New research shows healthy retirees face higher total health care costs

Healthy retirees actually face higher total health care costs over their remaining lifetime than the unhealthy, according to new research conducted by the Center for Retirement Research (CRR) at Boston College and underwritten by Prudential Financial (NYSE: PRU).

“Those that delay purchasing insurance until their health declines run the risk of facing higher premiums, or for long-term care insurance, not having access to coverage.”

"Does Staying Healthy Reduce Your Lifetime Health Care Costs?" is the second of two issue briefs summarizing key findings from research on the level, distribution and determinants of health care costs from age 65. The study found that the expected present value of lifetime health care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease is $220,000, including insurance premiums and the cost of nursing home care, and 5 percent can expect to spend more than $465,000. The comparable numbers for couples free of chronic disease at age 65 are substantially higher, at $260,000 and $570,000, respectively.

"This counterintuitive finding suggests that those currently in good health would be unwise to assume that they will continue to enjoy lower-than-average health care costs throughout their retirement," according to Alicia Munnell, director of the CRR. "The reality is that even the healthy can expect to eventually suffer from one or more chronic diseases and are actually more likely to eventually need nursing home care, which can result in high health care costs in retirement."

The Center for Retirement Research study cites reasons the healthy incur higher lifetime health care costs than the sick:

• First, people in good health can expect to live significantly longer, and therefore are at risk of incurring health care costs over more years.
• Second, many of those currently free of chronic disease will succumb to one or more such diseases.
• Third, people in healthy households face an even higher lifetime risk of requiring nursing home and other long-term care than those who are not healthy, reflecting their greater risk of surviving to advanced old age, when the risk of requiring such care is greatest.

"Households planning for retirement need to decide how much to set aside for health care costs and whether to purchase Medigap and/or long-term care insurance," said Malcolm Cheung, vice president of Long Term Care for Prudential. "Those that delay purchasing insurance until their health declines run the risk of facing higher premiums, or for long-term care insurance, not having access to coverage."