising the Caribbean, retirees may want to make sure they can afford to pay for their upcoming health care expenses. A recent survey conducted for Medco Health Solutions, Inc., a New Jersey-based pharmacy benefit manager, showed one in three retirees said they are spending far more on medical expenses than they had expected.

The research, which surveyed 1,000 Americans over age 65, suggests some seniors will probably have to alter their retirement lifestyle to pay for their medical expenses. For instance, 55% of retirees claimed they had miscalculated health care expenditures when planning for retirement. Nearly half of respondents indicated they never considered how health care costs would affect retirement savings or lifestyle, Medco found. One out of four middle-income retirees spent 10% or more of their monthly retirement income on medications.

Meanwhile, women and retirees who reside in the Northeast region of the country were more likely to admit that medical expenses were tough on the budget. Retired women were 52% more likely than men to claim their out-of-pocket medical expenses had outpaced their projections; whereas 45% of seniors in the Northeast thought the same, compared to only 27% of retirees in the West.

Other key findings included: 1) Nearly half of seniors admitted they rarely spoke with their physicians about ways to save money on their medications. 2) Approximately 76% of retirees indicated they were aware of the cost savings benefits of getting their drugs from a mail order pharmacy; however, 40% actually used the tool to save money on their medications. 3) Forty percent of seniors who have reviewed Medicare plans noted the main reason for choosing a plan is premium price, while only 15% considered the range of drugs offered.

“Retirees have planned for food, shelter, taxes and entertainment, but too many neglect drug and medical costs, which are rising far faster than the inflation rate,” says Sally Greenberg, executive director of the National Consumers League, a Washington D.C.-based consumers’ rights group. Unexpected health care expenditures not only jeopardizes the quality of life seniors expect to enjoy during retirement, but also shows a real need for education about how to build a healthy nest egg, she adds.